NEW PRODUCTS.NEW MARKETS.

NEW OPPORTUNITIES.

20I9 ANNUAL REPORT

TABLE OF CONTENTSMessage from the Chairman ................................................... 3

Excellence in Coverage and Access ........................................ 4

Risk Management Expertise to Fit Any Practice .................... 5

Compassionate, Comprehensive Claims Support .................. 6

Financially Strong and Poised for Growth .............................. 7

Board of Directors/Company Information .............................. 8

Our 2019 Annual Report highlights ISMIE’s continued focus on new products,

new markets and new opportunities—for our company and our policyholders

nationwide who trust us to protect their interests and needs.

This year ISMIE and its affiliates capitalized on opportunities by continuing to transform,

adapt, and excel to meet the constantly shifting—and increasingly unique—needs of our

policyholders and the markets we serve. We continue to expand and diversify, keeping a

sharp eye on the future while remaining true to our core tenets of quality, protection, service and value. As you will

see throughout this report, such an approach assures we remain financially strong and target new markets and

business opportunities, allowing us to build additional value for our policyholders now and well into the future.

These past 12 months have been marked by significant growth. Our A- AM Best rating was reconfirmed

and we’ve launched new, innovative products and coverage options to benefit our policyholders. We have

also developed platforms that open up new conduits of protection for physicians, healthcare administrators,

hospitals and healthcare entities. In addition to our longstanding coverage options, ISMIE also offers:

n Increased limits and product capacities for hospitalsn Risk Purchasing Group (RPG) coverage optionsn Reinsurance options for unaffiliated Risk Retention Groups (RRGs)n Deductible and Self-Insured Retention (SIR) programsn Reinsurance options that allow customers to spread risk on a quota-share or excess-of-loss basisn Fronting arrangements for captive insurers and self-insured healthcare organizations

ISMIE continues to seek unique opportunities to strengthen our company—and in turn our policyholders—and position it for long-term success. For example, our merger with the Southeast Michigan Physicians’ Insurance Company (SEMPIC) brings ISMIE’s outstanding coverage, risk management and claims support to health professionals at Detroit Medical Center hospitals and facilities. We also launched new affinity programs and ISMIE continued our highly successful Risk Management Symposium, connecting policyholders with nationally-renowned healthcare leaders who discussed leading issues impacting medicine today.

Healthcare is evolving today at an incredible pace. But no matter the changes, the methods of delivery or the platforms used to provide care, ISMIE remains steadfast in supporting our policyholders.

As we embark on a new decade, we are proud of all we are accomplishing together—and look forward to the future and the opportunities ISMIE and our policyholders have in front of us in 2020 and beyond.

Paul H. DeHaan, MDChairmanISMIE Mutual Insurance Company

MESSAGE FROM THE CHAIRMAN

“We continue to expand and diversify, keeping a sharp eye on the future while remaining true to our core tenets of quality, protection, service and value.”

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PROTECTION AS UNIQUE AS OUR POLICYHOLDERS

As medical practice models evolve, ISMIE remains at the forefront of customized coverage for healthcare professionals in all environments, whether practicing independently or providing patient care within a large group or hospital system. ISMIE continues to address today’s healthcare challenges, recognizing the opportunity to deliver coverage and value policyholders have trusted for four-plus decades. We have diversified our product offerings and expanded our reach, providing policyholders nationwide with physician-led quality, protection and service. ISMIE is a dynamic, multifaceted carrier servicing every segment of the medical professional liability insurance marketplace.

NEW PRODUCTS FOR NEW MARKETS AND NEW OPPORTUNITIES

We’ve developed new and innovative products such as RRGs, fronting and reinsurance options, excess liability programs, loss portfolio transfer capabilities, deductible and SIR programs—allowing large groups to transfer risk, decrease volatility and improve their overall balance sheet. Our occurrence, claims-made and Transfer-to-OccurrenceTM options help physicians and administrators alike in finding the coverage that best suits their needs. ISMIE Indemnity, our excess and surplus writing platform, provides wide-ranging coverage for clinics, miscellaneous facilities, community hospitals, locum tenens physicians and healthcare staffing agencies throughout all 50 states, plus Washington, D.C. and the U.S. Virgin Islands.

In 2019, ISMIE: n Merged the Southeast Michigan Physicians’ Insurance Company (SEMPIC) into ISMIE, providing

coverage for Detroit Medical Center (DMC) hospitals’ health professionals and expanding our Michigan presence.

n ISMIE Mutual was licensed and admitted in 14 states plus Washington, D.C. Of note, during the first quarter of 2020 ISMIE Mutual became licensed and admitted in an additional three states.

n Increased limit and product capacity for hospitals. n Provided reinsurance solutions for unaffiliated RRGs.n Successfully transferred large books of business from regional carriers to ISMIE.n Invested in our underwriting and claims systems and technologies to support ISMIE’s continued

growth through our national expansion. n Launched new affinity partnerships with the Ohio Osteopathic Association, Iowa Osteopathic

Medical Association and the Kentucky Osteopathic Medical Association.

As a physician-led insurer, ISMIE understands the significant issues, obstacles, challenges and opportunities that arise every day. We recognize the importance of innovative solutions that add value, improve capabilities and provide insight. Our goal is to work with physicians and healthcare professionals to provide the best care and protection possible, just as they do for their patients.

STRENGTHENING VALUED PARTNERSHIPS AND GAINING TRUST—THAT’S THE ISMIE WAY.

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REDUCING RISK. MAXIMIZING SAFETY.Health professionals are always innovating, finding new ways to care for patients. ISMIE understands that protecting our policyholders means bringing that same innovative spirit and drive for excellence to our risk management offerings.

The result? ISMIE’s Managing Risk Partnership Program. Our portfolio of on-demand educational content is continually updated and expanded as we develop new resources in response to an ever-changing medical landscape. A rich calendar of live seminars and webinars, including our annual Risk Management Symposium, brings policyholders together to learn from nationwide leaders in healthcare. And our risk assessment program offers tailored insights from our experienced risk management team, helping each policyholder mitigate risk in their practice environments.

All this adds up to one of the most comprehensive risk management approaches in the medical professional liability industry.

But it’s not just about the premium savings eligible policyholders earn through participation in our Risk Rewards program, or the continuing medical education credits. It’s about making sure each individual ISMIE covers has access to the most complete set of tools available to reduce their risk and provide the best possible patient care.

These tools work. An overwhelming majority of ISMIE policyholders participate in our Managing Risk program, and our data shows that policyholders who participate fully1 have:

n 21 percent fewer claims overall.n 37 percent fewer claims closing with an indemnity payment.n 22 percent less indemnity/expenses paid.

At the end of the day, managing risk is about working together to protect you and keep your practice healthy, so you can keep your patients safe and healthy.

1 Based on comparison of full participants versus nonparticipants.

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EXPANDING MARKETS, EXPANDING CLAIMS -READINESS

We understand and commit to minimizing the nerve-wracking moment a medical professional is made aware of a claim. As a physician-led insurer, a core tenet of ISMIE is to serve medical professionals by providing an unyielding claims defense with proven litigation strategies tailored for each case in every jurisdiction.

ISMIE has continued to expand our relentless defense of claims nationally with litigation strategies proven in some of the most litigious counties in the U.S.—Illinois’ Cook, Madison and St. Clair counties. We remain steadfast in our Claims philosophy as we seize opportunities in new markets, including each of our Claims core principles:

n That every dedicated medical professional and entity we insure deserves a strategic, vigorous and uncompromising defense. ISMIE will not simply settle a claim or lawsuit to avoid the costs of litigation. We stand by our policyholders, who hold the ultimate decision to settle any claim.

n That ISMIE supports its policyholders—inside and outside the courtroom. Defendant reimbursement and witness improvement support are standard elements of ISMIE coverage, as are resources to help cope with the personal and professional stress created by medical liability litigation.

n That we maintain the long-term financial strength needed to handle whatever legal challenges our policyholders may face, nationwide.

ISMIE has maintained a 93% defense verdict average on claims taken to trial. With the policyholder at the center of focus, they give us high marks on their claims experience, including:

n Overall satisfaction with the ISMIE Team, from first contact to case conclusion—is 9.5 out of 10.

n 83% told us they would prefer the same ISMIE representative if faced with another claim.

n 88% said they would prefer the same defense attorney.

As ISMIE continues to enter new markets, we remain dedicated in our commitment to policyholders, relying on the strength of our history for forward growth. Policyholders are the center of a team-based approach, along with a knowledgeable professional liability analyst and skilled defense attorney who all work together to achieve the best possible outcome for the case. Policyholders are able to select counsel from a list of approved panel attorneys and no case is settled without consent.

While new challenges are inevitable as we enter new markets with new products, ISMIE is fully prepared. Our claims professionals analyze laws, regulations and tort environments in every state. ISMIE’s collaborative model with defense teams that have vast historical litigation knowledge and trial experience in each new jurisdiction prepares ISMIE and its policyholders for protection in every market venue. This strength comes from an ongoing process to vet law firms and attorneys in each state that specialize in medical liability—ensuring that our policyholders have the best representation possible should the need arise. States are assigned to claims professionals who have undertaken rigorous educational requirements to achieve and maintain a license in their respective states.

We are proud to provide unparalleled claims service and will continue to deliver that exceptionally high standard of service in new markets.

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2019 FINANCIALS2019 was a year of significant growth for ISMIE, as we added expanded protection, new coverage options and products for our more than 11,200 policyholders nationwide. And while ISMIE continues to move forward in its expansion, we remain unwavering in our financial approach. We continue to grow strategically, looking to build our company both organically as well as seeking partnerships that add long-term value to our company and its policyholders.

As of Dec. 31, 2019, our total assets were more than $1.34 billion with a surplus approaching $700 million. Our excellent AM Best rating of A- was reconfirmed, indicating our continued strong and stable balance sheet.

Total Assets .....................................$1,340,164,630 Direct Written Premium ..........$156,446,094 Policyholder Surplus ....................$695,181,097 Claims Paid (net) ...........................$ 102,100,904 Claims Reserves (net) ................$523,579,303

Figures are reflective as of Dec. 31, 2019

FINANCIALLY STRONG AND POISED FOR GROWTH

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ISMIE Mutual Insurance Company20 N. Michigan Avenue, Suite 700, Chicago IL 60602Email: info@ismie.com Phone: 800-782-4767www.ismie.com

© 2020 ISMIE Mutual Insurance Company. All rights reserved. The use of any portion of this document without the express written permission of ISMIE is prohibited and subject to legal action.

2019–2020 BOARD OF DIRECTORSPaul H. DeHaan, MD,ChairmanPeter E. Eupierre, MD,Vice ChairmanRichard A. Geline, MD, Secretary-Treasurer Proctor R. Anderson, MDAlejandro Aparicio, MDCraig A. Backs, MDPeter A. Brusca, MDScott A. Cooper, MDJohn J. DeGuide, MD

Adrienne L. Fregia, MDWilliam J. Holt, MDTim C. Kisabeth, MDWilliam E. Kobler, MDJames L. Milam, MDDennis G. Norem, MDRobert J. Oliver, MDSandra F. Olson, MDWayne V. Polek, MDP. Sandy Sundram, MDMerita R.C. Tan, MDCheryl D. Wolfe, MD

Alexander R. Lerner, Chief Executive OfficerCheryl L. Koos, Chief Operating Officer