TEXAS MUTUAL INSURANCE COMPANY BEST'S RATING FIVE YEAR RATING HISTORY KEY FINANCIAL INDICATORS

Transcription

1 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 1 TEXAS MUTUAL INSURANCE COMPANY Tel: AMB#: FEIN#: East Highway 290, Austin, Texas, United States Web: Fax: NAIC#: BEST'S RATING The company is assigned the classification of NR-5 (Not Formally Followed) as it is a company that A. M. Best gathers information on and reports on, but is not formally evaluated for the purposes of assigning a rating. FIVE YEAR RATING HISTORY Best's Date Rating 06/20/08 NR-5 06/21/07 NR-5 06/02/06 NR-5 06/23/05 NR-5 06/25/04 NR-3 KEY FINANCIAL INDICATORS Statutory Data ($000) Direct Net Pretax Period Premiums Premiums Operating Ending Written Written Income , ,257 95, , ,763 78, , ,850 61, , ,023 24, , ,005 31,448 09/ , ,443-6,062 09/ , ,127 22,352 Statutory Data ($000) Total Policy- Period Net Admitted holders' Ending Income Assets Surplus ,843 2,182, , ,666 2,605,486 1,040, ,229 2,899,583 1,137, ,887 3,303,272 1,261, ,120 3,603,806 1,306,020 09/ ,566 3,524,466 1,298,636 09/2008 8,443 3,521,164 1,089,993

2 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 2 Profitability Leverage Liquidity Inv. Pretax Overall Oper. Period Comb. Yield ROR NA Inv NPW Net Liq Cash- Ending Ratio (%) (%) Lev to PHS Lev (%) flow (%) Yr Avg / XX -1.1 XX / XX 3.9 XX BUSINESS REVIEW Texas Mutual Insurance Company, formerly The Texas Workers Compensation Insurance Fund, was created in August 1991, through the passage of House Bill 62 by the Texas legislature, operates as a domestic mutual insurance company licensed to sell workers compensation insurance in Texas. The company was created to operate competitively in the Texas workers compensation insurance market and became the insurer of last resort, beginning January 1, 1994, when the Texas Workers Compensation Insurance Facility ceased writing new workers compensation insurance policies. The company was capitalized by a $300 million bond issue authorized by state law. Repayment of the Revenue Bonds was to be provided through maintenance taxes assessed on all insurance companies authorized and admitted to write workers compensation insurance in the state of Texas. As of December 31, 1999, the company had defeased or provided for reimbursement all amounts pertaining to the Revenue Bonds. The company operates through a nine member Board of Directors. Four of the Board members are appointed by policyholders with the remaining five members, including the chairman, appointed by the Governor and confirmed by the Senate BUSINESS PRODUCTION AND PROFITABILITY ($000) % of Pure Loss Product Premiums Written Total Loss & LAE Line Direct Net NPW Ratio Reserves Workers' Comp 751, , ,886,322 Totals 751, , ,886,322 Major 2007 Direct Premium Writings By State ($000): Texas, $751,916 (100.0%). PROFITABILITY ANALYSIS

3 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 3 Company Industry Composite Pretax Return Pretax Return Period ROR on Comb. Oper. ROR on Comb. Oper. Ending (%) PHS(%) Ratio Ratio (%) PHS(%) Ratio Ratio Yr Avg / XX XX XX XX XX 09/ XX XX XX XX XX UNDERWRITING EXPERIENCE Net Undrw Loss Ratios Expense Ratios Income Pure Loss & Net Other Total Div. Comb Year ($000) Loss LAE LAE Comm Exp. Exp. Pol. Ratio , , , , , Yr Avg / , XX XX / , XX XX INVESTMENT INCOME ANALYSIS ($000) Company Net Realized Unrealized Inv Capital Capital Year Income Gains Gains ,913 27, , ,936 36,123 69, ,015 51,700-15, ,916 44,818 57, ,827 36,673-35,227 09/ ,752 39,628 7,209 09/ ,097-13, ,872

4 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 4 Company Industry Composite_ Inv Inc Inv Total Inv Inc Inv Growth Yield Return Growth Yield Year (%) (%) (%) (%) (%) Yr Avg /2007 XX XX 4.9 XX XX 09/2008 XX XX -2.9 XX XX INVESTMENT PORTFOLIO ANALYSIS 2007 Inv Asset Assets % of Invested Assets Annual Class ($000) % Chg Long-Term bonds 2,385, Stocks 816, Affiliated Investments 21, Other Inv Assets 191, Total 3,415, BOND PORTFOLIO ANALYSIS % of Mkt Val Avg. Class Class Struc. Struc. Asset Total to Stmt Maturity Secur. Secur. Class Bonds Val(%) (Yrs) (%) (%) (%) (% of PHS) Governments States, terr & poss Corporates Total all bonds CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Pretax Total Net Operating Inv. Contrib. Year Income Gains Capital , , , , ,529 36, , , ,448 1,446 5-Yr Total 290, ,671 09/2007-6,062 46,837 09/ , ,781

5 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 5 Source of Surplus Growth Other, Change PHS Net of in Growth Year Tax PHS (%) , , , , , , ,530 44, Yr Total 3, ,348 09/2007-3,736 37, / , , QUALITY OF SURPLUS ($000) % of PHS Dividend Requirements Year- Cap Stk/ Un- Stock- Div to Div to End Contrib. assigned holder POI Net Inc. Year PHS Cap. Other Surplus Divs (%) (%) , ,040, ,137, ,261, ,306, /2007 1,298, /2008 1,089, LEVERAGE ANALYSIS Company Industry Composite NPW to Reserves Net Gross NPW to Reserves Net Gross Year PHS to PHS Lev Lev PHS to PHS Lev Lev / XX XX XX XX XX 09/ XX XX XX XX XX PREMIUM COMPOSITION & GROWTH ANALYSIS

6 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 6 Period DPW GPW Ending ($000) (% Chg) ($000) (% Chg) , , , , , , , , , , Yr CAGR Yr Change / , , / , , Period NPW NPE Ending ($000) (% Chg) ($000) (% Chg) , , , , , , , , , , Yr CAGR Yr Change / , , / , , LOSS & ALAE RESERVE DEVELOPMENT: CALENDAR YEAR ($000) Original Developed Develop. Develop. Develop. Unpaid Unpaid Calendar Loss Reserves to to to Reserves Resrv. to Year Reserves Thru 2007 Orig.(%) PHS (%) NPE Dev.(%) , , , ,838 1,087, , ,113,457 1,236, , ,350,550 1,380, ,138, ,615,918 1,596, ,436, ,857,020 1,857, ,857, LOSS & ALAE RESERVE DEVELOPMENT: ACCIDENT YEAR ($000) Original Developed Develop. Unpaid Acc Yr. Acc Yr. Accident Loss Reserves to Reserves Loss Comb Year Reserves Thru 2007 Ratio Ratio , , , , , , , , , , , , , , , , , , ASBESTOS & ENVIRONMENTAL (A&E) RESERVES ANALYSIS

7 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 7 Company Net A&E Reserve Net Reserves Retention IBNR Year ($000) (%) Mix (%) Company Industry Composite Comb Comb Comb Comb Survival Ratio Ratio Survival Ratio Ratio Ratio Impact Impact Ratio Impact Impact Year (3 yr) (1 yr) (3 yr) (3 yr) (1 yr) (3 yr) CEDED REINSURANCE ANALYSIS ($000) Company Industry Composite Ceded Business Rein Rec Ceded Business Rein Rec Ceded Reins Retention to PHS Reins to Retention to PHS Reins to Year Total (%) (%) PHS (%) (%) (%) PHS(%) , , , , , REINSURANCE RECOVERABLES ($000) Paid & Total Unpaid Unearned Other Reins Losses IBNR Premiums Recov* Recov US Insurers 47,961 13,955 61,916 Pools/Associations 1, ,278 Other Non-US 5,521 1,627 7,148 Total (ex US Affils) 55,239 16,103 71,342 Grand Total 55,239 16,103 71,342 * Includes Commissions less Funds Withheld INVESTMENT LEVERAGE ANALYSIS (% OF PHS)

8 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 8 Company Industry Composite Class Real Other Non-Affl Class 3-6 Estate/ Invested Common Inv. Affil 3-6 Common Year Bonds Mtg. Assets Stocks Lev. Inv. Bonds Stocks LIQUIDITY ANALYSIS Company Industry Composite Gross Gros Quick Current Overall Agents Bal Quick Current Overall Agents Ba Year Liq (%) Liq (%) Liq (%) to PHS(%) Liq (%) Liq (%) Liq (%) to PHS(% /2007 XX XX XX XX XX 09/2008 XX XX XX XX XX CASH FLOW ANALYSIS ($000) Company Industry Composite_ Underw Oper Net Underw Oper Underw Oper Cash Cash Cash Cash Cash Cash Cash Year Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%) , ,321-46, , ,011-5, , ,433-27, , ,876 51, , ,302 20, / , ,535 16, XX XX 09/ , ,602 5, XX XX HISTORY The Texas Workers Compensation Insurance Fund was formed in August 1991 through the passage of House Bill 62 by the Texas Legislature as a governmental corporation licensed to sell workers' compensation insurance in Texas effective January 1, The Texas Workers' Compensation Insurance Fund was created to operate competitively in the Texas workers' compensation insurance market and became the insurer of last resort, beginning January 1, 1994, when the Texas Workers' Compensation Insurance Facility ceased writing new workers' compensation insurance policies. Effective September 1, 2001, the Texas Workers' Compensation Insurance Fund became Texas Mutual Insurance Company (the "company") through the passage of Texas House Bill The legislation mandates that the company operate as a domestic mutual insurance company with the consent of the Commissioner of Insurance to write workers' compensation insurance in the State of Texas. Although the Texas Legislature established the company, all monies, revenues and assets belong solely to the company and may not be borrowed or appropriated by the State of Texas. In addition, as a mutual organization, the company is no longer subject to the Texas Sunset Act, Chapter 325, of the Government Code. The company is treated by the State of Texas as a commercial insurance company subject to the rules and regulations of the Texas Department of Insurance ("TDI"). The company will continue to serve as a competitive force in the Texas workers' compensation insurance market and as the insurer

9 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 9 of last resort. MANAGEMENT The Texas Workers' Compensation Insurance Fund had a nine-member Board of Directors (the "Board") made up of Texas business employers who were appointed by the Governor and confirmed by the Senate. Effective September 1, 2001, the company continues to have a nine-member Board; however, the Governor appoints only five members, including the chairman, and the company's policyholders elect the remaining four. Legislation prohibits the appointment of any person who has a potential conflict of interest because of other involvement within the insurance industry. Officers: President, Russell R. Oliver; Chief Operating Officer, Ronald O. Wright; Senior Vice Presidents, Perry M. Barron, Lisa M. Corless, Elliot S. Flood, Terry L. Frakes, Cecily A. Gallagher, L. Randall Johnson, William A. McLellan, Jr., Mary B. Nichols. Directors: Robert C. Barnes, Judy S. Broussard, Richard A. Cooper, Jay L. Eisen, Delia M. Reyes, James D. Ross, George Wesch, Jr., Charles H. Whiteside. REGULATORY An examination of the financial condition was made as of December 31, 2004 by the Insurance Department of Texas. The 2007 annual independent audit of the company was conducted by Deloitte & Touche, LLP. The annual statement of actuarial opinion is provided by Mark M. Mulvaney, Milliman USA. The company is licensed in Texas. TERRITORY BALANCE SHEET ($000) ADMITTED ASSETS 12/31/ /31/ % 2006 % Bonds 2,385,475 2,135, Preferred stock 1,493 1, Common stock 815, , Cash & short-term invest 106,586 85, Other non-affil inv asset 56,444 20, Real estate, offices 21,698 19, Total invested assets 3,386,888 3,107, Premium balances 180, , Accrued interest 28,535 24, All other assets 7,539 7, Total assets 3,603,806 3,303,

10 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 10 LIABILITIES & SURPLUS 12/31/ /31/ % 2006 % Loss & LAE reserves 1,886,322 1,651, Unearned premiums 341, , Conditional reserve funds All other liabilities 70,001 69, Total liabilities 2,297,786 2,041, Unassigned surplus 1,306,020 1,261, Total policyholders' surplus 1,306,020 1,261, Total liabilities & surplus 3,603,806 3,303, SUMMARY OF 2007 OPERATIONS ($000) FUNDS PROVIDED STATEMENT OF INCOME 12/31/2007 FROM OPERATIONS 12/31/2007 Premiums earned 729,530 Premiums collected 732,297 Losses incurred 476,977 Benefit & loss related pmts 242,968 LAE incurred 47,723 Undrw expenses incurred 178,940 LAE & undrw expenses paid 218,805 Div to policyholders 138,462 Div to policyholders 138,380 Net underwriting income -112,571 Undrw cash flow 132,143 Net investment income 143,827 Investment income 144,968 Other income/expense 191 Other income/expense 191 Pre-tax oper income 31,448 Pre-tax cash operations 277,302 Realized capital gains 36,673 Net income 68,120 Net oper cash flow 277,302 INTERIM BALANCE SHEET ($000)

11 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 11 ADMITTED ASSETS 03/31/ /30/ /30/2008 Cash & short term invest 37, , ,649 Bonds 2,514,327 2,517,714 2,439,717 Preferred stock 1,492 1,492 1,490 Common stock 767, , ,110 Other investments 79,148 81,949 66,249 Total investments 3,400,317 3,474,939 3,285,214 Premium balances 199, , ,121 Reinsurance funds 995 1,253 1,809 Accrued interest 31,072 29,063 30,578 All other assets 6,011 5,735 5,442 Total assets 3,638,115 3,716,281 3,521,164 LIABILITIES & SURPLUS 03/31/ /30/ /30/2008 Loss & LAE reserves 1,954,273 2,010,117 2,023,645 Unearned premiums 358, , ,346 Conditional reserve funds All other liabilities 41, ,590 62,149 Total liabilities 2,354,254 2,574,414 2,431,171 Unassigned surplus 1,283,860 1,141,867 1,089,993 Policyholders' surplus 1,283,860 1,141,867 1,089,993 Total liabilities & surplus 3,638,115 3,716,281 3,521,164 INTERIM INCOME STATEMENT ($000) Period Ended Period Ended Increase/ 09/30/ /30/2007 Decrease Premiums earned 568, ,787 21,426 Losses incurred 314, ,036-24,582 LAE incurred 53,794 54, Underwriters expenses incurred 137, ,621 5,798 Div to policyholders 162, ,094 27,036 Net underwriting income -99, ,191 13,607 Net investment income 122, ,752 15,344 Other income/expenses Pre-tax operating income 22,352-6,062 28,414 Realized capital gains -13,909 39,628-53,537 Net income 8,443 33,566-25,123 INTERIM CASH FLOW ($000)

12 Best's Insurance Reports - Property Casualty, US, 2008 Edition ( Month Supplement, Version ) Page 12 Period Ended Period Ended Increase/ 09/30/ /30/2007 Decrease Premiums collected 554, ,038 11,694 Benefit & loss related pmts 193, ,169 14,160 Undrw expenses paid 182, ,093 7,509 Div to policyholders 158, ,798 26,539 Underwriting cash flow 20,465 56,978-36,513 Investment income 119, ,180 11,667 Other income/expense Pre-tax cash operations Net oper cash flow , , ,535-25, , ,535-25,934