MASSACHUSETTS MEDICAL MALPRACTICE REINSURANCE PLAN GOVERNING COMMITTEE Minutes of a Meeting Tuesday October 21, 2008

Transcription

1 MASSACHUSETTS MEDICAL MALPRACTICE REINSURANCE PLAN GOVERNING COMMITTEE Minutes of a Meeting Tuesday October 21, 2008 A Meeting of the Governing Committee of the Massachusetts Medical Malpractice Reinsurance Plan ( MMMRP ; the Plan) was held at the Executive Offices, 95A Turnpike Road, Westborough, MA on Tuesday, October 21, The following members were present: William T. McGrail, Chairman John S. Coldiron, MD, Vice-Chairman Gerald J. Cassidy (via teleconference) Jill A. Gold Peter T. Robertson, Esq. The following MMMRP Staff/Consultants/Sub-Committee members were present: Dolores Ivester, Director of Administration Moe Edwards, CPA, CFO Peter F. Kiely, Investment Committee James Bacon, Investment Committee Gerald Condon, Division of Insurance 1. Call to Order Mr. McGrail called the meeting to order at 9:35 AM. Dolores Ivester kept a record of the proceedings. 2. Quorum and Notice Mr. McGrail stated all committee members were in attendance, noting one member on conference call, and that a quorum was present at the meeting. Mr. McGrail reported that the required notices for the meeting had been sent to the Secretary of State, Executive Office of the Administration and Finance, and the Division of Insurance and placed on the Plan s website.

2 3. Minutes of Prior Meeting Mr. McGrail noted the minutes to the previous meeting had been distributed to all in attendance. A motion was made by Dr. Coldiron and duly seconded by Ms. Jill Gold to approve the July 22, 2008 minutes as presented. Mr. Cassidy noted a wording correction for one sentence on p.2 to which the word up will be added after phrase loss adjustment expenses were. The motion as corrected passed unanimously. 4. Financials Mr. Moe Edwards, CFO Second quarter financial reports had been distributed comprised of unaudited financial statements through June 30, 2008 prepared by Mr. Edwards as well as Summary of Ceded Policies Written, Ceded Policies In Force and Ceded Policies by Risk Category reports prepared by Ms. Ivester. Mr. Moe Edwards reviewed the Balance Sheet, making note under Assets that Cash is down due to increase in claim payouts and under Liabilities that Case Reserves dropped to $15M in the 3 rd quarter. Mr. Edwards continued and reviewed the Income Statement first making note of Losses and LAE paid of nearly $5M. Per Ms. Ivester, based on 3 rd quarter payouts and 4 th quarter invoices already in-house, he estimated year-end total of $9M significantly over $4M budgeted and affecting cash needs for the Plan. Mr. Edwards expects IBNR to drop by year end and this along with assessment return and confidence level will be further discussed with Towers Perrin at the upcoming Compliance Committee meeting. Mr. Edwards explained more details of the loss the Plan has experienced in its equity portfolio with Lehman bonds which are down 90% of their value. Based on information from its accountant, actuary and investment advisor, the Plan will need to make a decision on how to handle current investments (including Lehman bonds) with regard to tax implications and assessment return as year-end approaches. Mr. Cassidy commented that the Plan should proceed with caution when deciding on an assessment return to make sure too much is not paid back too quickly to allow for 2

3 forthcoming claim payments. Mr. Kiely provided more specifics of the Lehman bond holdings which now have a value of $66K coming from a cost of $753K. The Investment Committee is waiting for additional analysis due at its next scheduled meeting in early December to make any decision on assets. The committee discussed and concluded it will probably take considerable time for Lehman bonds to work back to their currently anticipated $30 recovery. Mr. Edwards noted that the Plan will probably need to do some sell offs of bonds to produce enough cash for assessment return, claim payouts and/or operating costs with only $4M currently available in cash at Madison Scottsdale. Mr. Edwards was asked to have most current financial scenario for both this year and next year available for Governing Committee meeting scheduled for December 9. Mr. McGrail noted that the Governing Committee will have to make final financial decisions for this fiscal year at the December meeting. Mr. Edwards had already stated anticipated claims payouts for the year and added that the Income Statement is very subject to change based on Investment Income results and Governing Committee final decisions. Mr. Cassidy asked for clarification on several policy totals on the Ceded Premium by Risk Category report. Ms. Ivester will follow up with specific details of the policies in question. A motion was made and duly seconded to approve the unaudited June 30, 2008 financial reports as presented. The motion passed unanimously. 5. Global Financial Situation Mr. Peter Kiely and Mr. James Bacon Mr. Kiely described that the Investment Committee has been in repeated contact with the investment advisors to oversee the Plan s increasing cash needs. He followed with a synopsis of what led to a crisis in the credit markets and eventually panic in the financial markets due to factors including imprudent lending and borrowing, over-leveraging by banks and hedge funds and inadequate regulations. He compared today s market crisis as very different from the 1929 crisis in that the market was overvalued in All in attendance had received a handout from Mr. Kiely which he reviewed and a copy is included with the minutes. Total assets for the Plan 3

4 are $48.4M which include cash holdings at Clinton Savings and Avidia Bank not included in the handout graphs. He pointed out in graph p2 that the Plan had changed to an ETF driven equity portfolio over the last year. The remainder of the handout shows the Plan s bond portfolio holdings managed by Madison Scottsdale. Mr. Kiely noted the US Market is off 36% from its peak and foreign markets off more than 46%. Responses by world governments to the crisis have included interest rate cuts, guarantees for banks and bank depositors, direct investments in banks and direct purchases from the banking system. He points out there are small positive signs that the steps are working, but will take time. The Investment Committee has been advised to stand with the current bond portfolio including Lehman holdings and is awaiting further advisement at its next meeting in November. He notes the equity portion of the assets has fallen below the strategic 20% level, but the committee is hesitant to increase equities at this time due to uncertainty of Plan s year end cash needs. The Investment Committee has voted to recommend to approve the transfer of $3M cash from Madison Scottsdale to Avidia Bank for the Plan s anticipated cash needs. Mr. Kiely also noted the committee approved a section under Specific Investment Goals added to the Investment Policy Statement. It allows the fixed income investment manager to invest with a dual purpose objective of both book yield and total return. A copy of the revised IPS was available at the meeting and signed by the members in attendance while Mr. Cassidy will be sent the IPS to return with his signature. Mr. McGrail gave details on the Investment Committee s recommendation to transfer the cash from Madison Scottsdale which included performing due diligence on Avidia Bank s financial integrity despite Dubilo & Hill s advice to retain the funds with Madison. Mr. Bacon further pointed out the rate guarantee with Avidia versus fluctuation in a money market holding. A motion was made by Dr. Coldiron and duly seconded by Ms. Jill Gold to approve the transfer of $3M cash from Madison Scottsdale to Avidia Bank. The motion passed unanimously. Mr. James Bacon handed out a detailed packet to all in attendance titled Credit Crises & Consequences and a copy is included with the minutes. He reviewed the contents in 4

5 detail which included topics of: Roots; Catalysts; Now; Current Financial Regulation; The Way Out; Consequences and Impact on MMMRP Portfolios. The packet included a very insightful list and graphic of the financial regulation systems now in place showing all the inadequacies. The committee asked questions and discussed various aspects throughout the presentation. In addition discussions took place on the impact of the upcoming elections, oil prices, state and municipal deficits and Medicare/Social Security issues to resolve. It was concluded that long term the economy should revert to an inflationary period despite what is and should be a short term recession. 6. Other Business Mr. McGrail informed the committee of recent DOI hearings that were held on Medical Malpractice in both Boston and Worcester. He described the presentations by ProMutual, MA Academy of Trial Lawyers and Medical Protective representatives. The DOI will submit a report to the legislature by the first of the year. When a copy is available, it will be distributed to all MMMRP committees. Mr. McGrail reported on a recent meeting he attended with Robert White along with the Governor s Appointment Secretary and Director of Boards and Commissions in which the Governing Committee member reappointment letter to the Governor was discussed. He felt the information regarding the Plan s operation and appointments was well received by the Governor s representatives. No decision has been made on re-appointments. Mr. McGrail informed the attendees that Ms. Ivester had resigned her position with the Plan and thanked her for almost 5 years of service helping the Plan operate and achieve its goals. Next meeting dates were reviewed: Governing Committee, Tuesday December 9 and Operations Committee, Monday December 8. 5

6 7. Adjournment A motion was made and duly seconded to adjourn the October 21, 2008 Governing Committee meeting at 11:10AM. The motion passed unanimously. A true record transcribed on October 31, MMMRP Chairman/Officer ACTION ITEMS: Current: Ms. Ivester will send copies of P. Kiely and J. Bacon handouts to Mr. Cassidy. Ms. Ivester will follow up on questions by Mr. Cassidy on several policies on Risk Category Report. Ms. Ivester will send signature page and updates to IPS to Mr. Cassidy for his signature and return. Mr. Edwards will have up-to-date financial scenarios available at next Governing Committee meeting needed for cash, assessment and investment final decisions. 6