A MESSAGE FROM
THE CHAIR & THE CEO
As a healthcare provider, trust and care are two words that define a shared commitment
– a commitment to patients and to the betterment of healthcare. These are also two
words that frame NORCAL’s commitment to you, our policyholder-owner. We believe
these are the fundamental tenets of a policyholder-owned mutual company and an
important differentiator that NORCAL brings to our valued insureds.
We began building trust 42 years ago and continue to grow our legacy as we expand across the
nation to offer exceptional medical professional liability coverage. After Dr. Sandra Beretta’s election
as Chair in June, we undertook a comprehensive review of NORCAL’s mission and strategy focused
on the rapidly changing needs of physicians and other health care providers.
The new Mission Statement that emerged reflects our purpose:
“NORCAL SAFEGUARDS OUR POLICYHOLDERS FROM RISK, GUIDES THEM THROUGH
THE UNEXPECTED AND PROTECTS THEIR PRACTICE OF MEDICINE.”
SANDRA BERETTA, MD
President & CEO
2 | 2017 ANNUAL REPORT
Our company exists solely to help protect our policyholders from the risks that are inherent to the
practice of medicine and, most importantly, to be there when the unexpected happens and our
insureds need us most. That is a commitment of care, trust and partnership. Throughout these pages
you will hear from some of our dedicated NORCAL employees sharing their personal perspectives
about their role in supporting members of the NORCAL Group of companies. The level of care and
commitment across the organization is a powerful factor that has fueled NORCAL’s momentum and
policyholder retention throughout a remarkable year.
2017 began with the acquisition of PPM Services, officially welcoming Preferred Physicians Medical
Risk Retention Group (PPM) to the NORCAL Group. Internally, the year was focused on strengthening
our foundation, which enabled us to navigate the continued soft market and pricing pressures through
prudent business decisions and purposeful efforts to reduce our operating expenses. All of these
efforts are reflected in our solid financial results, and the designation of an A.M. Best “A” (Excellent)
rating for the 34th consecutive year.
With a longer view, we also invested in key areas to support our national expansion through a national
operations center, and improvements in our interactions with our policyholders through our newly
established Customer Experience team.
2017 was also a year when we all saw and felt the devastating effects of natural disasters in Florida,
Texas and California – communities where we have numerous policyholders, agents and employees.
We immediately extended payment deadlines for our insureds, our employees joined several local
relief efforts, and NORCAL donated a total of $50,000 to the Red Cross to support the many efforts
to provide immediate relief and help prepare for recovery.
We are also very proud that NORCAL significantly expanded our philanthropic efforts with the
establishment of the NORCAL Group Foundation, focused on providing grants for the betterment of
health care in the local communities we live in and serve.
This was clearly a year of challenge and change. Our approach of staying ahead of known impacts
and successfully navigating through the unexpected – just as we do for our policyholders – has
served us well. As we enter 2018 and beyond, NORCAL will continue to ensure your coverage is
strong and your support is delivered with the trust and care you deserve.
Thank you very much for your business and for your confidence in our company. We look forward to
serving you for many years to come.
2017 ANNUAL REPORT | 3
WE’RE DEDICATED TO
MAKING A DIFFERENCE
At NORCAL, we understand that the practice of medicine is more than just
a business – it’s your life’s work. We also understand that supporting our
policyholder-owners is much more than a financial relationship. It’s about
the support and care we deliver, and the trust we instill at every phase of
our partnership – making a difference for you whenever you need us.
From left to right: Dustin Shaver, VP of Risk Management // Rommel Tanega, Senior Underwriter //
Erica Presley, Underwriter // Shawn Walker, Underwriter // Chris Frostad, Claims Director //
John Nunes, UW Training & Development // NORCAL Group Office - San Francisco, CA
4 | 2017 ANNUAL REPORT
2017 ANNUAL REPORT | 5
FROM COAST TO COAST
WE’RE READY TO HELP
Through our continued expansion, NORCAL has grown to become the fourth largest insurer
of physicians and surgeons nationally,* offering our Health Care Professional policy in 39
states, including D.C., by the close of 2017. We also diversified and expanded our reach into
the specialty market with the acquisition of PPMR RRG, the only anesthesia-specific MPL
insurance carrier in the nation. Our national footprint and expertise is among the most comprehensive
in the industry, while still retaining strong local understanding through our NORCAL team and a
network of carefully selected local agent/broker partners.
In 2017, NORCAL welcomed the first female Chair of the NORCAL Mutual Board of Directors, Dr.
Sandra Beretta. As a practicing OB/GYN for nearly 25 years and a managing partner of a private
practice partnership in California, Dr. Beretta knows well and cares deeply about the needs of
We continued to deliver industry-leading Risk Management services awarding more than 30,000 CME
certificates on patient safety and practice management topics in 2017. Leveraging more channels to
connect with our insureds, NORCAL introduced a series of live online webinars focusing on a variety
of topics applicable to today’s healthcare practices, including one of the top 100 healthcare webinars
of 2017.† As we look ahead, we’ll continue to build new channels to make it easier for insureds to
access our award-winning Risk Management materials, including enhancements to the MyNORCAL
app to include on-demand webcasts, as well as existing Claims Rx articles.
Supporting our policyholders includes being good stewards in the communities where we work
and live. The establishment of the NORCAL Group Foundation formalized our commitment to
giving back, offering grants to worthwhile non-profit programs focused on patient safety, patient
care and physician wellness.
6 | 2017 ANNUAL REPORT
* Data compiled from S&P Global Market Intelligence (formerly SNL Financial) on March 19, 2018 for direct premiums written in 2017
† Among healthcare webinars on the GoToWebinar platform
AS PART OF AN
MANAGEMENT TEAM, I
TAKE GREAT PRIDE IN EDUCATING
INSUREDS SO THEY CAN IDENTIFY
AND MITIGATE POTENTIAL RISKS
BEFORE THEY HAPPEN.
TERRY SISLO, CPHRM
Senior Risk Management Specialist, PA
Throughout this Annual Report we highlight NORCAL’s successes in 2017 in delivering
on what has always been our mission — providing our policyholder-owners the care
they’ve come to trust to safeguard them from risk, guide them through the unexpected,
and protect their practice of medicine.
A SIMPLE AND SEAMLESS
BILLING PROCESS IS WHAT OUR
POLICYHOLDERS DESERVE — I’M
HERE TO MAKE THAT HAPPEN.
Billing, Reporting and
Other Operations Manager, TX
2017 ANNUAL REPORT | 7
POLICYHOLDERS GET SO
MANY BENEFITS FROM OUR TEAM’S
STRONG PARTNERSHIP WITH OUR
NATIONWIDE NETWORK OF
AGENTS AND BROKERS.
Regional Business Development
WHEN PHYSICIANS ARE IN THE MIDST OF A CLAIM,
IT’S ONE OF THE MOST STRESSFUL EXPERIENCES OF
THEIR CAREERS. I STRIVE TO BE THE CALM REASSURANCE
TO GUIDE THEM EVERY STEP OF THE WAY.
8 | 2017 ANNUAL REPORT
Senior Claims Associate, FL
MY GREATEST SATISFACTION
COMES FROM KNOWING OUR
POLICYHOLDERS FEEL SECURE THAT THEIR
COVERAGE MEETS THE UNIQUE
NEEDS OF THEIR PRACTICE.
Senior Underwriter, CA
2017 ANNUAL REPORT | 9
OUR TEAM IS THE FRIENDLY VOICE ON THE OTHER END OF THE LINE.
WE LOVE GETTING TO KNOW OUR CUSTOMERS, AND TRULY ENJOY
KNOWING WE MAKE THEIR DAYS A LITTLE EASIER.
Customer Service Supervisor, PA
Customer Service Manager, PA
10 | 2017 ANNUAL REPORT
MY FOCUS IS
TO ENSURE AN
EXPERIENCE WITH EVERY
INTERACTION — THAT’S
VP of Marketing & Communications
and Customer Experience, TX
THERE ARE MANY
UNCERTAINTY FROM THE
TIME A CLAIM IS REPORTED
TO THE TIME IT CLOSES. WE
TRY TO TAKE THAT WORRY
AWAY SO OUR PHYSICIANS
CAN CONCENTRATE ON
Claims Director, FL
2017 ANNUAL REPORT | 11
A MESSAGE FROM THE CFO
STEADY AND STRONG
The NORCAL Group of companies finished 2017 in the
strongest financial position in the company’s 42-year history.
This is the result of steady, strategic efforts made over the past several
years to ensure that NORCAL has a solid foundation to weather the
changing healthcare market, with consolidations of medical practices
and emerging risks. In 2017, NORCAL Group completed the acquisition
of PPM Services, thereby establishing an affiliation with Preferred
Physicians Medical Risk Retention Group (PPM), the nation’s largest
anesthesia-specific medical professional liability carrier. Also in 2017,
NORCAL Group expanded its footprint to 49 states plus the District of
Columbia, thus completing its transformation to a true national carrier
serving the future of healthcare.
NORCAL Group was once again affirmed by A.M. Best with an “A”
(Excellent) rating for the 34th consecutive year for its stability and
financial strength. NORCAL Group’s diligence in identifying and
committing to operational efficiencies and sound underwriting and
claims practices resulted in a policyholders’ surplus of $741 million, the
highest in the company’s history.
NORCAL Group remains well-positioned to serve our policyholders for
many years to come.
MARK D. JOHNSON
Senior Vice President & Chief Financial Officer
12 | 2017 ANNUAL REPORT
DIRECT WRITTEN PREMIUM
grew to $332 million with the addition of PPM and other new business opportunities.
2015 // $290M
2016 // $293M
2017 // $332M
TOTAL ADMITTED ASSETS
steadily increased to $1.6 billion over the past three years.
is at the company’s highest at $741 million, due
to sound business practices and solid business
has grown to over 32,000 across 49 states.
2017 ANNUAL REPORT | 13
NORCAL GROUP CONSOLIDATED
NORCAL Group continued to experience upward momentum in 2017, with strong
investment results, coupled with diligent oversight of expenses.
Reflected in the 2017 financial statement are the results of the acquisition of PPM Services.
Together, NORCAL Group closed the year with $332 million of direct written premium. The group
of companies remains well capitalized with more than $1.6 billion in total admitted assets and
$741 million in policyholders’ surplus.
STATUTORY - BASIS INCOME STATEMENTS 2017 2016
INCOME Net premiums earned 317,870 315,984
Net investment income 36,649 39,021
Net realized gains on investments 28,888 6,402
Other Income (735) 3,881
Total Income $382,672 $365,288
Losses & loss adjustment
Other underwriting expenses 50,739 47,926
Acquisition costs, net 31,269 32,078
Total Expenses $318,647 $314,388
Income before dividends
& federal income taxes
Dividends declared to
Income before federal income taxes 64,025 50,976
Federal income tax expense 362 6,379
Net Income $63,663 $44,597
Dollars in thousands, as of December 31
14 | 2017 ANNUAL REPORT
STATUTORY - BASIS BALANCE SHEET 2017 2016
ADMITTED ASSETS Debt securities 1,102,868 1,100,559
Equity securities 294,504 245,167
Cash, cash equivalents
& short-term investments
Other invested assets 22,345 23,333
Total Cash & Investments $1,454,640 $1,491,085
Investment income receivable 11,275 11,624
Premiums receivable 69,252 62,711
Reinsurance recoverables 4,950 11,317
Federal income tax recoverable 10,168 2,476
Deferred tax assets 14,776 31,809
Other admitted assets 68,859 46,230
Total Admitted Assets $1,633,920 $1,657,252
LIABILITIES Losses & loss adjustment expenses 652,065 705,239
Unearned premiums 150,100 146,124
Premiums collected for
Dividend payable to policyholders - -
Reinsurance liabilities 8,092 6,934
Federal income tax payable - -
Funds held under
Notes payable - -
Other liabilities 52,562 59,747
Total Liabilities $892,710 $952,147
Unassigned surplus 741,210 705,105
Total policyholders’ surplus 741,210 705,105
Total Liabilities &
Dollars in thousands, as of December 31
2017 ANNUAL REPORT | 15
NORCAL GROUP’S 2017
BOARD OF DIRECTORS
1 2 3 4 5
SANDRA L. BERETTA, MD
Chair — Obstetrics & Gynecology
FABIOLA COBARRUBIAS, MD, MBA
Vice Chair — Hospitalist
STEVEN PACKER, MD
Secretary — President & CEO, Community Hospital Foundation
PATRICIA A. DAILEY, MD
President & CEO, NORCAL Mutual Insurance Company
16 | 2017 ANNUAL REPORT
6 7 8 9 10
ALICE H. GANNON, FCAS, MAAA, CPCU
ROGER M. HAYASHI, MD
M. DIANE KOKEN, JD
REBECCA J. PATCHIN, MD
SCOTT C. SYPHAX
President & CEO, Nehemiah Corporation of America
2017 ANNUAL REPORT | 17
NORCAL GROUP’S 2017
SENIOR MANAGEMENT TEAM
& Chief Executive Officer
RONALD C. RUMIN
Senior Vice President
& Chief Operating Officer
JULIE L. BURNS
Senior Vice President
& Chief Human Resources Officer
MARK D. JOHNSON
Senior Vice President
& Chief Financial Officer
KARA M. RICCI
Senior Vice President, Chief Legal Officer,
Corporate Secretary & Chief Compliance Officer
18 | 2017 ANNUAL REPORT
NORCAL SAFEGUARDS OUR POLICYHOLDERS FROM
RISK, GUIDES THEM THROUGH THE UNEXPECTED
AND PROTECTS THEIR PRACTICE OF MEDICINE.
THANK YOU FOR PLACING YOUR TRUST IN US — AND NORCAL GROUP.
2017 ANNUAL REPORT | 19
575 Market Street, Suite 1000 | San Francisco, CA 94105 | 844.4NORCAL | norcal-group.com
©2018 NORCAL Mutual Insurance Company. All rights reserved. ng5087