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.
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.
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:
- Our membership count has increased by 51% (Special thanks to the MTM Marketing staff).
- Our premium income increased by 42%.
- Our claims frequency is nearly half of what it was (special thanks to the MTM Claims and Loss Control staff).
- The MTM staff is stable (last new hire or departure was over 4 ½ years ago) and with deep knowledge of the Michigan law.
- 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.
Payroll renewal forms have been sent out to all insureds that have an effective date in January 2018. We are asking for your estimated annual payroll for 2018 which assists in reducing the chance for additional audit money due and the end of your policy. Please complete the form and return it to Glenda Moyle or an additional copy can be requested at Glenda.Moyle@mtmic.com/blog.
Thursday, October 19
11:00 am – 2:00 pm
The Inn at St. John’s
It is almost time for the MTMIC Annual Member Meeting and there is still time to RSVP if you haven’t already done so. Invitations went out in the mail a few weeks ago and registration can be emailed to Patty Allen at Patricia.Allen@mtmic.com/blog until October 12th. We have an exciting agenda, great raffle prizes and hope to see you there.
In the last two weeks I attended the Michigan State insurance association meeting, MTM Board meeting, the summer MTM staff picnic, and some MTM member shop visits. After these meetings I was reminded how different and special MTM is.
The insurance association meeting was attended by many fine people. In the group discussions, I was reminded that as good as these people are their master was most often the company stockholders. At the end of the day their products and services are built to reward their stockholders. At MTM with Board and Committee meetings held in our office, staff is constantly reminded that we exist solely because of our members. MTM is not a large or international insurance company, but rather a small group of shop owners who believe in combining their safety efforts to reduce the cost long term of their workers’ compensation insurance.
At the MTM Board meeting with the officers and managers in attendance, we get to hear the discussion and direction from ten Board members who are also MTM members. The personal and fiduciary focus is for what’s best for MTM members at large. Each summer we hold a MTM staff picnic. To change the pace a bit, this year’s picnic was held at the Rod Stewart outdoor concert. Given the age of most staff members, Rod Stewart is an icon. His singing of Forever Young while doing calisthenics (Rod is 72 years old) was amazing. This event also reminded me of the special MTM staff. Nearly all staff members have at least 30 years of experience. Most of that experience is with MTM. As an example, Glenda, who handles premium and endorsement underwriting service questions, has been with MTM for 36 years. Chris, our CFO, 29 years. Donna, VP of Claims, 22 years. Cindy, our Senior Claims Adjustor, 27 years, and our Claims Technician, Marci, 29 years. I could go on but you get the gist.
Last week while I was at the insurance association meeting, I arrived at the meeting hall about an hour early. With that extra time I wandered through the meeting hall and I noticed that a meeting room had an MTM member name on it. Shortly, some management members of that company arrived and I talked with them in the hall. I found out that not only were they having a management update meeting, but they were also celebrating the company’s 90th anniversary. A few days later I was visiting another member and saw in their lobby a sign that they were celebrating their 50th anniversary. MTM is full of these stories. We have history, traditions, dedicated long term staff, a focused Board and loyal members. What a winning combination. Until next time, enjoy the summer.
“Members own and direct” is more than an MTM saying. It is something that we live by daily whether it be a member’s dividend program that in large equated to an average 23.4% of each member’s premium, or as I often say, my bosses as President of MTM are my 10 Board of Directors that own and operate shops like yours. All Board members have shop ownership benefits and challenges like our regular MTM members at large.
In 2016, the Board authorized a Board Finance Committee. This Committee was to give management guidance on investments and company budgets as well as membership input and oversight to the professional MTM insurance managers. This year, the Board authorized a Board Marketing/Underwriting Committee. Like the Board Finance Committee, the Board Marketing/Underwriting Committee is to give membership input and oversight to the MTM insurance managers. This new Committee held 1its first meeting June 20th and is chaired by Board member, Brad Lawton of Star Cutter Company. A second Committee member, Jerry Decker, is also an MTM Board member and President of Precision Boring Company. Two committee members at large are Bob Joly, President of Hancock Enterprises, and Mark Mullen, President of Griggs Steel Company. This Committee’s management liaison is Megan Brown, VP of Sales and Marketing. Also attending the meeting were Kurt Heuser, MTM Chairman of the Board, Chris Doebler, MTM CFO and me.
The Board of Directors and Committee members are available to you at any time and appreciate your feedback. Recently the website, www.mtmic.com/blog, has been updated with photos of the Board of Directors and Committee Members with the hopes that you find it beneficial to have a name and a face for these groups. If you have an idea for MTM, never hesitate to contact one of the Board members, Committee members, or any of the staff at MTMIC. MTM exists solely for the benefit of our 883 member owners.
Until the next time, I always appreciate your input and support. Please enjoy the summer.
By Travis Halsted, Loss Control Consultant
MTMIC is proud to announce that there are several new safety videos available to you on the MTMIC Client Portal. The videos that were recently added to an already extensive streaming video collection include; Bloodborne Pathogens, Walking and Working Surface Safety, First Aid Awareness, Lockout/Tagout Practices and Procedures, and Safety Awareness: Attention to Detail. While these videos can be vital in assisting you in providing a proactive safety culture, it is important to point out that there have been no recent rule changes pertaining to these topics, and these videos were added only as another valuable resource that MTMIC has to offer. If you need assistance logging into the Client Portal, please do not hesitate to contact Patricia Allen at (248) 715-0013 or sales@mtmic.com/blog.
Look for your invitation in the mail soon!
The Inn at St. John’s – Plymouth, MI
October 19, 2017
11:00 am – 2:00 pm
Agenda
Shoulder Evaluation: The Industrial Athlete and a Return to Work Approach
Scott Smith, MPT
Senior Regional Director – ATI Physical Therapy
Living by Design
James E. Blessman, Jr., MD, MPH
Wayne State School of Medicine Health Officer, Assistant Professor / Department of Family Medicine & Public Health Sciences
Company Overview: A Year in Review
John R. Karlen, CPCU, APA, ARe
President
MTMIC Dividend History: An Early Look at 2017
Chris Doebler, CPA
Chief Financial Officer
Please Join Us!
It is hard to believe that three years and six months ago I left my keys on the desk and walked out of my office door for the last time. Who would have thought that after that much time I have been asked to write for the MTMIC Newsletter?
Normally I start my dialogue with a weather report from the Arizona desert but, after my recent trip to Michigan on a joint business and personal trip I will confirm that 90 degrees with 90% humidity is roughly equal to 108 degrees with 15% humidity. For the first time since 2013 my wife accompanied me to visit the kids and grandkids. It was great for her to see them but the 5th grade graduation ceremony in a packed non-air-conditioned gym was a reminder to both of us how warm it can get in Michigan.
Some of you may know that I have not completely disappeared from the roster at MTMIC. I continue as an employee of MTMIC as an underwriting consultant to the President. The company has continued to flourish in my absence and the staffing has remained at the same level, except for the addition of me in a part-time capacity.
Once again MTMIC will be sending out a customer survey to gather your input on how we are doing. If you receive an email from sales@mtmic.com/blog for a Survey Monkey survery, please complete it so that we can continue to improve our service. Should you have any questions, please contact Patty Allen at (248) 725-0013.
Our Annual Meeting will be taking place on October 19th, 2017 at The Inn at St. Johns in Plymouth, Michigan.
We are excited to announce that Dr. James E. Blessman will be one of our featured speakers at the Annual Meeting
As a graduate of Cass Tech High School, University of Michigan, and Michigan State University, Dr. Blessman is board certifed in both Internal Medicine and Occupational Medicine. He is also an assistant professor in the Department of Family Medicine Public Health Sciences, where he has practiced preventive medicine for over 25 years. He has served in many roles to include Medical Director for Risk Management at the City of Detroit for 18 years with overlapping roles as the Medical Officer of the Detroit Health Department for 8 years. He has also served on several boards of directors and national committees where his knowledge of occupational and environmental medicine has been highly sought. He currently serves as the CURES COEC co-director, which helps to connect WSU environmental health research with the community, as well as the medical director of occupational health services for Michigan Urgent Care. His passions surround optimizing health through both hazard reduction, and health promotion, emphasizing social tness through a tool known as the Citizen Report Card. His vision is a “City of A’s”, which is why he can often be seen with “the hat”.
Normally, each month, I give you a technical critique on some Workers’ Comp issue or provide an update on company financials. Often, our members ask me about an update on the Members’ Dividend Program. Since the Member’s dividends were delivered in March and we’re still early in the year to give any financial predictions of 2017, I thought I might use this time to tell you about my upcoming four-year anniversary as President of MTM.
At the annual meeting, I often start out by telling you about the amazing MTM staff. Our employees at MTM, on average, have been with the company for over 20 years. In fact, a statement I often use at the annual meeting is, in 2017, we had no new hires, 2016, no new hires, 2015, no new hires, 2014, no new hires, and I was the last new hire when Gary Wood retired in 2013. Pretty amazing to say that we have had no staff turnover in four years. And the last staff turnovers we have had have all been because of retirements. This staff stability means that you have been dealing with Glenda for over 35 years, you’ve been dealing with Chris for 25 years, you’ve been working with Donna for 25 years. And I could go on. You know the managers and staff members of MTM very well.
The same stability applies to the MTM Board. Eight of our 10 Board members have 1been with the company for 15 years or more. A few of them have over 25 years of experience with MTM. The Board has been committed to member needs and yet gives the insurance professionals latitude to do what we do best. I am appreciative at every meeting for the guidance they provide the MTM management team.
There’s no surprise that with the vision of the Board and the insurance expertise of staff that the results have been remarkable. In my four years, we’ve seen the member count increase by 24%. We’ve seen the financial stability, as measured by surplus, increase 149%. At the same time we increased the member surplus of the company, we have returned $9.5 million in owner dividends. These outstanding results are possible because of the three-legged stool: loyal membership, a good Board, and a technically-competent staff.
On the personal side, one of the reasons I have been able to focus on company issues is that family issues have been minor and rare. My wife Patty has been tolerant of me for 42 years. What most people do not know is that not only did Patty and I date through college, but she also chased me in the kindergarten playground. Of course, she was much bigger than I was and, therefore, could out run me. But I have pictures of this event and can say in a small town of Boring, Oregon, she did not select me, because of any wonderful attributes, but because in a tiny town – I was probably a high rating “pick”. The Karlen family includes my son who is very tall, very blonde, and very smart. Therefore, I have no genetic ties to him whatsoever. He is an electrical engineer/patent attorney in Seattle and London. Ten years behind Little John is my daughter, Laura. She just graduated from Western Michigan in Integrated Supply Management and will soon be off the family payroll as she starts her job with Rolls-Royce.
So, you have a little bit of an update on the company results over the last four years and a little more of a picture of my family. I have to say it has been a fun and quick-paced four years for me at MTM. I expect much like the recent past, for the next few years the pace will stay the same (or even speed up) and that the challenges will likely be similar.
I am looking forward to a couple long summer weekends and, in the meantime, will greatly enjoy visiting and touring your shops.
