By Glenda Moyle, Premium Accounting Manager

Each year we evaluate officer coverage and rating rules. Currently, officers are included in your Workers’ Compensation calculation with a minimum payroll amount of $20,800 and a maximum of $45,000 each.

Effective 1/1/19 or later the minimum payroll amount for an officer is $26,000 and the maximum included will be $50,000.

These new amounts will automatically be applied to renewals effective 1/1/19 and after. If you have any questions, please contact me at glenda.moyle@mtmic.com/blog.

I have mentioned in previous newsletters that the best part of my job is delivering member dividend checks in March. I have also said the second-best part of my job is going to and touring MTM member’s facilities. One MTMIC member that makes a particularly interesting product is Avalon & Tahoe.

You probably have heard the name before, but if not, they build pontoon boats. Before my tour, my image of a pontoon boat was anything but sleek, plush, and cool. My tour was arranged by Avalon & Tahoe’s CFO, Barry Kavanagh. Mr. Kavanagh handed me over to their plant Operations Manager, JJ Dudick. This tour changed my vision completely. Before getting to that, let me tell you what their brochure says, and now with the tour knowledge in hand I can say these statements are very accurate.

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At a recent MTM Board meeting, I was asked for a “wrap up” report from the spring dividend. It was the normal report with management members, but one set of numbers is worth sharing with our members. The question was how does the MTM dividend compare with similar and competing mutual insurance companies with special focus on mutual companies. Here was what was reported to the Board:

MTM returned 83.4% of its 2017 profit as member dividends. We reviewed 3 well-known companies to provide the following comparison. Company A, a nonmutual returned 7.6% of its profit as member dividends. Mutual competitor number one returned 18.9% while mutual company number two returned 5.3%. The MTM member owner dividend is in a completely different ballpark compared to commercial carriers, and even other mutual companies. These numbers prompted a whole different conversation of why MTM is so different.

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We are proud to announce a new Association member program effective August 1, 2018. This partnership, MFG Works Partners, is a collaboration between the Michigan Manufacturers Association (MMA) and MTMIC will offer our policyholders who are members of MMA an additional 3% discount on your workers’ compensation insurance premium. This discount will be automatically applied at your next policy renewal.

For 115 years, the MMA has been serving Michigan manufacturers and related industries by providing effective representation at Michigan’s Capitol, timely educational seminars; quality and competitive-rate insurance programs, informational e-newsletters and a monthly magazine. Visit www.mimfg.org for more information on the benefits of joining the MMA or contact Brett Gerrish, at 800-253-9039 ext. 533 or 517-487-8533.

Both MMA and MTMIC are excited about this new partnership and its potential for keeping your business competitive. Watch for more information on the MFG Works Partners program in our monthly newsletters and additional publications. For more information on the MFG Works Partners program contact Megan Brown: megan.brown@mtmic.com/blog or (248) 715-0012.

This Year’s Annual Meeting Speakers:
Kenneth L. Wolf, Ph.D. and Marilyn Knight, M.S.W.

We are pleased to announce that this year’s annual meeting speakers are Dr. Kenneth L. Wolf, Ph. D & Marilyn Knight, M.S.W. Our speakers are experts in their field and will be speaking on the topic of “Crisis Recovery After Active Shooter and Traumatic Events”.

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Last year I wrote you about the best part of my job – “delivering member dividend checks”. I can report that the ranking has not changed. From the pictures in this newsletter and last month, you can see the fun I (and staff) have with this MTM “job”. What I rarely talk about is the second best part of my job. So here it is – touring your shops. While you live in your shop and it’s old hat to you, our members design, build, melt stuff, mold, inject, stamp, drill, weld, print, bind, deliver,…. amazing products. Sometimes the product is a simple part of a big part and sometimes it is an intricate part that makes this accounting, actuarial type guy wonder – how do they do that? I was at one shop that was making overpass steel beams. The beam in process was just over 100 feet in length. I asked the plant manager what the tolerance was?

For the poor handy skills I have – the answer would be if I could get anything 100 feet long within 3 inches, I would go out for a celebration dinner. The answer in our members’ world was .005. Our members are amazing.

Also in each of my plant tours I asked if I could operate some of our member’s equipment. Can I do that? I think I can weld, drill, stamp. Can I try that? Our members clearly sensed my lack of skills and the answer – NO. I am 0 for at least 200. Not one of you has let me turn a dial, control a robot, use a forklift, tool, print press or other fun looking machines. This could be an underground conspiracy. I have checked my safety glasses and hard hat. Thought they might have something printed on them such as “extremely clumsy” or warning “NO eye/hand co-ordination”. I have found no such warnings. Ah, maybe I should check the back of my MTM jacket. Lack of success or skills does not sway my determination – I will keep you informed of my challenge.

Till next time, spring looks to be finally here. Let’s enjoy it.

The MTMIC Annual Meeting is scheduled for Thursday, October 18th.

We will be meeting at the same location, The Inn at St. John’s and providing lunch along with a brief meeting and exciting speakers.

Please mark your calendars and be on the lookout for more details to follow.

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As President of MTM, my principle duties are to work with members, help MTM staff and work with the MTM Board of Directors and its Committees. However, there are some other duties that I must budget time for. One of those duties is to monitor insurance regulations and legislative matters. To accomplish this, I spend one or two days a month in Lansing meeting with the insurance association, insurance department and legislators. While nearly all of this designated legislative time deals with workers’ compensation issues, a recent item surfaced that departed from my normal focus. As a Board member and member of the regulatory oversight committee of the Insurance Institute of Michigan, I was made aware of nearly 20 bills that had been submitted for consideration dealing with the Larry Nassar case. As I listened to some of the testimony, I and everyone in the hearing were disgusted with this physician’s actions and the systems that should have caught his criminal activities over many years they occurred.

Most of these bills deal specifically with Larry Nassar and the systems surrounding him, however some bills are not so restricted and will bring other groups/1employers into the mix. Some of the bills being considered dramatically increase the reporting period for sexual misconduct incidents from two or three years to 30 years. Some of the bills change the burden of proof so that a mere allegation can be sufficient to warrant legal action, defense, and ultimately settlements. As defense attorneys look at how they would manage these cases, trying to pull witnesses together and accuracy of testimony (which could be many years or decades old) is daunting.

While MTM usually does not get involved in non-workers’ compensation issues, this case and the possible impact on our over 900 shop owners and managers warranted some involvement. Most recently, more moderate amendments have been considered that open up slightly the reporting period, except for alleged victims under 16. These bills seem to be progressing through the legislative process.

While it is too early yet to tell what exactly will come out of the legislature process, there is no doubt that changes to the existing law will happen.

While our focus continues to be on workers’ compensation and how to maintain and improve cost-effective coverage for our MTM members, occasionally we have to lend our weight to other issues. Protection of our members justifies it. As we learn more, I will bring you up to date on this topic. In the meantime, the MTM staff will continue to focus on providing our members with the most cost-effective and focused services for their workers’ compensation exposure.

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By the time you receive this newsletter, MTM staff will be in the final phase of delivering the 2018 member dividends. This year’s dividend is $4 million made up of two Board declarations. The $3.5 million amount matches the dividend amounts from March, 2017 and March, 2016. Plus this year the Board declared an additional $500,000 from savings of the tax bill signed into law in December. The total dividend amounts to an average dividend of 22% of member’s premium. Staff has 802 dividend checks. Delivery methods vary from mailing, to agency delivery, MTM Loss Control Reps, Megan Brown – VP of Marketing and Sales and me. Last year Megan and I drove over 12,000 miles in 3 weeks delivering checks to members. Each stop was a surprise, great conversation, plant tour and pictures.

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MTM Member Dividends

On February 15th, the MTM Board of Directors met and approved a member’s dividend based on calendar year 2017 results. With the dividend proposal approved, we will be hitting the road beginning Monday, March 5th for delivery of those checks. Before I get into the details of the dividend, I will update you on the events of the last six weeks in case my recent article on this was missed.

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The MTMIC Annual Meeting is scheduled for Thursday, October 18th. We will be meeting at the same location, The Inn at St. John’s and providing lunch along with a brief meeting and exciting speakers. Please mark your calendars and be on the lookout for more details to follow.

Interesting Ending for 2017

On December 30th we closed the MTM financial year. The same day we sent all of our claims data and premium information to our actuary for loss reserve calculations. This review with independent peer evaluation takes about three weeks and is required by the Michigan Insurance department. When this is completed we will have a final picture of the financial results for 2017. One item different for MTM this year is that a member dividend was declared before the final results were completed. We have never done that before and have always waited until the complete financial picture is available before management’s estimates are disclosed. Our traditional method is the more precise way to handle our member’s dividend calculation.

However this year was different. Just before Christmas, President Trump signed a new tax law. Part of this law changed the company tax rate from 35% to 21%. This law affects your shops 1and MTM. Member dividends paid by MTM are a deduction from income and therefore reduce MTM taxes. On Christmas day, the MTM CFO contacted me to say he thinks we need to take advantage of the higher deduction in 2017 versus 2018 and declare the dividend early. This early dividend would reduce our taxable income for 2017. The net effect would be a 13% savings on every million dollars of income. Using the $3.5 million dividend from last year, a deduction on 12/28 results in a significant savings. This tax savings would turn into a benefit to MTM members.

On December 26th we ran the situation by the MTM Board Chairman, Jack Accardo. He jumped right in with management and contacted other Board members about the situation. A special Board vote was held December 27th and by a vote of 10 to 0, the Board declared a member dividend of $3.5 million payable in the usual time frame of early March. This was a little out of sequence but just as our shops sometimes have to do, you use the facts that are in front of you and manage the situation the best you can.A $3.5 million member dividend with a significant tax savings is a great way to start 2018.

Happy New Year.

Hope you’re having a wonderful holiday.

At MTM, staff in underwriting, sales and loss control are working hard on the December and January member renewals. While many members have minor renewal changes, others have added/deleted locations, new contracts with higher payroll or new operations in class codes. Sales and underwriting are working to apply the new member’s experience modifications and also making sure discounts each member has earned are applied to their policy renewal.

The MTM claims department and CFO are focused on closing out 2017 successfully. On December 30, our CFO sends 2017 financial and claims data to our actuary. The actuary studies our numbers compared to prior years and then trends these to come up with year-end financial results. Based on what management knows from our monthly reviews, 2017 will be a good year and member dividends are most likely. We will have the final data in late January.

Once Management has the final 2017 numbers; we go to the MTM Board Finance Committee, Board Marketing Committee and finally the Board of Directors in the first half of February. These meetings involve dividend discussions and final decisions are made. As a reminder all Board Committee members and Board members are MTM members themselves.

After the Committees and Board complete their work and decisions are made, MTM Management is next in the process. MTM staff produce the reports that back up the dividends and then Megan and I lead the delivery process. I should also note that the fun of member check deliveries are enjoyed/conducted by our loss control team also. In the last three years MTM has distributed $9.5 million to its members. We are excited to make this the fourth year in a row. We only have 9 days until the close of 2017. Just like young children at Christmas, MTM Management are counting the days to a successful year end. Finally a big thank you needs to go to you, our MTM members for your loss control work. In the end, our lower rates and member dividends are made possible only because of our member’s support of the loss control efforts and your assistance in claims cost management.

More dividend news soon.

At the MTM annual members meeting October 19th, we had a couple terrific guest speakers and presented the current status for a members dividend in March 2018. At the meeting we also had the handoff of the MTM Chairman’s leadership from Kurt Heuser to Jack Accardo. Kurt was the Chairman for 5 years and below are some words about his experience.

For those of you who were unable to attend the October Annual Members meeting, an important leadership change was announced. After 5 years of being honored with the position of Chairman of the MTM Board of Directors, it was time for a new leader to take the reins. With nearly 100 MTM members present, I handed the Chairman’s gavel to Mr. Jack Accardo.

Jack is a long time MTM Board Member, Chairman of the MTM Finance Committee and CFO of Haller Industries in Detroit. Jack has the ability to bring common sense solutions to the table. I have known Jack for 15 years and I am confident about his leadership qualities.

Looking back I am very proud of the MTM Board, Officers, Staff and Member Owners. Here is what we accomplished together:

1. Our membership count has increased by 51% (Special thanks to the MTM Marketing staff).
2. Our premium income increased by 42%.
3. Our claims frequency is nearly half of what it was (special thanks to the MTM Claims and Loss Control staff).
4. The MTM staff is stable (last new hire or departure was over 4 ½ years ago) and with deep knowledge of the Michigan law.
5. The financial strength, member surplus increased by 280% (Special thank you to our Treasurer).

I would also like to thank: Mr. Al Gardner, investment advisor for MTM and Mr. Gary Wood. Gary retired as COO from the MTM in 2013. Today Gary continues with MTM as an underwriting advisor. Mr. John Karlen, President and CEO of MTMIC. John’s vast experience and knowledge has brought continuous innovation to the organization.

All of these factors contributed to some amazing owner benefits. In 2015, $2,500,000 was returned to members in the form of a dividend. In 2016, we were able to increase the dividend to $3,500,000. In 2017, a $3,500,000 dividend was returned with an added benefit of also an increase in premium credits (i.e. lower premiums paid by our members) that benefited our members to the tune of $1,700,000.

Together our Members, Staff and Board Directors have accomplished some amazing results. I am confident in the continued strength of the organization as we move forward.

As for myself, I continue as Director on the Board of MTM along with my duties as President of Bokum Tool Company, Inc. Bokum Tool is a 3rd generation cutting tool company located in Madison Heights and was founded in 1937.

Sincerely, Kurt Heuser

Over the last several months I have given you profiles on the MTM Board of Directors, Board Finance and Marketing Committees and staff. It is easy to overlook another integral part of the MTM team, and that is our outside actuary. First let me describe how the outside actuary comes into play in the insurance world. Once a year, as required by state insurance law, all insurance companies must get an outside opinion of its financial condition, specifically evaluations of losses and the adequacy of loss reserves to pay all claims. MTM management, each month and quarter, evaluates our claims cost. In insurance, different than most of our members’ production process, it can take years for us to know the final cost of our product. That is, a workers’ comp claim happens today, and we could be paying on that claim, if it was a disability claim, for months and years. Therefore, the cost of our claims becomes complicated by using estimates on what we know about the claim today, and what we will likely learn about our claims in the future.

While management does this monthly/quarterly review, each year at 12/31 we use an outside actuary to validate or change our estimates. For the last 16 years our outside actuary has been Cecilia LePere. A little bit of background on Cecilia. She graduated from Bloomsburg State University, with a Bachelor’s degree in Mathematics and followed that by getting her Master’s degree in Mathematics from Penn State. She passed her actuarial exams in 1986. She is a Senior Vice President at Casualty Actuarial Consultants, Inc. of Brentwood, Tennessee and has been there for 24 years.

Every 12/31, Cecilia takes all management reports and trending estimates from prior years, to come up with her own evaluation of loss costs as of 12/31. Near the end of January, Chris Doebler, MTM CFO and I meet with Cecilia to review her findings. At the completion of this review, we have an official number to publish to the regulators at the State of Michigan Insurance Department. With this number, we then are able to go to the MTM Board of Directors in February to declare how the year finally gets booked and what member dividend is possible.

For the last three years we have had great news for our members. You may recall that in March of 2015, the Board declared a $2.5 million member dividend. A year later in March of 2016, the Board increased the dividend to $3.5 million, and in March of 2017, the Board of Directors declared another $3.5 million dividend.

To get an early look of each year, we also ask Cecilia to complete a midyear 6/30 abbreviated review. This does not give us a firm number, but does provide information on how the year will likely end. This is helpful to the management team in Board meetings held in August and October, and is also for reporting to our members at the Annual Members meeting in October.

That is the Insurance 101 lesson for the month and shows another side of the MTM business. Cecilia is an important part of our process, and I can report that Chris Doebler and I enjoy working with Cecilia in having a debate about assumptions that go into making the final calculation. The net result to our members is that we have a financially stable company that gets high independent rating agency marks and also allows us to return profits to our members.

Harvey and Irma

Harvey and Irma continue to be front page news. Headlines in the paper “Insurance Premiums could Climb beyond Disaster Areas” and “Companies Look to Recoup Billions Paid in Hurricane Harvey and Irma”. This may be a good time for an insurance executive class 101. Reinsurance is insurance bought by insurance companies. A primary purpose of reinsurance is to cover catastrophic events not anticipated in day-to-day insurance operations. At MTM, we know that bad things can happen in our shops. A serious employee injury is something we deal with on a daily basis. But what if there was a shop explosion that seriously injured 10 or 20 employees or a vehicle accident with 5 employees affected. This could dramatically change our loss ratio for the year and the surplus cushion of the company for years to come. So, like most other insurance companies, MTM buys reinsurance.

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