MAG Mutual – Nothing But Profits

One need only look at the premium to loss comparison in the chart above to determine how MAG made a profit every year in the 1990’s and has continued to do so since 2000.

Even if medical malpractice insurance companies spend more than they make in premiums, they can be, and usually are, still profitable because they are able to take the premiums they earn, invest them in the financial markets and hold those premium and investment dollars for many years before they ever have to pay them out for a claim.  This “float” enables medical malpractice insurance companies to pay out considerably more money than they earn in premiums and still do quite well. 

MAG Mutual is a model of how a medical malpractice insurer can succeed in Georgia.  MAG Mutual reports in a recent publication that it is in such good financial shape that:

It paid $30 million in dividends back to its policyholders from 1994-2000[41]

In July 2001, MAG Mutual reported that it had over $558 million in assets, $176 million in policyholder surplus, and an “A” rating by A. M. Best[42] 

A legitimate question is why MAG has felt obligated to increase physician premiums instead of using its massive surplus to maintain level premiums or more moderately increase them. 

The truth is malpractice insurance is one of the most profitable lines of insurance in the industry. The National Association of Insurance Commissioners (NAIC) reports that medical malpractice insurers were the third most profitable of all insurers nationwide.[43] Profits from medical malpractice coverage were almost double the property and casualty insurance industry average in 1999 with malpractice garnering a 14.2% profit, and property and casualty lines making 8.2%.[44]

In Georgia, malpractice insurers were more profitable than any other line of insurance except for a few commercial and private auto lines.[45]  When different auto lines are combined, the NAIC reports that malpractice insurance was the most profitable definable line of insurance in Georgia from 1991-2000, the latest dates for which figures have been released.[46]

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