The MCIT Board of Directors places the highest priority on maintaining the organization’s financial integrity and fully funded status. At the root of all decisions, including those related to future costs, member services and coverage enhancements, is an underlying commitment to the financial health of the pool.
It is with this backdrop that the board anticipates a report from MCIT’s long-time actuary each June on the merits of declaring a dividend. This year, Mark Doepke and Scott Anderson of Actuarial Advisors outlined the results of their analysis.
The report is the product of a comprehensive review of MCIT’s reserving and rate levels, net investment income and rate of return, claims performance in both the workers’ compensation and property/casualty divisions, and operational performance.
Rates, Investment Returns Factor into Decision
Although the actuaries concluded that MCIT is positioned to release fund balance to members this year, they reported that there are several factors affecting the amounts available.
Both divisions realized a decrease in contribution received from members in 2018 as compared to 2017. That is a direct result of the trend of rate reductions or rates remaining flat over the past several years, yielding fewer dollars available for investment.
Directly related to rate reductions is lower net investment income in both divisions, totaling $2.3 million, as compared to 2017.
The 2019 dividend announcement marks the 29th consecutive year MCIT has returned fund balance to its membership, bringing total dividends to more than $343 million. The 2019 announcement reflects the benefits of pooling and continued participation in MCIT.
Claims Development Influences Dividend
Where the analysis diverges is in a comparison of claims development between the two divisions. Doepke reported that workers’ compensation claim development was close to what was expected in 2018. The property/casualty division, however, saw a considerable increase in incurred losses (amounts paid and reserved on claims) over the year.
This was largely related to claims arising from law enforcement and jail operations. MCIT members reported an increased number of constitutional claims arising from jail suicides, deaths while incarcerated and claims related to inmate medical care with a net effect of reducing the amount available for dividends.
Consistent rate reductions meant fewer funds available for investment. Combined with a sluggish investment environment and higher-than-anticipated claim activity in the property/casualty division, the result is the lowest property/casualty dividend allocation since MCIT first declared a dividend in 1991.
After much discussion and reassurance from Doepke and Anderson that the financial health of MCIT remains strong, the board unanimously voted to return $10 million of fund balance to members in good standing. The 2019 dividend is split among the two coverage divisions this way:
- Workers’ compensation: $8 million
- Property/casualty: $2 million
Members are reminded that there is no guarantee of future dividends. The board evaluates the merits of returning fund balance on an annual basis, and a dividend is declared only when it is determined to be fiscally sound and financially prudent.
Checks Mail in November
Each member will receive notice of its specific 2019 dividend later this month, and the dividend checks will be distributed in November.