REGULATOR’S VIEW -A tale of two Group Self Insurance Funds

HP Consulting Services, LLCPaul Cooksey

cookseypaul@gmail.com

Surplus

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,000

Fund Year End

Surp

lus

-10.0

-5.0

0.05.0

10.0

15.0

20.0

Writ

ings

Rat

io Fund Year Surplus

Cummulative Surplus

Writings Ratio (Gross)

Surplus

(500,000)

0

500,000

1,000,000

1,500,000

Fund Year End

Surp

lus

-10.0

-5.0

0.05.010.0

15.0

20.0

Writ

ings

Rat

io

Fund Year SurplusCummulative Surplus

Writings Ratio (Gross)

Earned Premium

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Fund Year End

Prem

ium

Earned Premium

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,000

20012002

200320

042005

20062007

20082009

2010

Fund Year End

Prem

ium

GENERAL & ADMINISTRATIVE EXPENSE

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Fund Year End

% P

rem

ium

Expense Before ExcessInsurance

GENERAL & ADMINISTRATIVE EXPENSE

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Fund Year End

% P

rem

ium

Expense Before ExcessInsurance

Loss Fund - Available to Pay Losses

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%

Fund Year

Rat

io

Expense Ratio

XS Insurance Ratio

Amount Available to PayLosses

Loss Fund - Available to Pay Losses

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Fund Year

Rat

io

Expense Ratio

XS Insurance Ratio

Amount Available to PayLosses

Loss Fund Compared to Actual Ultimate Losses

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%

Fund Year End

Rat

io Amount Available to Pay LossesUltimate Loss Ratio

Loss Fund Compared to Actual Ultimate Losses

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

Fund Year End

Rat

io Amount Available to Pay LossesUltimate Loss Ratio

Underwriting Gain (Loss)

0

200,000

400,000

600,000

800,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Fund Year End

U/W

Gai

n (L

oss)

50.0%

55.0%

60.0%

65.0%

70.0%

Ultim

ate

L/R

Underwriting Gain (Loss) Loss Ratio

Underwriting Gain (Loss)

(1,500,000)(1,000,000)

(500,000)0

500,0001,000,0001,500,000

Fund Year End

U/W

Gai

n (L

oss)

0.0%20.0%40.0%60.0%80.0%100.0%

Ultim

ate

L/R

Underwriting Gain (Loss) Loss Ratio

Average Ultimate Loss

0

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Fund Year End

Ave

rage

Los

s

Average Ultimate Loss

0

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Fund Year End

Ave

rage

Los

s

ClaimFrequency Trends

-5.0

10.015.020.025.030.035.040.045.0

Fund Year End

# C

laim

s

0.00

0.501.00

1.502.00

2.503.00

3.50

# C

laim

s Per 1,000,000 of PremiumPer 1,000,000 of Payroll

ClaimFrequency Trends

-20.040.060.080.0

100.0120.0140.0160.0

Fund Year End

# Cla

ims

0.00

2.00

4.00

6.00

8.00

10.00

# Claim

s Per 1,000,000 of PremiumPer 1,000,000 of Payroll

Payroll - Last 10 FYs & Bulk Rate

-2.0004.0006.0008.000

10.00012.00014.000

Fund Year

Bulk

Rat

e

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Payr

oll

Bulk Rate ChargedPayroll

Payroll - Last 10 FYs & Bulk Rate

-

2.000

4.000

6.000

8.000

10.000

Fund Year

Bulk

Rat

e

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Payr

oll Bulk Rate Charged

Payroll

10 FY Underwriting Gain (Loss) Compared to Rate Charged

0100,000200,000300,000400,000500,000600,000700,000800,000

Fund Year

Gai

n (L

oss)

-

2.000

4.000

6.000

8.000

10.000

12.000

14.000

FY Underwriting Gain (Loss)FY Bulk Rate Charged

10 FY Underwriting Gain (Loss) Compared to Rate Charged

(1,500,000)

(1,000,000)

(500,000)

0

500,000

1,000,000

1,500,00020

0120

0220

0320

0420

0520

0620

0720

0820

0920

10Fund Year

Gai

n (L

oss)

-1.0002.0003.0004.0005.0006.0007.0008.0009.00010.000

FY Underwriting Gain (Loss)FY Bulk Rate Charged

Fund Year Cash Flow

Fund Year Cash Flow

(500,000)

0

500,000

1,000,000

1,500,000

2,000,000

Fund Year End

Cash

Flo

w

Allocation of Investment Income According to Fund Year Cash Flows

Investment Income Allocation

(100,000)

0

100,000

200,000

300,000

400,000

500,000

Fund Year End

Inve

stm

ent I

ncom

e

Allocated Investment Income Calendar Year Investment Income

Loss Development (Redundancy)

-60.0%-50.0%-40.0%-30.0%-20.0%-10.0%

0.0%10.0%20.0%

% Premium

Fund

Yea

r End

1st to Last Report % 2nd to Last Report % 3rd to Last Report %4th to Last Report % 5th to Last Report %

Loss Development Redundancy

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

Fund Year End

% C

hang

e

1st to last % Change 2nd to last % Change 3rd to last % Change4th to last % Change 5th to last % Change

Mississippi Benchmark Database

MASI’s 14th Annual Conference

Christopher J. Burkhalter, FCAS, MAAABickerstaff, Whatley, Ryan & Burkhalter, Inc.

September 30, 2011

Benchmark Database

• Source of data– Audited Financial Statements– Actuarial Reserve & Rate Analyses– Additional Data Requests

• Definition of “Fund Year Ending”

• Minimum / Maximum / Average

Mississippi Benchmark Database

MASI’s 14th Annual Conference

Christopher J. Burkhalter, FCAS, MAAABickerstaff, Whatley, Ryan & Burkhalter, Inc.

September 30, 2011