The final 2014 Financial Audit Review will be distributed to the AVMA by July 1, 2015, as stipulated by the Trust Agreement.

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1 May 18, 2015 AVMA Board of Directors Dr. Ron DeHaven, CEO AVMA Dear Doctors and Colleagues: We are pleased to prepare for your review the 2014 House of Delegates Annual Report of the AVMA Group Health and Life Insurance Trust (AVMA GHLIT), which we are submitting to the Board of Directors for referral to the House of Delegates, as appropriate. The final 2014 Financial Audit Review will be distributed to the AVMA by July 1, 2015, as stipulated by the Trust Agreement. Representatives of the AVMA GHLIT will be available during the Reference Committee #6 at the July meeting in Boston, should any member wish to ask questions regarding this summary. Sincerely, Dwight D. King, DVM Chair Enclosure

2 ANNUAL REPORT OF THE AVMA GHLIT TRUSTEES FINANCIAL YEAR ENDING DECEMBER 31, 2014 The Board of Trustees of the AVMA GHLIT submit the following report reflecting actions and activities of the GHLIT for the period Jan Dec, Mission Statement We are veterinarians serving the profession by educating the membership and providing value-based products and services to uniquely protect the financial security of the veterinary community and their families EXECUTIVE SUMMARY 2014 was a milestone year for the AVMA GHLIT as it marked the first time in the 58 year history of the Trust that medical insurance was not offered to veterinarians as a group product. Although the significance of this change should not be minimized, the Trust is thriving and financially stable, as will be reflected in this report. 69,901 total policies were issued to 28,003 AVMA members. New Trustee appointed July Dr. Renee Schmid, replaced Dr. James Brandt 88 Brand Partners began the quantitative and qualitative research to gain insight from key constituents as we develop a brand strategy. Phase 1 of this project was completed in The GHLIT has joined with AVMA, SAVMA and AVMA PLIT as a sponsor for the ALL for Students program by contributing $100,000. Continued to pay medical claims throughout 2014 for dates of service in 2013 and prior. Claims administration for most insurance products has now been transitioned to New York Life. Added the salary for a Relief Veterinarian to the list of covered expenses under the Professional Overhead Expense (POE). AVMA GHLIT Board of Trustees approved a new Mission Statement (see above) AVMA GHLIT Annual Report / Page 1

3 This Executive Summary marks the first report reflecting the AVMA GHLIT activities and financial status on a calendar year reporting period versus a fiscal year; covering Trust operations from January 1 - December 31, We will highlight information on financial status, Trust participation, product offerings, member services and marketing initiatives. FINANCIAL STATUS Effective Jan 1, 2014, the group medical coverage previously offered by the GHLIT underwritten by NYLIC, was terminated. As a result, the gross premium collected for all remaining GHLIT products in 2014 decreased approximately 79% from the prior period. Even with such a drastic change, the GHLIT management team positioned the Trust to be in a strong financial position by creating adequate reserves, increasing product sales, managing expenses and maximizing short-term investment opportunities. The GHLIT remains very strong financially. Cash and reserves of $229.2M remain in Trust accounts, even after suffering a loss of approximately $31.0M caused by medical claims run-out charges for claims paid in 2014 with dates of service in 2013 and before. Run-out claims adjudication in 2015 will be nominal. Interest on deposits ranged from.25% for funds in a Money Market/CD to 4.94% for the CSR. Additionally, in 2014 the GHLIT established a Dividend on Deposit (DOD) account with NYL. These funds represent dividends paid by NYL out of positive plan experience after the claim reserves have been funded. The initial deposit for 2014 was $8.0M with an interest rate of 2.5%. Finally, all Life and Disability insurance certificates are supported by annual premiums, strong reserves, and ultimately by New York Life - one of the strongest insurance companies in the United States. AVMA members can be confident that these products remain robust, and that their future financial security is protected. TRUST PARTICIPATION Life and Disability insurance continue to be the AVMA GHLIT s premier products, and plan participation reflects this with the majority of the 28,003 unique AVMA members holding one or more certificates. Total policies inforce as of December 31, 2014 equaled 69, Member Participation As of December 31, 2014 reflects non-medical lives only 2014 AVMA GHLIT Annual Report / Page 2

4 Annual Convention MEMBER SERVICE As a way to show our commitment to AVMA members, the GHLIT once again hosted a Wellness Booth at the AVMA Convention. The 2014 Wellness Booth had 537 participants who took advantage of the personal evaluation. Wellness Booth Results Rabies Titer Participants Besides offering the Wellness Booth at the AVMA Convention, we also had the opportunity to partner with Zoetis and conference organizers at the 2014 North American Veterinary Conference and the Western Veterinary Conference. In total, the GHLIT spent nearly $30,000 to provide this service to veterinarians. Student Services Even with significant changes and uncertainty to Trust revenue in 2014, the Trustees felt it important to continued our commitment to those entering our profession. Direct donations to student activities were $130,000 including $100,000 to the ALL for Students program, $20,000 to the SAVMA One Health Project, $10,000 to the National VBMA and $1,500 to the SAVMA Faculty Leadership Conference, however indirect contributions included presentations to students throughout the year at no cost to the student organization or veterinary school and leveraging our network of GHLIT-appointed insurance agents to each CVM. BRANDING INITIATIVE In May 2014, the GHLIT engaged with 88 Brand Partners to assess the strength of our brand and outline a workflow that will evolve the brand to be more relevant to the membership. The process began by assessing the brand through review of current materials and Intake Sessions with key stakeholders including Trustees, staff and business partners. We solicited feedback from more than 1,300 veterinarians and veterinary students through focus groups, one-on-one telephone interviews and through an online quantitative survey. Perceptions of the GHLIT brand were explored, as well as the benefits to members and communications. Key insights learned allowed the following recommendations to be concluded: Establish a brand foundation that clearly defines who the GHLIT is today. Elevate the GHLIT above a commoditized landscape. Position the GHLIT as a valuable resource for making insurance-related decisions. Disability Income is the GHLIT s signature product. Develop a name and brand that more accurately reflects today s product offerings AVMA GHLIT Annual Report / Page 3

5 In 2015, we will continue our work with 88 Brand Partners with a targeted launch of our new brand in the autumn. Our work will include building on existing strengths and refresh key components of our brand foundation to ensure long-term effectiveness. PRODUCT OFFERINGS The Trust is committed to making available competitive insurance coverages that are aligned with the marketplace for every stage of a member s life and career. Our cornerstone products, underwritten by New York Life Insurance Company include: Life Insurance At the end of 2014, approximately 34,870 life insurance policies are in place for AVMA members, spouses and dependents. Total premium for life insurance policies in 2014 resulted in $13.8M in gross premium. Interest earned helps mitigate the impact of claims on reserves, therefore the adjusted claims loss ratio equates to 88.8%. Term insurance is designed to help protect members from unnecessary financial burdens and insure their family s financial security with a level premium for a 10-year or 20-year period. Premiums are based on the insured s age on the policy effective date, with benefit amounts ranging from $100,000-$1.0M. The current average annualized life insurance premium is $306 per year. Advantages of the GHLIT Term Life Insurance coverage: Eligibility - Applications for 10-year term coverage can be submitted up to age 70; applications for 20-year term coverage can be submitted up to age 60. Coverage can remain in force until age 80. Spouse/domestic partner and dependent coverage is available. Benefits can be assigned to a bank, loan, business partner, trust, etc to facilitate the purchase or building of a veterinary practice. An Accelerated Death benefit is available to policyholders under age 79; designed to provide terminally ill life insureds with the option to have a portion of their life insurance benefit paid while still alive, with no restrictions as to how the money is used. An optional Large Scale Accidental Death & Dismemberment (AD&D) coverage is available to protect against the financial impact of a serious accident. Principal benefits are available up to $200,000. Short and Long Term Disability Income Insurance Approximately 27,200 policies are inforce for AVMA members and students which include long-term and short-term disability plans. Total premium for disability policies in 2014 resulted in $18.6M in gross premium. No premium increases have occurred in over 25 years and recent enhancements to the underwriting guidelines allow more veterinarians to qualify for this coverage. We will be keeping an eye on these coverages however, as the adjusted loss ratio for 2014 was 110.2%, although one year of experience is not enough to warrant change. Long Term Disability (LTD) is designed to protect a member s earning power if they are unable to work due to an accident, injury or illness. Premiums are based on the insured s age and health status at the time the policy is issued, with the exception of recent graduates who receive $2,500/month of coverage with no medical underwriting. Advantages of the GHLIT Long Term Disability coverage: Eligibility - Available to AVMA member veterinarians under age 70 and actively at work for at least 20 hours per week. Benefit amounts range from $1,000- $12,500 per month depending on the members age but will not exceed 60% of pre-disability net earned income. If permanently disabled before age 50, benefits can be paid for the life of the member AVMA GHLIT Annual Report / Page 4

6 A choice of elimination periods allows policyholders to customize a plan that meets their needs. Plans include 30-day, 60-day, 90-day or 120-day elimination periods. The longer the waiting period, the lower the premium, which are generally 40%-50% less than most competition and don t rise as the member ages. Rates are not based on gender or practice type which can cause some carriers to raise rates. Residual benefits may be paid to help offset a lower income after returning to work when a disability claim has been filed. Optional riders available: Future Purchase Option - as income rises, this option gives members the opportunity to increase coverage in the future without medical underwriting. Own Occupation Plus if a disability precludes a policyholder from returning to their previous occupation in veterinary medicine, this rider may allow a monthly benefit while working in an alternative occupation. Cost of Living Adjustment (COLA) after a disability benefit starts, this rider allows the monthly benefit amount to be adjusted to keep pace with inflation. Short Term Disability (STD) may provide income to a member who cannot work for a period of six months or less; it is a good compliment to LTD by providing a means of continual coverage throughout a disability. Advantages to STD include: Coverage is available to AVMA members who are under age 65 and work at least 20 hours per week. Two plan options are available allowing members to customize their coverage. Benefit amounts range between $200 - $5,000 per month. Premiums are not based on gender or practice type which can cause some carriers to raise rates, and do not increase with age. Because of the growing number of women in the profession, a maternity benefit has been added to this coverage. Regardless of prepartum or postpartum, maternity can be considered a disability with only a physician statement to qualify. The maximum benefit for pregnancy is 3 months. Professional Overhead Expense This coverage is intended to assist a member in paying their practice expenses while they are disabled, so they may not have to use their personal savings or disability plan benefits to stay in business. Approximately 3,300 policies were inforce in 2014 to cover professional expenses that continue to occur during an extended illness or disability. Advantages of Professional Overhead Expense (POE): Available to veterinarians who own their business, are under age 70 and work at least 20 hours per week. If the business is incorporated, a partnership or a joint tenant, the plan can cover the policyholders portion of expenses. Covered expenses include salaries for staff and relief veterinarians, rent, loans, utilities, equipment, etc. Rates are not based on gender or practice type, which generally allows GHLIT rates to be more competitive AVMA GHLIT Annual Report / Page 5

7 Benefit amounts range from $300 - $45,000 per month with two plan options available to allow customization of benefits. Benefits could be assigned to a bank, loan, business partner, etc as instructed by the policyholder. Student Coverage Options As a member of the Student Chapter of the AVMA (SAVMA), emerging professionals have special insurance needs. Although they have not yet established their veterinary careers, an illness or disability could impede their financial ability to complete their studies or launch a new career. The AVMA GHLIT student insurance products allow maximum coverage for individuals who may have more student debt than income. Student Life and Disability An insurance package designed especially for full-time veterinary students that combine $100,000 of term life insurance with $500 per month of disability coverage, if the individual is unable to attend classes. Advantages of the Student Life and Disability: Eligibility Available to US SAVMA members between the ages of 18-64, who are attending veterinary school full-time. Guaranteed-to-issue no medical underwriting. Flat premium regardless of age, gender or location. Disability benefits may pay up to 5 years, provided the insured remains disabled. A special Disability Semester Benefit may pay up to $2,000 in benefits if the insured misses two consecutive weeks of class requiring they withdraw from the balance of the academic year. Graduate Guarantee A suite of products offered to graduating SAVMA members as they launch their career. Products to choose from include Long Term Disability and Short Term Disability, Life Insurance, the Basic Protection Package which includes a rabies prophylaxis benefit, Hospital Indemnity Plan, Accidental Death & Dismemberment and Professional Overhead Expense. Advantages of the Graduate Guarantee: Eligibility - Coverage may be purchased at the time of graduation, or within 3 years of graduation through age 29. Guaranteed-to-issue - No medical underwriting. Promissory Note Premiums for the first 6 months can be financed by the GHLIT at a low 4% interest rate. Accrued interest will be waived if the note is paid by Oct 31 of the graduation year. Hospital Indemnity Plan Currently, approximately 3,000 policies inforce but seen as a growth market. Good compliment coverage for those with a high deductible medical plan. Out-patient surgical procedures or inpatient hospital stay is covered. Large Scale Accidental Death and Dismemberment protects veterinarians in the event they lose use of a limb or eye. Basic Protection Package this package includes accidental death/dismemberment and decreasing term life insurance plus a rabies prophylaxis benefit. Other insurance options include Dental Plan offered to both individuals and staff members. Vision Plan offered to both individuals and staff members. Long Term Care Insurance a product gaining in popularity as baby boomers age AVMA GHLIT Annual Report / Page 6

8 For more information on the above products, please visit our website at The Trustees continue to review additional products to offer veterinarians. MARKETING INITIATIVES A new marketing strategy for 2014 promoted non-medical product by taking on a more direct and statistical approach to the messaging. The marketing strongly urges members to seek coverage to protect their families and their income as well as establishes a sense of stability. New campaigns used infographics with dramatic statistical facts on injuries, illnesses and protecting your family. Marketing initiatives include adding short product specific videos to the website and a new student landing page. Google Remarketing Ads have also been added. Remarketing lets you show ads to users who have previously visited the GHLIT website as they browse the Web. It is a powerful way to stay engaged with the target audience. Respectfully submitted, Dwight D. King, DVM Chair Carolynn T. MacAllister, DVM Secretary-Treasurer David E. Granstrom, DVM, PhD, DACVM Liaison Trustee David C. Koncal, DVM Robert L. Hatch, DVM Gary R. Holfinger, DVM Blair Hollowell, DVM Martha O Rourke, DVM Paula C. Rode, DVM Renee D. Schmid, DVM 2014 AVMA GHLIT Annual Report / Page 7

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