2011 LM Annual - lmick.com · Lawyers Mutual Insurance Company of Kentucky 1 Thanks to your continued support and loyalty Lawyers Mutual Insurance Company of Kentucky (LMICK) made

By Kentucky LawyersFor Kentucky Lawyers

Fitting Kentucky’s LegalMalpractice Needs

Annual Report 2011

SecretaryDavid L. YewellOwensboro – 2nd [email protected]

Stephen D. Wolnitzek Covington – 6th [email protected]

Marcia L. Wireman Jackson – 7th [email protected]

Beverly R. Storm Covington – 6th [email protected]

Board ChairJohn G. Prather, Jr. Somerset – 3rd [email protected]

Escum L. “Trey” Moore, IIILexington – 5th [email protected]

Marcia Milby Ridings London – 3rd [email protected]

Treasurer Daniel P. StrattonPikeville – 7th [email protected]

Glenn D. DentonPaducah – 1st [email protected]

PresidentRuth H. BaxterCarrollton – 6th district [email protected]

Bruce K. DavisLexington – 5th [email protected]

EXECUTIVE COMMITTEE

BOARD OF DIRECTORS

Charles E. “Buzz” English, Jr. Bowling Green – 2nd [email protected]

Lawyers Mutual Insurance Company of Kentucky

Annual Report 2011

Anne McMillin Louisville – 4th [email protected]

John G. McNeill Lexington – 5th [email protected]

Dustin E. Meek Louisville – 4th [email protected]

W. Douglass Myers Hopkinsville – 1st [email protected]

Margaret E. “Maggie” Keane Louisville – 4th [email protected]

Table of ContentsLetter to Our Policyholders . . . . . . . . . . . . . .1Claims Data . . . . . . . . . . . . . . . . . . . . . . . . . .2Lawyers Mutual’s Features . . . . . . . . . . . . . .3Statements of Admitted Assets, Liabilities and Policyholders’ Surplus . . . . . . . . . . . . . .4Statements of Operations . . . . . . . . . . . . . . .5

Statements of Changes in Policyholders’ Surplus . . . . . . . . . . . . . . . . .6Statements of Cash Flows . . . . . . . . . . . . . . .7Lawyers Mutual Insurance Agency . . . . . . .8QR Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Management and Staff . . . . . . . . . . . . . . . . .9


1

Thanks to your continued support and loyalty Lawyers Mutual Insurance Company of Kentucky (LMICK) made 2011 another landmark year. We are happy to report we made a profi t for the fi fth consecutive year, and our renewal rate for policyholders was 95%.

The Company’s success is due to the support of our policyholders, a dedicated Board of Directors, sound underwriting and effi cient claims management. We maximize the staff’s capabilities and operate responsibly. We continue to stand by the fundamental principle for which we were founded: we are here for Kentucky lawyers to provide malpractice insurance for the generations to follow.

Our policyholders understand our premiums are based solely on the claims experience of Kentucky lawyers. We operate in a conservative manner, and provide exceptional service in claims prevention and repair, as well as in our defense of our insureds.

Claims frequency and severity are challenging to predict. We continue to protect Kentucky lawyers from fi nancial loss by assuming millions of dollars of risk each year. As the charts on page two indicate, the highest number of claims continues to arise from the personal injury plaintiff area of practice.

The personal injury plaintiff area of practice has historically been responsible for the most claims reported, and resulted in a 15% increase in 2011 over 2010. Real estate claims are a close second in number. We are dedicated to preventing claims through risk management and strive to be accessible to address questions about potential claims, provide guidance, and resolve issues in a timely manner at no additional cost to our insureds.

Lawyers Mutual also provides free continuing education programs, sponsorship of a variety of meetings and events

for all practioners, and the production and distribution of The Risk Manager to all Kentucky lawyers.

In 2011, we: • presented at each district bar meeting and New Lawyer Program• sponsored 63 meetings and events for various local bar associations• distributed The Risk Manager quarterly• presented at 34 continuing legal education events• developed fi ve new CLEs on topics we believe valuable to the profession • promoted “Lawyers as Leaders” for lawyers with one to fi ve years experience.

Anyone interested in scheduling a CLE can view the complete list of topics at http://lmick.com/resources/schedule-an-ethics-cle.html or contact Nancy Meyers at 502-568-6100 or e-mail [email protected].

This past year we welcomed two new faces to the Board of Directors. Anne McMillin from Louisville fi lled the vacancy created when Ronald Gaffney retired from the Board, and W. Douglas Myers from Hopkinsville began his three year term as an offi cer of the Kentucky Bar Association. Anne, Doug, and all members of our Board, welcome any questions or feedback. Complete contact information for the entire Board can be found on the inside cover of the Annual Report or on our web site http://lmick.com/about-us/board-of-directors.html.

To ensure you are maximizing your policy coverage, a list of features can be found on page three. As always, we are thankful for your continued support. Please contact us if you have questions and again we thank you for allowing us to serve you as we embark on our 25th year.

April 2010

Letter to Our PolicyholdersApril 2012

John G. Prather, Jr.Board ChairJoBo

ather, Jr.ir

Asa P. “Pete” Gullett, III Chief Operating Offi cer

Ruth H. BaxterPresident


Annual Report 20112

Claims Frequency by Areas of Practice since 1986 *=since 2005

Area of Law PercentPersonal Injury Plaintiff ......................... 24%Real Estate .............................................. 21%Collection & Bankruptcy ........................ 10%Estate, Trust & Probate ............................. 8% Family Law ............................................... 7% Workers’ Compensation ........................... 6% Criminal Law ............................................ 4% Corporate & Business Organization .......... 3%Labor & Employment Law* ...................... 3% Personal Injury Defendant ........................ 2%Other ...................................................... 12%

Claims Frequency by Areas of Practice in 2011

Area of Law Percent Personal Injury Plaintiff ......................... 36% Real Estate .............................................. 13% Collection & Bankruptcy ........................ 13% Family Law ............................................... 8% Workers’ Compensation ........................... 7% Criminal Law ............................................ 5% Estate, Trust & Probate ............................. 5% Labor & Employment Law ........................ 3% Personal Injury Defendant ........................ 3% Corporate & Business Organization .......... 1% Other ........................................................ 6%

Claims Reported

86 84

5765

45

77

48

96

144

122 122

170ClaimsIncident Total

170

160

140

120

100

80

60

40

20

0

58

94

152

2007 2008 2009 2010 2011

Frequency of Claims

(Number per 100 lawyers insured)

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00

3.66

3.11 2.71

3.493.79

2007 2008 2009 2010 2011

3


• Immediate assistance in claims avoidance and claims repair

• Up to $10,000 for attorneys fees in defending a bar complaint (outside of policy limits) per policy period

• $500 loss of earnings, for each named insured, each day when attending a trial, arbitration, mediation, or deposition up to $10,000 (outside of policy limits) per policy period

• Coverage for acts, errors, and omissions anywhere in the world

• Mediator/arbitrator coverage• Coverage for non-lawyers for services performed in the course and scope of employment with the insured fi rm

• Penalty-free reporting for incidents or potential claims

• Immediate coverage for new partners, associates, and employees during the term of the policy, with no additional premium due until policy renewal

• Free extended reporting period endorsement (“tail” coverage) provided upon death

• Free extended reporting period endorsement (“tail” coverage) for retiring or disabled attorneys who have been with Lawyers Mutual for fi ve consecutive years

• CLE premium discounts

• New lawyer discount of 60% in the fi rst year of practice (with graduated discounts through the fourth year of practice)

Lawyers Mutual’s Features


4 Annual Report 2011

Statements of Admitted Assets, Liabilities and Policyholders’ Surplus December 31, 2011 and 2010

Admitted AssetsCash and invested assets: Bonds Cash, cash equivalents and short-term investments

Total cash and invested assets

Accrued investment incomeUncollected premiumsReinsurance balances receivableDeferred tax assetFederal income tax recoverableOther admitted assets

Total admitted assets

Liabilities and Policyholders’ Surplus

Reserves: Losses Loss adjustment expenses Unearned premiums Advance premiums

Total reserves

Reinsurance balances payableProvision for reinsuranceAccrued expenses and other liabilities

Total liabilities

Policyholders’ surplus: Paid-in surplus Unassigned surplus

Total policyholders’ surplus

Total liabilities and policyholders’ surplus

2011

$ 17,218,665 762,485 17,981,150

211,6431,129,443

205,763378,360

6,94818,783

$ 19,932,090

$ 5,800,3644,237,1522,148,251

405,496

12,591,263

144,68745,000

238,140

13,019,090

4,325,7922,587,208

6,913,000

$ 19,932,090

2010

$ 17,974,949 570,393

18,545,342

219,716 880,618 16,467 367,559 53,809 35,325

$ 20,118,836

$ 5,649,437 4,471,495 2,130,139 398,353

12,649,424

400,750 38,000 235,448

13,323,622

4,336,967 2,458,247

6,795,214

$ 20,118,836

Dean Dorton Allen Ford, PLLC, performed an independent audit of the Company’s 2011 fi nancial statements. A complete copy of the audited statements with all explanatory notes and the Independent Auditors’ Report is available upon request and is posted on Lawyers Mutual’s Web site http://lmick.com/about-us/fi nancial-reports.html.


5

Statements of OperationsYears ended December 31, 2011 and 2010

Premiums earned

Losses and loss adjustment expenses incurred

Other net underwriting expenses incurred: General expenses Net commissions (from) to reinsurers

Total other net underwriting expenses incurred

Underwriting loss

Investment gain: Investment income earned Net realized capital (losses) gains

Net investment gain

Other income

Income before federal income taxes

Federal income tax benefi t

Net income

2011

$ 4,930,139 4,674,152

1,054,746 (76,901)

977,845

(721,858)

719,694 2,134

721,828

56,478

56,448

64,049

$ 120,497

2010

$ 4,555,471 4,038,353

1,144,439 (97,652)

1,046,787

(529,669)

682,012 (31,717)

650,295

48,087

168,713

-

$ 168,713

1,000 -

800 -

600 -

400 -

200 -

0 -

966

722614

746650

2007 2008 2009 2010 2011

Net Investment Gain (Dollars in Thousands)



Statements of Changes in Policyholders’ SurplusYears ended December 31, 2011 and 2010

Balance, December 31, 2009

Net income for the year ended December 31, 2010 Change in surplus subscriptions Change in net unrealized capital losses Change in net deferred tax asset Change in non-admitted assets Change in provision for reinsurance


Net income for the year ended December 31, 2011 Change in surplus subscriptions Change in net unrealized capital losses Change in net deferred tax asset Change in non-admitted assets Change in provision for reinsurance


Paid-in Surplus

$ 4,344,031 - (7,064) - - - - 4,336,967 - (11,175) - - - -

$ 4,325,792

Unassigned Surplus

$ 2,418,652 168,713 764 31,254 (44,934) (128,202) 12,000 2,458,247 120,497 1,275 4,494 20,244 (10,549) (7,000)

$ 2,587,208

Total Policyholders’

Surplus

$ 6,762,683 168,713 (6,300) 31,254 (44,934) (128,202) 12,000 6,795,214 120,497 (9,900) 4,494 20,244 (10,549) (7,000)

$ 6,913,000

Policyholders’ Surplus (Dollars in Thousands)

7,000 -

6,000 -

5,000 -

4,000 -

3,000 -

2,000 -

1,000 -

0 -

6,3316,564 6,763

6,9136,795

2007 2008 2009 2010 2011


7

Statements of Cash FlowsYears ended December 31, 2011 and 2010

Cash fl ows from operating activities: Premiums collected, net of reinsurance Net investment income Miscellaneous income Losses and loss adjustment expenses, net of reinsurance Underwriting expenses Federal income taxes refunded

Net cash (used in) provided by operations

Cash fl ows from investment activities: Proceeds from investments sold, matured or repaid: Bonds Other invested assets

Total investment proceeds

Cost of investments acquired: Bonds

Total investments acquired

Net cash provided by (used in) investment activities

Cash fl ows from fi nancing and miscellaneous activities: Change in surplus subscriptions Other cash received (applied)

Net cash provided by (used in) fi nancing activities

Net increase (decrease) in cash, cash equivalents and short-term investments

Cash, cash equivalents and short-term investments, beginning of year

Cash, cash equivalents and short-term investments, end of year

2011

$ 4,450,507 785,246 56,478 (4,946,864) (985,676) 110,910 (529,399)

2,550,000 270

2,550,270

(1,849,332)

(1,849,332)

700,938

(9,900) 30,453 20,553

192,092

570,393

$ 762,485

2010

$ 3,110,861 724,410 48,087 (2,513,610) (1,224,846 ) - 144,902

1,756,900 1,383

1,758,283

(2,664,421)

(2,664,421)

(906,138)

(6,300) (270,635) (276,935)

(1,038,171)

1,608,564

$ 570,393

7,242

6,659 6,5066,681

6,650

7,500 -

7,000 -

6,500 -

6,000 -

5,500 -

5,000 -

4,500 -

4,000 -

3,500 -

3,000 -

2007 2008 2009 2010 2011

Gross Premiums Written (Dollars in Thousands)


Lawyers Mutual continues to offer a full range of probate and court bonds through The Bar Plan. This program distinguishes itself by offering 24-hour turnaround service, competitive rates and an attorney managed underwriting staff dedicated to working closely with attorneys to meet the

individual needs of attorneys and their clients. It is easy to apply for a bond. In addition to phone, fax and e-mail, we offer instant quotes and a fully automated online application option at https://lmia.onlinecourtbonds.com/.

For immediate access to the information in the annual report on Lawyers Mutual’s website, scan the codes below with your smartphone. If you do not have a QR reader on your smartphone, go to this site and download the free app. http://www.mobile-barcodes.com/qr-code-software/.

Rate StructureAdministrator, Executor, Conservator, Guardian and Small Estate Bonds

Amount of Bond Rate (All rates based on per annum basis)

Up to $15,972 $100.00$15,973 to $50,000 $100.00 plus $5.57 per thousand over $15,972$50,001 to $200,000 $290.00 plus $4.45 per thousand over $50,000

$200,001 to $500,000 $957.00 plus $2.76 per thousand over $200,000

$500,001 to $1,000,000 $1,784.00 plus $1.12 per thousand over $500,000

$1,000,001 and up $2,348.00 plus $.56 per thousand over $1,000,000

Court Bonds (Replevin, Injunction, Appeal and Attachment)

Premium

$5.97 - $22.18 per thousand depending on the type of bond

Lost Instrument Bond

Premium

$5.97 - $30.05 per thousand depending on the risk of the security that has been lost and whether or not the bond has a fixed or open penalty.

Notary Bonds

Term Premium$35.00

Note: All bonds are subject to a $100.00 minimum annual premium except notary.

Visit us at www.lmia.onlinecourtbonds.com or call our underwriters at 877.553.6376 from 8:00 a.m. to 5:00 p.m. Central Time.

Annual Reports andAudited Financials

Board of Directors

Schedule an Ethics CLE

Court Bonds


Probate & Court Bonds by Lawyers Mutual Insurance Agency

QR Codes


Jennifer S. BicknellClaims [email protected]

Jane Broadwater LongVice President & Claims [email protected]

Robert G. BreetzClaims [email protected]

Asa P. “Pete” Gullett, IIIExecutive Vice President & Chief Operating [email protected]

Sarah B. KessingerAccounting [email protected]

Dulaney L. “Del” O’Roark, Jr.Newsletter Editor; Claims, and Loss Prevention [email protected]

MANAGEMENT AND STAFF CLAIMS

John F. Reesor, CPA Vice President & Chief Financial [email protected]

Lois A. SmithVice President, [email protected]

Connie S. Harper Underwriting [email protected]

UNDERWRITING FINANCIAL

COMMITTEES

Audit & Finance – Daniel P. Stratton,Glenn D. Denton, Charles E. “Buzz” English, Jr., John G. Prather, Jr., Marcia L. Wireman

Claims – David L. Yewell, Ruth H. Baxter, Glenn D. Denton, Charles E. “Buzz” English, Jr., Anne McMillin, John G. McNeill, Dustin Meek, Marcia Milby Ridings, Beverly R. Storm, Stephen D. Wolnitzek, Marketing – Ruth H. Baxter, Dustin E. Meek, Escum L. “Trey” Moore, III, David L. Yewell

Nominating – Marcia L. Wireman, Bruce K. Davis, Glenn D. Denton, Escum L. “Trey” Moore, III

Underwriting – John G. Prather, Jr., Bruce K. Davis, Glenn D. Denton, Margaret E. “Maggie” Keane, W. Douglas Myers, Marcia Milby Ridings, Beverly R. Storm, Daniel P. Stratton, Marcia L. Wireman, Stephen D. Wolnitzek

Nancy L. MeyersMarketing [email protected]

MARKETING & SALES

ADVISORS & CONSULTANTS

ActuaryPinnacle Actuarial Resources, Inc.Roswell, GA

AuditorDean Dorton Allen Ford, PLLCLexington, KY

Investment BrokerPNC Investments, Inc.Louisville, KY

Reinsurance BrokerGuy Carpenter & Company, LLC Boston, MA

Waterfront Plaza323 West Main Street, Suite 600Louisville, KY 40202

502.568.6100 • 800.800.6101 www.lmick.com • [email protected]

Annual Reports andAudited Financials

2012 Annual Policyholders MeetingThe Annual Policyholders Meeting of Lawyers Mutual Insurance Company of Kentucky is scheduled for 8:00 a.m., Wednesday, June 6, 2012 in the Nunn Room, Galt House East, Louisville, KY. Included in the items of business are the election of a class of the Board of Directors and a report on Company Operations. As a reminder all proxies must be received by June 1, 2012.

We look forward to seeing you at the meeting.

Documents

2011 LM Annual - lmick.com · Lawyers Mutual Insurance Company of Kentucky 1 Thanks to your continued support and loyalty Lawyers Mutual Insurance Company of Kentucky (LMICK) made