Bill McDonough, President and CEO, Constellation

2019 Financial Highlights – Constellation Insurance Companies

Constellation is a growing portfolio of medical professional liability (MPL) insurance companies, which currently includes MMIC in the Midwest, UMIA in the Mountain States and Arkansas Mutual. Together, these organizations collaborate throughout much of the country to offer our health care and long-term care clients a market-leading blend of financial stability, highly responsive customer service, and innovative approaches to liability risk management. Our dedication to care teams informs all we do, as we believe that what’s good for care teams is good for business. In 2019, we worked “together for the common good” to achieve another year of impressive results, as well as strong positioning for our future.

“A” rated by A.M. Best

A.M. Best, the most widely recognized insurance rating agency, affirmed our financial stability with an “A”
(“Excellent”) rating. Our ongoing financial strength enables us to deliver superior service to our policyholders
while continuing to invest in opportunities that will drive future growth. Ultimately, our solid financial position
fuels our mission to help physicians and all those who devote their lives to health care attain their dream—to help,
heal and serve.

Excellent customer retention

During 2019, 97.6% of our clients chose to continue their policies with one of our Constellation insurance companies
rather than switching to a competitor. We take pride in the trust our clients place in us, and we are committed to
providing personalized service and innovative offerings that will continue to earn their business.

Innovation

We continue to find new and innovative ways to better serve our policyholders, including these new programs implemented in 2019.

  • HEAL℠ offers a better way forward after patient harm events. This program equips health care teams to act promptly and effectively after unanticpated outcomes to achieve meaningful resolution.
  • Constellation Aligned Performance Initiative (CAPI) is a strategic program that acknowledges the work our customers are doing to mitigate risk and measure patient safety outcomes. In 2019, Constellation began a strategic initiative with Baldrige, a public-private partnership dedicated to performance excellence. This is the first collaboration Baldrige has entered with an MPL insurance company, having been inspired by Constellation’s CAPI program that acknowledges—and rewards—the goals, performance and benchmarks our customers achieve.

Growth in a competitive market

Premiums grew again in 2019 as more customers confidently placed their business
with us and we worked hard to earn our policyholders’ continued loyalty. As a result,
we reached $178.6 million in premiums written, the highest level in our 41-year
history.

Challenging claim environment

Jury verdicts continued their recent upward trend, increasing our claim costs in 2019.
This impacted our combined ratio, which ended the year at 107.6%. This means that
for every $1.00 of premium we received, we paid out nearly $1.08 in claims and
expenses. We continue to implement new strategies to combat these increasing
costs, including the HEAL℠ program, which provides early insight as to whether the
standard of care was met to enable better-informed decisions on next steps. This
may include a prompt offer of compensation, if warranted, to help patients and
families move on while limiting financial liabilities for policyholders’ businesses. We
are also addressing the issue of diagnostic errors, as well as other initiatives that may
shorten the claim lifecycle and lower the risk of large claim verdicts in order to keep
coverage prices reasonable for our policyholders.

Good bottom line results

Constellation insurance companies collectively reported net income of $19.1 million
in 2019, as solid investment performance offset the challenging underwriting
environment. Although we did begin to see pricing pressure abate in certain
segments, our companies still incurred an underwriting loss for the year as indicated
by the 107.6% combined ratio noted above. Our invested assets have performed well
through volatile financial markets benefiting from a long-term investment approach
and, despite persistent low interest rates, continue to provide significant investment
income that helps to support our operations and build our financial strength.

Policyholder surplus growth

Policyholder surplus grew 8.3% to $390.5 million at the end of 2019—the highest
ever in our history and a testament to our financial strength and stability. This means
your company is going to be here for you now and in the future.

We look forward to another year of providing exceptional service to our
policyholders and the organizations—and people—they serve. Thank you for placing
your trust in us.