Bill McDonough, President and CEO, Constellation


2018 Financial Highlights – Constellation Insurance Companies

Constellation is a growing portfolio of medical professional liability 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 2018, 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 2018, 98.4% 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.

Successful partnership

2018 marked five years since UMIA joined Constellation and the final installment payments to
former UMIA subscribers were completed as agreed. The companies have worked together to
achieve significant integration across operations, ranging from claim philosophy to
organizational culture to reinsurance and investment capabilities.
Constellation continues to pursue creative partnership opportunities and was singled out as a
“company to watch” at the 2018 Medical Professional Liability Symposium in Chicago,
conducted by the Professional Liability Underwriting Society (PLUS). The mention came in a
market update delivered by insurance research firm Conning, who highlighted various ways
organizations in our industry are joining forces to respond creatively to market challenges.

Growth in a competitive market

2018 marked our first year of service to Montana-based Mountain States Healthcare Reciprocal
Risk Retention Group (MSHRRRG) and its 17 owner-insured hospitals and more than 1,500
employed physicians. We are thrilled to have earned the trust of this highly regarded health care
organization as well as additional new clients that helped us achieve outstanding premium
growth in 2018 of 16.5%.

Investments in technology and information security

In 2018, we made significant investments in technology to strengthen our customer service
capability and further safeguard our information. These efforts are strategically important as we
scale our business. These key investments, most of which were one-time in nature, impacted our
2018 combined ratio, which ended the year at 108.5%. The combined ratio measures
underwriting profitability as a percentage of premium.

Strong income despite market challenges

Constellation insurance companies collectively reported strong net income of $30.8 million in
2018, despite a challenging underwriting environment. Pricing pressure continues to grow as the
health care market consolidates and a well-capitalized medical professional liability insurance
industry competes aggressively. Our invested assets have performed well in volatile financial
markets, providing significant investment income that helps to support our operations and build
our financial strength. That strength has enabled us to reward policyholders over the years with
nearly $126 million in policyholder dividends.

Solid policyholder surplus

Policyholder surplus, an indicator of financial strength and stability, totaled $360.6 million at the
end of 2018, up 16.3% since the end of 2014. These funds enable us to honor our commitments
and to invest in new avenues that provide value for our policyholders.

Improving our customers’ experience

Our solid financial position allows us to invest in solutions that protect our policyholders from
medical liability risks and support their efforts to improve patient care, reduce health care
delivery costs and drive growth for their organizations. In addition, we are dedicated to
improving their experience as Constellation customers. In 2018, we developed online mobile risk
assessments and launched a policyholder forum that enables our customers to benefit from
each other’s expertise and enthusiasm.

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.