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REPORT ON LOSS RESERVING PRACTICES
June 2007
• | Section I provides an overview of our financial objectives and results, and explains why accurate reserving is important |
• | Section II describes how reserve development affects our financial results, and how we have performed relative to our goal of having total reserves that are adequate and develop with minimal variation |
• | Section III defines the types of reserves, how they are related and how we analyze them |
• | Section IV describes how and why we estimate our required reserves by segment |
• | Section V presents the process enhancements we introduced in 2006 |
• | Section VI defines many of the terms we use throughout the report |
• | Sections VII and VIII in the Appendix present two case studies of segment reserve reviews – one for loss reserves and one for loss adjustment expense (LAE) reserves, including discussion of the issues we consider and the calculations involved |
Section I – About Progressive | ||||
Our Business | 1 | �� | ||
2006 Business Highlights | 1 | |||
Our Financial Objectives | 1 | |||
Relationship Between Loss Reserving and Pricing Functions | 2 | |||
Section II – About Reserves and Development | ||||
Definition and Stated Goals | 4 | |||
Calendar Year versus Accident Year | 4 | |||
Paid Development Patterns | 5 | |||
Reserve Development | 6 | |||
External Reporting of Reserve Changes and Reserve Development | 9 | |||
Internal Reporting of Reserve Changes and Reserve Development | 10 | |||
Section III – Types of Reserves | ||||
Loss Reserves | 11 | |||
Case Reserves | 11 | |||
Incurred But Not Recorded (IBNR) Reserves | 14 | |||
Loss Adjustment Expense (LAE) Reserves | 15 | |||
Salvage and Subrogation | 16 | |||
Involuntary Market Operating Loss Reserves | 16 | |||
Section IV – Estimating Loss Reserves | ||||
Segmentation of Reserves for Analysis | 18 | |||
Projections of Ultimate Losses | 19 | |||
Section V – Process Enhancements Introduced in 2006 | ||||
Calculation of carried LAE IBNR reserves | 21 | |||
Additional segmentation | 21 | |||
Section VI – Terms and Definitions | 22 | |||
Section VII – Case Study: Loss Reserve Review | Appendix | |||
Section VIII – Case Study: Loss Adjustment Expense Reserve Review | Appendix |
1 | Based on net income. | |
2 | Use of Comprehensive ROE is consistent with the Company’s policy to manage on a total return basis and reflects changes in unrealized gains and losses on securities held in our portfolio. For Progressive, Comprehensive ROE consists primarily of: | |
[Net income + changes in unrealized security gains, net of tax] / [average shareholders’ equity]. | ||
To review all components of Progressive’s Comprehensive ROE, refer to our Consolidated Statement of Changes in Shareholders’ Equity and related Notes in our2006 Annual Report to Shareholders, which is attached as an appendix to the Company’s2007 Proxy Statement. | ||
®Net Promoter® is a registered trademark of Satmetrix Systems, Inc. |
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• | Operating – Monitor pricing and reserving discipline |
• | Financing – Maintain sufficient capital to support insurance operations |
• | Investing – Maintain a liquid, diversified, high-quality investment portfolio |
• | Overall changes in the level of reserves by type of reserve (see Section III) | ||
• | History of claim development and selected ultimate losses by accident period | ||
• | Changes in selected ultimate loss amounts over time | ||
• | Selected severity by historical accident period and resulting trends | ||
• | Selected frequency by historical accident period and resulting trends | ||
• | Changes in actuarially determined case average reserves by age (see Section III) | ||
• | Changes in the level of average adjuster-set case reserve estimates (see Section III) | ||
• | Changes in claim closure rates | ||
• | Changes in the rate of claims closed without payment (CWP rate) |
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Paid Development Patterns
Bodily injury and property Damage Claims
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• | Claims settle for more or less than the established reserves for those claims | ||
• | Adjuster-set reserve estimates on open (reported) claims change | ||
• | Average reserves set by the loss reserving area for open (reported) claims change | ||
• | Unreported claims emerge (i.e., they are reported after the accounting date) at a rate greater or less than anticipated. This can be due to either or both of the following: |
O | The actual number (frequency) of “late reported” claims differs from the estimate | ||
O | The average amount (severity) of these claims differs from the estimate |
• | Loss reserving area’s estimates of future emergence patterns on unreported claims change | ||
• | Salvage and subrogation recoveries are greater or less than anticipated | ||
• | Changes in earned premium affect carried IBNR (incurred but not reported) reserves, which are calculated as a percentage of earned premium. |
(unaudited)
For years ended December 31, | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||||||||||||||||||
Loss and LAE reserves, net | $1,532.9 | $1,867.5 | $1,945.8 | $ | 2,200.2 | $2,785.3 | $3,069.7 | $3,632.1 | $4,346.4 | $4,948.5 | $5,313.1 | $ | 5,363.6 | |||||||||||||||||||||||||||||||
Re-estimated reserves as of: | ||||||||||||||||||||||||||||||||||||||||||||
One year later | 1,429.6 | 1,683.3 | 1,916.0 | 2,276.0 | 2,686.3 | 3,073.2 | 3,576.0 | 4,237.3 | 4,592.6 | 5,066.2 | ||||||||||||||||||||||||||||||||||
Two years later | 1,364.5 | 1,668.5 | 1,910.6 | 2,285.4 | 2,708.3 | 3,024.2 | 3,520.7 | 4,103.3 | 4,485.2 | |||||||||||||||||||||||||||||||||||
Three years later | 1,432.3 | 1,673.1 | 1,917.3 | 2,277.7 | 2,671.2 | 2,988.7 | 3,459.2 | 4,048.0 | ||||||||||||||||||||||||||||||||||||
Four years later | 1,451.0 | 1,669.2 | 1,908.2 | 2,272.3 | 2,666.9 | 2,982.7 | 3,457.8 | |||||||||||||||||||||||||||||||||||||
Five years later | 1,445.1 | 1,664.7 | 1,919.0 | 2,277.5 | 2,678.5 | 2,993.7 | ||||||||||||||||||||||||||||||||||||||
Six years later | 1,442.0 | 1,674.5 | 1,917.6 | 2,284.9 | 2,683.7 | |||||||||||||||||||||||||||||||||||||||
Seven years later | 1,445.6 | 1,668.4 | 1,921.9 | 2,287.4 | ||||||||||||||||||||||||||||||||||||||||
Eight years later | 1,442.5 | 1,673.9 | 1,923.4 | |||||||||||||||||||||||||||||||||||||||||
Nine years later | 1,443.2 | 1,675.5 | ||||||||||||||||||||||||||||||||||||||||||
Ten years later | 1,443.6 | |||||||||||||||||||||||||||||||||||||||||||
Cumulative Development: | ||||||||||||||||||||||||||||||||||||||||||||
favorable/(unfavorable) | $ | 89.3 | $ | 192.0 | $ | 22.4 | ($87.2 | ) | $ | 101.6 | $ | 76.0 | $ | 174.3 | $ | 298.4 | $ | 463.3 | $ | 246.9 | ||||||||||||||||||||||||
% of Original Reserves | 5.8 | % | 10.3 | % | 1.2 | % | -4.0 | % | 3.6 | % | 2.5 | % | 4.8 | % | 6.9 | % | 9.4 | % | 4.6 | % |
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• | Reserve development on claims that settle more slowly (e.g., bodily injury liability claims) can be highly variable and challenging to evaluate. |
• | Regardless of how close the initial accident year estimates are, they will never be exactly right, and there will always be development until all claims are settled. |
• | Years in which we experience significant reserve development in either direction are learning experiences, affording us the opportunity to get better at estimating future reserves. |
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• | There is unfavorable development of prior accident years during the current year. |
• | Reserves for accidents that occur in the current year are over-estimated (i.e., subsequent evaluation shows favorable development of these reserves in future years). |
• | In 1998, the reported earnings were over-stated. This was mainly due to year-end 1997 reserves (for accident years 1997 and prior) developing favorably during 1998, reducing incurred losses and increasing earnings during calendar year 1998. |
• | In 1999, the reported earnings were also over-stated. In this case it was mainly due to the under-estimated (deficient) reserves for 1999 accidents. |
• | In 2000, the reported earnings were under-stated. This was due to a combination of the year-end 1999 reserves (for accident years 1999 and prior) developing unfavorably during 2000, and the reserves for 2000 accidents being over-estimated (conservative). |
Earnings Per Share*
Impact of Reserve Development
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* | Adjusted for the May 18, 2006 4-for-1 stock split. |
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Companywide | ||||
December 2006 Year-to-Date | Total | |||
($ in millions) | ||||
Net Premiums Earned | $ | 14,117.9 | ||
Actuarial Adjustments | ||||
Reserve Decrease/(Increase) | ||||
Prior accident years | $ | 158.3 | ||
Current accident year | 57.8 | |||
Calendar year actuarial adjustment | $ | 216.1 | ||
Prior Accident Years Development | ||||
Favorable/(Unfavorable) | ||||
Actuarial adjustment | $ | 158.3 | ||
All other development | 88.6 | |||
Total development | $ | 246.9 | ||
Calendar year loss/LAE Ratio | 66.5 | |||
Accident year loss/LAE Ratio | 68.2 | |||
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• | Features that closed | ||
• | Features that opened (including reopened features) | ||
• | Changes in reserve averages on new features (due to loss reserving) | ||
• | Changes in reserve averages on open features (due to loss reserving) | ||
• | Inflationary impact on open features (inflation factor applied to average reserves) | ||
• | Aging of open features (features moving to the next age grouping) | ||
• | Changes from adjuster-set to average reserve (reserve amount changes from above threshold to below threshold) | ||
• | Changes from average reserve to adjuster-set (reserve amount changes from below threshold to above threshold) | ||
• | Changes in adjuster-set reserves (reserve amount changes, but stays above threshold) | ||
• | Changes due to resegmentation of data |
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Life of a Large Bodily Injury Claim
Private Passenger Automobile
Policy Limit = 300,000
Threshold = 75,000 State XYZ
Inflation Factor = 6% per year
(Excludes Loss Adjustment Expense)
Case Reserve | ||||||||||||||
Transaction | Age of Claim | Adjuster Estimate | Carried on | Amount | ||||||||||
Month-End | Date | Claim Activity | (months)* | of Claim Amount | Company Books | Paid | Explanation of Reserve Change | |||||||
1/5/05 | Accident Occurs | 1 | N/A | 0 | ||||||||||
Jan-05 | 1 | N/A | IBNR | 0 | Aggregate amount based on factor of EP for Segment | |||||||||
2/12/05 | Claim is Reported | 2 | N/A | 0 | Claim is in "Pipeline"; Still IBNR | |||||||||
2/15/05 | Claim is Recorded | 2 | N/A | 0 | No estimate yet made by adjuster | |||||||||
Feb-05 | 2 | N/A | 5,829 | 0 | Actuarially determined Average Reserve for 1-2 mo. Age group | |||||||||
Mar-05 | 3 | N/A | 7,121 | 0 | Aging to 3-4 mo. Age group & Inflation | |||||||||
Apr-05 | 4 | N/A | 7,157 | 0 | Inflation | |||||||||
5/20/05 | Adjuster sets up reserve | 5 | 30,000 | 0 | This is below the Effective Threshold** | |||||||||
May-05 | 5 | 30,000 | 8,391 | 0 | Actuarial review & Aging to 5-6 mo. Age group | |||||||||
Jun-05 | 6 | 30,000 | 8,433 | 0 | Inflation | |||||||||
July-05 | 7 | 30,000 | 9,789 | 0 | Aging to 7-12 mo. Age group & Inflation | |||||||||
8/10/05 | Adjuster revises estimate | 8 | 50,000 | 0 | This is below the Effective Threshold** | |||||||||
Aug-05 | 8 | 50,000 | 10,250 | 0 | Actuarial review revised Averages | |||||||||
Sep-05 | 9 | 50,000 | 10,301 | 0 | Inflation | |||||||||
10/25/05 | Adjuster revises estimate | 10 | 70,000 | 0 | ANCR Factor for 7-12 mo. Age group = 1.25 | |||||||||
Oct-05 | 10 | 70,000 | 87,500 | 0 | (70,000) X (1.25) is greater than 75,000 | |||||||||
Nov-05 | 11 | 70,000 | 87,500 | 0 | ||||||||||
Dec-05 | 12 | 70,000 | 87,500 | 0 | ||||||||||
Jan-06 | 13 | 70,000 | 80,500 | 0 | ANCR Factor for 13-24 mo. Age group = 1.15 | |||||||||
Feb-06 | 14 | 70,000 | 80,500 | 0 | (70,000) X (1.15) is still greater than 75,000 | |||||||||
3/10/06 | Adjuster revises estimate | 15 | 80,000 | 0 | ||||||||||
Mar-06 | 15 | 80,000 | 92,000 | 0 | (80,000) X (1.15) | |||||||||
Apr-06 | 16 | 80,000 | 92,000 | 0 | ||||||||||
May-06 | 17 | 80,000 | 88,000 | 0 | Actuarial review revised ANCR Factor to 1.10 | |||||||||
Jun-06 | 18 | 80,000 | 88,000 | 0 | (80,000) X (1.10) | |||||||||
7/15/06 | Claim is Paid | 19 | 90,000 | 90,000 | ||||||||||
Jul-06 | 19 | N/A | 0 | 90,000 | Claim is Closed |
Life of a Large Auto Bodily Injury Claim
Accident Occurred in January, 2005
Recorded in February, 2005
Claim Settled in July, 2006 for $90,000
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Countrywide Personal Auto Bodily Injury
RECORDED FEATURE COUNT
Lag Quarters* | Incremental % | Cumulative % | ||||||
Lag 0 | 83.5 | % | 83.5 | % | ||||
Lag 1 | 12.3 | % | 95.8 | % | ||||
Lags 2-3 | 2.2 | % | 98.0 | % | ||||
Lags 4-6 | 1.1 | % | 99.1 | % | ||||
Lags 7-9 | 0.6 | % | 99.7 | % | ||||
Lags 10+ | 0.3 | % | 100.0 | % |
* | Record Quarter = Accident Quarter Plus Lag |
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• | Determine Progressive’s estimated portion of the assigned risk pool by multiplying our projected market share by the estimated future size of the assigned risk pool in that state | |
• | Reduce this by any credits a state may allow such as voluntarily writing policies that would have otherwise been considered assigned risk-type business | |
• | Estimate the operating loss that we expect to incur from this business |
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2007 Personal Auto BI Loss Reserve Segments
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1. | Amount Paid, in which we organize the total loss dollars paid by accident period and age of development into a triangular format and project them to estimated ultimate amounts. We base our selections of future loss development largely on the historical development of prior periods. |
2. | Average Paid, in which we organize the paid severity (average amount paid per feature) by accident period and age of development into a triangular format and project the severities to estimated ultimate levels. Ultimate loss amounts are then calculated as the ultimate severities multiplied by the estimated ultimate number of features to be paid. |
3. | Bornhuetter-Ferguson Paid, which uses the paid loss development pattern to determine the percent unpaid. We apply the percent unpaid to the expected ultimate loss amount to arrive at the expected unpaid amount, which is added to actual losses paid-to-date. |
4. | Amount Incurred, in which we organize the total loss dollars incurred by accident period and age of development into a triangular format and project them to estimated ultimate amounts. We base our future loss development largely on the historical development of prior periods. |
5. | Average Incurred, in which we organize the incurred severity (average amount incurred per feature) by accident period and age of development into a triangular format and project the severities to estimated ultimate levels. Ultimate loss amounts are then calculated as the ultimate severities multiplied by the estimated ultimate number of features to be paid. |
6. | Bornhuetter-Ferguson Incurred, which uses the incurred loss development pattern to determine the percent not yet recorded. We apply the percent unrecorded to the expected ultimate losses to arrive at the expected unrecorded amount, which is added to actual losses incurred-to-date. |
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• | Calculation of carried LAE IBNR reserves |
• | Additional segmentation |
• | We expanded the segmentation of personal auto uninsured/underinsured motorist bodily injury loss reserves by separately reviewing two additional states. | ||
• | We review the lower and upper limits reserves separately for more of the personal auto bodily injury and uninsured/underinsured motorist bodily injury segments. | ||
• | For commercial auto bodily injury loss reserves, we now review 12 states individually, with three of those further segmented into regions. | ||
• | For personal auto bodily injury LAE reserves, we now review each individual state twice a year. |
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• | Additional Needed Case Reserves (ANCR):An actuarially determined reserve intended to cover expected future emergence and development of claims above the threshold. | ||
• | Adjuster-set reserves:The claims adjuster’s best estimate of how much a specific claim will cost. Only claims estimates above a specified threshold are included in financial reserves. All adjuster estimates are included in the actuarial reserve analyses. | ||
• | Average reserves: When the adjuster estimate for a feature is below a predetermined threshold, the financial case reserve is the average reserve. These |
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are determined by the loss reserving area and vary by segment. Within each segment, they may also vary by age (months since the accident occurred), policy limit, and geographic area. | |||
• | Financial reserves:The case reserves carried on the Company’s financial records. Below a predetermined dollar threshold, the average reserve developed by the loss reserving area is used. The adjuster-set reserve multiplied by an ANCR factor is used if it exceeds the threshold. |
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Total Loss Adjustment Expenses (LAE) =
[Defense and Cost Containment (DCC) expenses] + [Adjusting & Other (A&O) expenses]
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440.461.5000 progressive.com
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REPORT ON LOSS RESERVING PRACTICES
APPENDIX
June 2007
Appendix
Case Studies
Section VII – Loss Reserve Review | ||||
Introduction | 1 | |||
Exhibits A – E | 3 | |||
Exhibit A – Accident Period Analysis | 10 | |||
Exhibit B – Accident Period Average Incurred Loss Development | 24 | |||
Exhibit C – Record Period Analysis | 29 | |||
Exhibit D – Summary of Estimated IBNR | 32 | |||
Exhibit E – IBNR Analysis | 37 | |||
Section VIII – Loss Adjustment Expense Reserve Review | ||||
Introduction | 42 | |||
Exhibit DCC – Defense and Cost Containment Expense Reserve Analysis | 44 | |||
Total DCC Expense Analysis | 45 | |||
DCC Expense Analysis by Component | 51 | |||
Other Parameters | 54 | |||
Exhibit ADJ – Adjusting and Other Expense Reserve Analysis | 56 |
• | Case Reserves can be revised by changing: |
o | Average reserves, which are applied to open features below the threshold | ||
o | ANCR factors, which are applied to adjuster-set reserves on open features above the threshold | ||
o | Theinflation factor, which is applied to average reserves in months following a review |
• | IBNR Reserves can be revised by changing: |
o | IBNR factors, which are applied to trailing periods of earned premium |
Type of Loss Reserve | Claims Data Organized by | |
Total (Case + IBNR) | Accident Period | |
Case | Record Period | |
IBNR | Record within Accident Period |
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Exhibit B–Accident Period Average Incurred Loss Development
Exhibit C–Record Period Analysis
Exhibit D–Summary of Estimated IBNR
Exhibit E(3 pages) –IBNR Analysis
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(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | ||||||||||||||||||||||||||||||||||||||||
Accident | Paid | Avg. Paid | BF Paid | Incurred | Avg. Incurred | BF Incurred | Adj. Inc. @ | Pd. Loss @ | Indicated | |||||||||||||||||||||||||||||||||||||||
Semesters | Projection | Projection | Method | Projection | Projection | Method | 12/31/2006 | 12/31/2006 | Ultimate | |||||||||||||||||||||||||||||||||||||||
Ending | Ult ($ 000) | Ult ($ 000) | Ult ($ 000) | Ult ($ 000) | Ult ($ 000) | Ult ($ 000) | ($ 000) | ($ 000) | Loss ($ 000) | |||||||||||||||||||||||||||||||||||||||
PRIOR 3 yrs | 35,427 | 35,385 | 35,427 | 35,395 | 35,347 | 35,395 | 35,373 | 34,937 | 35,379 | |||||||||||||||||||||||||||||||||||||||
Jun-2003 | 10,930 | 10,940 | 10,931 | 11,193 | 11,170 | 11,193 | 11,111 | 10,434 | 11,186 | |||||||||||||||||||||||||||||||||||||||
Dec-2003 | 13,257 | 13,163 | 13,254 | 13,249 | 13,273 | 13,250 | 13,087 | 12,197 | 13,257 | |||||||||||||||||||||||||||||||||||||||
Jun-2004 | 13,534 | 13,781 | 13,603 | 14,012 | 13,985 | 14,141 | 13,738 | 11,955 | 14,046 | |||||||||||||||||||||||||||||||||||||||
Dec-2004 | 9,962 | 9,868 | 9,954 | 10,324 | 10,304 | 10,324 | 10,117 | 8,248 | 10,318 | |||||||||||||||||||||||||||||||||||||||
Jun-2005 | 9,485 | 9,492 | 9,435 | 10,149 | 10,100 | 10,127 | 9,888 | 7,014 | 10,125 | |||||||||||||||||||||||||||||||||||||||
Dec-2005 | 7,187 | 6,928 | 8,001 | 8,181 | 8,129 | 8,216 | 7,891 | 4,238 | 8,175 | |||||||||||||||||||||||||||||||||||||||
Jun-2006 | 9,689 | 8,667 | 9,207 | 8,842 | 8,727 | 8,846 | 8,529 | 3,221 | 8,805 | |||||||||||||||||||||||||||||||||||||||
Dec-2006 | 11,020 | 12,069 | 10,285 | 9,665 | 9,673 | 9,748 | 8,107 | 1,357 | 9,695 | |||||||||||||||||||||||||||||||||||||||
Total | 120,492 | 120,293 | 120,095 | 121,011 | 120,708 | 121,241 | 117,840 | 93,602 | 120,987 | |||||||||||||||||||||||||||||||||||||||
Paid Loss | 93,602 | 93,602 | 93,602 | 93,602 | 93,602 | 93,602 | 93,602 | |||||||||||||||||||||||||||||||||||||||||
Required Reserves | 26,890 | 26,691 | 26,494 | 27,409 | 27,106 | 27,639 | Required Reserves | 27,385 | ||||||||||||||||||||||||||||||||||||||||
Held Reserves | 28,038 | 28,038 | 28,038 | 28,038 | 28,038 | 28,038 | Held Reserves | 28,038 | ||||||||||||||||||||||||||||||||||||||||
Reserve Adequacy | 1,148 | 1,347 | 1,545 | 629 | 932 | 400 | Reserve Adequacy | 2.4 | % | 654 | ||||||||||||||||||||||||||||||||||||||
Average Last 4 | 3,132 | (2,025 | ) | 3,261 | 3,835 | |||||||||||||||||||||||||||||||||||||||||||
2nd to Last Diagonal | 2,865 | (3,318 | ) | 624 | 1,951 | |||||||||||||||||||||||||||||||||||||||||||
Last Diagonal | (7,001 | ) | (6,264 | ) | 3,470 | 3,154 | ||||||||||||||||||||||||||||||||||||||||||
(10) | (11) | (12) | (13) | (14) | (15) | (16) | (17) | (18) | (19) | (20) | ||||||||||||||||||||||||||||||||||||||
Accident | Avg. Adjuster | Paid | Clsd. w/Pay | Incurred | Recorded | Indicated | ||||||||||||||||||||||||||||||||||||||||||
Semesters | Avg. Paid | Avg. Incurred | Case Reserves | Closure Rate | CWP Rate | Ultimate | Counts | Counts | Counts | Counts | Ultimate | |||||||||||||||||||||||||||||||||||||
Ending | Severity | Severity | @ 6 Months | @ 6 Months | @ 6 Months | CWP Rate | Projection | Projection | Projection | Projection | Counts | |||||||||||||||||||||||||||||||||||||
PRIOR 3 yrs | 5,863 | 5,857 | 6,030 | 6,029 | 6,032 | 6,035 | 6,035 | |||||||||||||||||||||||||||||||||||||||||
Jun-2003 | 5,796 | 5,918 | 4,207 | 33.7 | % | 26.3 | % | 37.9 | % | 1,885 | 1,886 | 1,888 | 1,887 | 1,888 | ||||||||||||||||||||||||||||||||||
Dec-2003 | 6,141 | 6,192 | 4,321 | 28.6 | % | 29.4 | % | 40.4 | % | 2,144 | 2,145 | 2,145 | 2,142 | 2,144 | ||||||||||||||||||||||||||||||||||
Jun-2004 | 6,342 | 6,436 | 5,341 | 26.1 | % | 27.6 | % | 41.3 | % | 2,132 | 2,134 | 2,175 | 2,171 | 2,173 | ||||||||||||||||||||||||||||||||||
Dec-2004 | 5,404 | 5,643 | 5,291 | 32.3 | % | 26.3 | % | 39.8 | % | 1,821 | 1,822 | 1,827 | 1,825 | 1,826 | ||||||||||||||||||||||||||||||||||
Jun-2005 | 6,280 | 6,682 | 5,462 | 30.8 | % | 30.7 | % | 41.8 | % | 1,483 | 1,486 | 1,514 | 1,509 | 1,512 | ||||||||||||||||||||||||||||||||||
Dec-2005 | 5,686 | 6,671 | 5,213 | 26.4 | % | 29.2 | % | 42.5 | % | 1,198 | 1,196 | 1,222 | 1,215 | 1,219 | ||||||||||||||||||||||||||||||||||
Jun-2006 | 7,449 | 7,501 | 4,606 | 23.5 | % | 32.4 | % | 47.2 | % | 1,080 | 1,074 | 1,179 | 1,148 | 1,164 | ||||||||||||||||||||||||||||||||||
Dec-2006 | 8,940 | 7,165 | 4,153 | 21.5 | % | 28.7 | % | 43.1 | % | 1,177 | 1,104 | 1,449 | 1,379 | 1,350 | ||||||||||||||||||||||||||||||||||
18,950 | 18,876 | 19,431 | 19,311 | 19,309 | ||||||||||||||||||||||||||||||||||||||||||||
Accident | (21) | (22) | (23) | (24) | (25) | (26) | (27) | (28) | (29) | (30) | ||||||||||||||||||||||||||||||||||||||
Semesters | Ultimate | Change In | Ultimate | Change In | Pure | Loss | Premium | Earned | Change In | |||||||||||||||||||||||||||||||||||||||
Ending | Severity | Severity | Frequency | Frequency | Premium | Ratio | ($000) | Exposures | Avg EP | Avg EP | ||||||||||||||||||||||||||||||||||||||
PRIOR 3 yrs | 5,862 | 3.22 | % | 189 | 49.1 | % | 72,054 | 187,526 | 384 | |||||||||||||||||||||||||||||||||||||||
Jun-2003 | 5,926 | 3.59 | % | 212 | 64.6 | % | 17,325 | 52,642 | 329 | |||||||||||||||||||||||||||||||||||||||
Dec-2003 | 6,185 | 4.4 | % | 3.41 | % | -4.8 | % | 211 | 70.7 | % | 18,744 | 62,827 | 298 | -9.3 | % | |||||||||||||||||||||||||||||||||
Jun-2004 | 6,464 | 4.5 | % | 3.46 | % | 1.5 | % | 224 | 79.5 | % | 17,670 | 62,734 | 282 | -5.6 | % | |||||||||||||||||||||||||||||||||
Dec-2004 | 5,650 | -12.6 | % | 3.24 | % | -6.3 | % | 183 | 65.9 | % | 15,652 | 56,287 | 278 | -1.3 | % | |||||||||||||||||||||||||||||||||
Jun-2005 | 6,699 | 18.6 | % | 2.97 | % | -8.4 | % | 199 | 68.6 | % | 14,749 | 50,881 | 290 | 4.2 | % | |||||||||||||||||||||||||||||||||
Dec-2005 | 6,709 | 0.2 | % | 2.56 | % | -13.9 | % | 172 | 56.2 | % | 14,557 | 47,667 | 305 | 5.3 | % | |||||||||||||||||||||||||||||||||
Jun-2006 | 7,568 | 12.8 | % | 2.60 | % | 1.6 | % | 197 | 61.9 | % | 14,233 | 44,804 | 318 | 4.0 | % | |||||||||||||||||||||||||||||||||
Dec-2006 | 7,182 | -5.1 | % | 2.59 | % | -0.3 | % | 186 | 60.0 | % | 16,162 | 52,158 | 310 | -2.5 | % | |||||||||||||||||||||||||||||||||
196 | 60.1 | % | 201,146 | 617,528 | ||||||||||||||||||||||||||||||||||||||||||||
Chg Dec 06 | Chg Dec 06 | |||||||||||||||||||||||||||||||||||||||||||||||
4 Point Ann Exp Trend | 6.8 | % | vs. Dec 05 | -7.6 | % | vs. Dec 05 | -1.4 | % | 4.9 | % | ||||||||||||||||||||||||||||||||||||||
8 Point Ann Exp Trend | 6.5 | % | 7.0 | % | -10.5 | % | 1.3 | % | -4.7 | % | 0.4 | % |
Page 3
Semiannual | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accident | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Periods | Ultimate | Ultimate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | Severity | Loss ($000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-00 | 5,790 | 5,876 | 5,928 | 5,553 | 5,688 | 5,796 | 5,792 | 5,988 | 6,019 | 5,999 | 5,969 | 5,960 | 5,962 | 5,950 | 5,950 | 3,540 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-00 | 5,365 | 5,961 | 5,385 | 5,730 | 5,636 | 5,514 | 5,782 | 5,928 | 5,884 | 5,970 | 5,939 | 5,981 | 5,981 | 5,969 | 5,969 | 4,262 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-01 | 6,087 | 6,084 | 5,795 | 6,852 | 6,652 | 6,833 | 6,832 | 6,825 | 6,882 | 6,907 | 6,900 | 6,912 | 6,913 | 6,899 | 6,899 | 5,333 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-01 | 5,031 | 5,470 | 5,558 | 5,623 | 5,774 | 5,974 | 6,084 | 6,102 | 6,139 | 6,230 | 6,160 | 6,170 | 6,171 | 6,159 | 6,159 | 7,151 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-02 | 4,778 | 5,342 | 5,383 | 5,465 | 5,489 | 5,617 | 5,653 | 5,661 | 5,651 | 5,710 | 5,677 | 5,687 | 5,688 | 5,677 | 5,677 | 7,448 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-02 | 4,153 | 4,765 | 4,971 | 4,988 | 5,030 | 4,974 | 5,078 | 5,124 | 5,118 | 5,174 | 5,145 | 5,154 | 5,154 | 5,144 | 5,144 | 7,613 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-03 | 4,315 | 5,241 | 5,457 | 5,704 | 5,786 | 5,787 | 5,822 | 5,865 | 5,889 | 5,953 | 5,919 | 5,929 | 5,930 | 5,918 | 5,918 | 11,170 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-03 | 4,830 | 5,839 | 5,985 | 5,975 | 6,088 | 6,058 | 6,068 | 6,136 | 6,161 | 6,228 | 6,193 | 6,204 | 6,205 | 6,192 | 6,192 | 13,273 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-04 | 6,277 | 6,306 | 6,180 | 6,140 | 6,283 | 6,269 | 6,307 | 6,378 | 6,403 | 6,473 | 6,436 | 6,448 | 6,449 | 6,436 | 6,436 | 13,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-04 | 5,440 | 5,411 | 5,274 | 5,440 | 5,456 | 5,497 | 5,530 | 5,592 | 5,614 | 5,675 | 5,643 | 5,653 | 5,654 | 5,643 | 5,643 | 10,304 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-05 | 6,155 | 6,126 | 6,269 | 6,366 | 6,461 | 6,509 | 6,548 | 6,622 | 6,648 | 6,721 | 6,683 | 6,694 | 6,695 | 6,682 | 6,682 | 10,100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-05 | 5,657 | 5,850 | 6,189 | 6,356 | 6,451 | 6,499 | 6,538 | 6,611 | 6,638 | 6,710 | 6,672 | 6,684 | 6,685 | 6,671 | 6,671 | 8,129 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-06 | 5,513 | 6,756 | 6,959 | 7,147 | 7,253 | 7,307 | 7,351 | 7,434 | 7,463 | 7,545 | 7,502 | 7,515 | 7,516 | 7,501 | 7,501 | 8,727 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-06 | 5,289 | 6,453 | 6,647 | 6,826 | 6,928 | 6,979 | 7,021 | 7,100 | 7,129 | 7,206 | 7,166 | 7,178 | 7,179 | 7,165 | 7,165 | 9,673 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1-2 | 2-3 | 3-4 | 4-5 | 5-6 | 6-7 | 7-8 | 8-9 | 9-10 | 10-11 | 11-12 | 12-13 | 13-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-00 | 1.015 | 1.009 | 0.937 | 1.024 | 1.019 | 0.999 | 1.034 | 1.005 | 0.997 | 0.995 | 0.998 | 1.000 | 0.998 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-00 | 1.111 | 0.903 | 1.064 | 0.984 | 0.978 | 1.049 | 1.025 | 0.993 | 1.015 | 0.995 | 1.007 | 1.000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-01 | 1.000 | 0.953 | 1.182 | 0.971 | 1.027 | 1.000 | 0.999 | 1.008 | 1.004 | 0.999 | 1.002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-01 | 1.087 | 1.016 | 1.012 | 1.027 | 1.035 | 1.018 | 1.003 | 1.006 | 1.015 | 0.989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-02 | 1.118 | 1.008 | 1.015 | 1.004 | 1.023 | 1.006 | 1.001 | 0.998 | 1.010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-02 | 1.147 | 1.043 | 1.003 | 1.009 | 0.989 | 1.021 | 1.009 | 0.999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-03 | 1.215 | 1.041 | 1.045 | 1.014 | 1.000 | 1.006 | 1.007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-03 | 1.209 | 1.025 | 0.998 | 1.019 | 0.995 | 1.002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-04 | 1.005 | 0.980 | 0.993 | 1.023 | 0.998 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-04 | 0.995 | 0.975 | 1.031 | 1.003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-05 | 0.995 | 1.023 | 1.016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec-05 | 1.034 | 1.058 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jun-06 | 1.225 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss Development Factors | Adequacy | |||
Average Last 4 | 3,835 | |||
2nd to Last Diagonal | 1,951 | |||
Last Diagonal | 3,154 | |||
Selected Avg Inc Indication | 932 | |||
Selected Ultimate Indication | 654 |
Avg Last 5 x HiLo | 1.011 | 1.009 | 1.015 | 1.014 | 0.998 | 1.010 | 1.004 | 1.001 | 1.010 | |||||||||||||||||||||||||||||||||||||||||||||||
Avg Last 4 | 1.062 | 1.009 | 1.010 | 1.015 | 0.996 | 1.009 | 1.005 | 1.003 | 1.011 | 0.994 | ||||||||||||||||||||||||||||||||||||||||||||||
Prior Sel @ 6 Mth | 1.014 | 1.001 | 1.022 | 1.016 | 1.002 | 1.008 | 1.003 | 1.004 | 1.007 | 0.997 | 1.001 | 1.002 | 1.000 | |||||||||||||||||||||||||||||||||||||||||||
Prior Sel @ 3 Mth | 1.130 | 1.030 | 1.007 | 1.021 | 1.007 | 1.011 | 1.009 | 1.006 | 0.997 | 1.006 | 0.998 | 1.000 | 1.000 | |||||||||||||||||||||||||||||||||||||||||||
Select | 1.220 | 1.030 | 1.027 | 1.015 | 1.007 | 1.006 | 1.011 | 1.004 | 1.011 | 0.994 | 1.002 | 1.000 | 0.998 | Tail | ||||||||||||||||||||||||||||||||||||||||||
Cumulative | 1.355 | 1.110 | 1.078 | 1.050 | 1.034 | 1.027 | 1.020 | 1.009 | 1.005 | 0.994 | 1.000 | 0.998 | 0.998 | 1.000 |
Dec-06 | Jun-06 | Dec-05 | Jun-05 | Dec-04 | Jun-04 | Dec-03 | Jun-03 | Dec-02 | Jun-02 | Dec-01 | Jun-01 | Dec-00 | Jun-00 | |||||||||||||||||||||||||||||||||||||||||||
Ult. Severity | 7,165 | 7,501 | 6,671 | 6,682 | 5,643 | 6,436 | 6,192 | 5,918 | 5,144 | 5,677 | 6,159 | 6,899 | 5,969 | 5,950 | ||||||||||||||||||||||||||||||||||||||||||
Ult. Counts | 1,350 | 1,164 | 1,219 | 1,512 | 1,826 | 2,173 | 2,144 | 1,888 | 1,480 | 1,312 | 1,161 | 773 | 714 | 595 | ||||||||||||||||||||||||||||||||||||||||||
Ultimate Loss | 9,673 | 8,727 | 8,129 | 10,100 | 10,304 | 13,985 | 13,273 | 11,170 | 7,613 | 7,448 | 7,151 | 5,333 | 4,262 | 3,540 | ||||||||||||||||||||||||||||||||||||||||||
Ultimate LR | 59.9 | % | 61.3 | % | 55.8 | % | 68.5 | % | 65.8 | % | 79.1 | % | 70.8 | % | 64.5 | % | 46.2 | % | 48.1 | % | 54.5 | % | 53.3 | % | 48.4 | % | 43.3 | % | ||||||||||||||||||||||||||||
Ultimate PP | 185 | 195 | 171 | 198 | 183 | 223 | 211 | 212 | 168 | 185 | 215 | 213 | 191 | 167 |
Page 4
(1) | (2) | (4) | (5) | (7) | (8) | (9) | ||||||||||||||||||||||
Record | Paid | Avg. Paid | Incurred | Avg. Incurred | Adj. Inc. @ | Pd. Loss @ | Indicated | |||||||||||||||||||||
Semesters | Projection | Projection | Projection | Projection | 12/31/2006 | 12/31/2006 | Ultimate | |||||||||||||||||||||
Ending | Ult ($000) | Ult ($000) | Ult ($000) | Ult ($000) | ($000) | ($000) | Loss ($000) | |||||||||||||||||||||
PRIOR 3 yrs | 34,764 | 34,720 | 34,729 | 34,727 | 34,672 | 34,324 | 34,729 | |||||||||||||||||||||
Jun-2003 | 9,723 | 9,720 | 9,934 | 9,944 | 9,867 | 9,368 | 9,937 | |||||||||||||||||||||
Dec-2003 | 12,772 | 12,662 | 12,658 | 12,724 | 12,573 | 11,966 | 12,681 | |||||||||||||||||||||
Jun-2004 | 14,159 | 14,183 | 14,656 | 14,692 | 14,440 | 12,747 | 14,666 | |||||||||||||||||||||
Dec-2004 | 10,455 | 10,318 | 10,588 | 10,658 | 10,482 | 8,918 | 10,611 | |||||||||||||||||||||
Jun-2005 | 10,108 | 9,948 | 10,923 | 10,955 | 10,802 | 7,770 | 10,928 | |||||||||||||||||||||
Dec-2005 | 7,063 | 6,813 | 8,067 | 8,067 | 7,995 | 4,535 | 8,067 | |||||||||||||||||||||
Jun-2006 | 8,484 | 8,264 | 8,584 | 8,727 | 8,771 | 3,565 | 8,631 | |||||||||||||||||||||
Dec-2006 | 11,901 | 12,037 | 9,486 | 9,161 | 9,597 | 1,768 | 9,350 | |||||||||||||||||||||
Total | 119,430 | 118,664 | 119,627 | 119,656 | 119,199 | 94,961 | 119,577 | |||||||||||||||||||||
Paid Loss | 94,961 | 94,961 | 94,961 | 94,961 | 94,961 | |||||||||||||||||||||||
Required Reserves | 24,468 | 23,703 | 24,666 | 24,694 | Required Reserves | 24,615 | ||||||||||||||||||||||
Held Reserves | 23,587 | 23,587 | 23,587 | 23,587 | Held Reserves | 23,587 | ||||||||||||||||||||||
Reserve Adequacy | (882 | ) | (116 | ) | (1,079 | ) | (1,108 | ) | Reserve Adequacy | -4.2 | % | (1,029 | ) | |||||||||||||||
Average Last 4 | 1,021 | (2,991 | ) | 559 | 1,378 | |||||||||||||||||||||||
2nd to Last Diagonal | 1,284 | (3,280 | ) | (1,436 | ) | 242 | ||||||||||||||||||||||
Last Diagonal | (8,089 | ) | (7,008 | ) | 1,646 | 1,614 |
(10) | (11) | (12) | (13) | (14) | (15) | |||||||||||||||||||
Incurred | Indicated | |||||||||||||||||||||||
Record Semesters | Avg. Paid | Avg. Incurred | Ultimate | Change In | Counts | Ultimate | ||||||||||||||||||
Ending | Severity | Severity | Severity | Severity | Projection | Counts | ||||||||||||||||||
PRIOR 3 yrs | 5,867 | 5,868 | 5,867 | 5,919 | 5,919 | |||||||||||||||||||
Jun-2003 | 5,287 | 5,409 | 5,404 | 1,839 | 1,839 | |||||||||||||||||||
Dec-2003 | 6,262 | 6,293 | 6,265 | 16.0 | % | 2,024 | 2,024 | |||||||||||||||||
Jun-2004 | 6,438 | 6,669 | 6,651 | 6.2 | % | 2,205 | 2,205 | |||||||||||||||||
Dec-2004 | 5,371 | 5,548 | 5,521 | -17.0 | % | 1,922 | 1,922 | |||||||||||||||||
Jun-2005 | 6,173 | 6,798 | 6,770 | 22.8 | % | 1,614 | 1,614 | |||||||||||||||||
Dec-2005 | 5,605 | 6,637 | 6,618 | -2.1 | % | 1,219 | 1,219 | |||||||||||||||||
Jun-2006 | 7,118 | 7,517 | 7,333 | 12.0 | % | 1,177 | 1,177 | |||||||||||||||||
Dec-2006 | 9,259 | 7,047 | 6,622 | -3.5 | % | 1,412 | 1,412 | |||||||||||||||||
Chg Dec 06 | ||||||||||||||||||||||||
4 Point Ann Exp Trend | 0.7 | % | vs. Dec 05 | 19,331 | 19,331 | |||||||||||||||||||
8 Point Ann Exp Trend | 5.9 | % | 0.1 | % |
Page 5
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | |||||||||||||||||||||||||||||||||
Calculated | Quarterly | IBNR | 6-mo emerg | ||||||||||||||||||||||||||||||||||||||||
Prior Review | PP using | Rec w/n Acc | Total | Indicated | Current | Emerged | Indicated | ||||||||||||||||||||||||||||||||||||
Future | 6 month | Periods | Future | Earned | Earned | Indicated | IBNR | IBNR | Since | IBNR | |||||||||||||||||||||||||||||||||
Pure Premium | Emerged | Ending | Pure Prem | Exposures | Premium | IBNR | Factors | Factors | Jun-2004 | Factors | |||||||||||||||||||||||||||||||||
1.17 | 0.89 | Sep-2002 | 0.60 | 22,103 | 8,156,777 | 13,163 | 0.2 | % | 6,110 | 0.2 | % | ||||||||||||||||||||||||||||||||
1.65 | 1.22 | Dec-2002 | 0.78 | 23,265 | 8,307,946 | 18,249 | 0.2 | % | 6,110 | 0.3 | % | ||||||||||||||||||||||||||||||||
2.12 | 0.87 | Mar-2003 | 0.98 | 24,674 | 8,417,123 | 24,058 | 0.3 | % | 1.1 | % | 17,913 | 0.5 | % | ||||||||||||||||||||||||||||||
2.43 | 1.05 | Jun-2003 | 1.16 | 27,968 | 8,907,753 | 32,482 | 0.4 | % | 1.1 | % | 17,913 | 0.6 | % | ||||||||||||||||||||||||||||||
2.74 | 1.70 | Sep-2003 | 1.35 | 30,751 | 9,331,069 | 41,499 | 0.4 | % | 1.1 | % | 17,913 | 0.6 | % | ||||||||||||||||||||||||||||||
3.05 | 1.80 | Dec-2003 | 1.54 | 32,076 | 9,413,188 | 49,381 | 0.5 | % | 1.1 | % | 17,913 | 0.7 | % | ||||||||||||||||||||||||||||||
3.36 | 1.93 | Mar-2004 | 1.73 | 31,817 | 9,094,404 | 55,086 | 0.6 | % | 2.1 | % | 30,074 | 0.9 | % | ||||||||||||||||||||||||||||||
3.80 | 2.10 | Jun-2004 | 2.15 | 30,918 | 8,575,229 | 66,559 | 0.8 | % | 2.1 | % | 30,074 | 1.1 | % | ||||||||||||||||||||||||||||||
4.24 | 2.68 | Sep-2004 | 2.58 | 29,011 | 7,995,863 | 74,802 | 0.9 | % | 2.1 | % | 30,074 | 1.3 | % | ||||||||||||||||||||||||||||||
4.69 | 3.13 | Dec-2004 | 3.01 | 27,276 | 7,655,772 | 82,052 | 1.1 | % | 2.1 | % | 30,074 | 1.5 | % | ||||||||||||||||||||||||||||||
5.14 | 3.62 | Mar-2005 | 3.44 | 26,502 | 7,425,622 | 91,225 | 1.2 | % | 3.1 | % | 45,060 | 1.8 | % | ||||||||||||||||||||||||||||||
5.69 | 4.11 | Jun-2005 | 4.00 | 24,379 | 7,323,851 | 97,579 | 1.3 | % | 3.0 | % | 39,863 | 1.9 | % | ||||||||||||||||||||||||||||||
6.81 | 5.14 | Sep-2005 | 4.78 | 24,375 | 7,367,666 | 116,551 | 1.6 | % | 4.1 | % | 37,814 | 2.1 | % | ||||||||||||||||||||||||||||||
7.58 | 5.64 | Dec-2005 | 5.47 | 23,292 | 7,189,243 | 127,483 | 1.8 | % | 4.5 | % | 82,033 | 2.9 | % | ||||||||||||||||||||||||||||||
8.95 | 6.33 | Mar-2006 | 6.59 | 22,123 | 7,035,903 | 145,689 | 2.1 | % | 4.9 | % | 160,243 | 4.3 | % | ||||||||||||||||||||||||||||||
11.31 | 9.00 | Jun-2006 | 8.92 | 22,681 | 7,197,385 | 202,219 | 2.8 | % | 5.7 | % | 570,118 | 10.7 | % | ||||||||||||||||||||||||||||||
15.82 | 13.83 | Sep-2006 | 11.74 | 25,217 | 7,724,378 | 295,929 | 3.8 | % | 6.9 | % | |||||||||||||||||||||||||||||||||
35.65 | 34.05 | Dec-2006 | 33.52 | 26,942 | 8,437,252 | 903,099 | 10.7 | % | 11.6 | % | |||||||||||||||||||||||||||||||||
2,560,917 | 475,370 | 145,556,425 | 2,437,105 | Total | 1,139,299 | ||||||||||||||||||||||||||||||||||||||
Zero Runoff | IBNR Reserves ($000) | 6 Mth Runoff | |||||||||||||||||||||||||||||||||||||||||
2,437 | Indicated | 2,377 | |||||||||||||||||||||||||||||||||||||||||
4,452 | Held | 4,196 | |||||||||||||||||||||||||||||||||||||||||
2,015 | Adequacy | 1,819 |
Page 6
Page 1
Quarterly | ||||||||||||||||||||||||||||||||||||||||
Rec w/n Acc | ||||||||||||||||||||||||||||||||||||||||
Periods | ||||||||||||||||||||||||||||||||||||||||
Ending | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | Ultimate | ||||||||||||||||||||||||||||||
Sep-02 | 496,686 | 518,026 | 470,878 | 478,747 | 444,503 | 444,244 | 434,161 | 423,421 | 421,999 | 402,689 | ||||||||||||||||||||||||||||||
Dec-02 | 563,065 | 602,907 | 574,026 | 582,766 | 533,957 | 521,264 | 519,834 | 510,883 | 508,050 | 496,017 | ||||||||||||||||||||||||||||||
Mar-03 | 701,628 | 724,404 | 683,572 | 722,382 | 756,639 | 873,140 | 849,821 | 858,810 | 866,299 | 841,951 | ||||||||||||||||||||||||||||||
Jun-03 | 926,112 | 992,882 | 936,052 | 1,074,640 | 1,040,663 | 990,419 | 882,542 | 936,217 | 922,570 | 893,998 | ||||||||||||||||||||||||||||||
Sep-03 | 762,137 | 742,380 | 710,141 | 696,527 | 614,613 | 598,305 | 587,628 | 580,404 | 575,320 | 559,296 | ||||||||||||||||||||||||||||||
Dec-03 | 1,403,988 | 1,429,926 | 1,328,895 | 1,282,623 | 1,223,390 | 1,217,221 | 1,222,239 | 1,219,462 | 1,209,300 | 1,182,188 | ||||||||||||||||||||||||||||||
Mar-04 | 1,153,489 | 1,091,243 | 941,836 | 889,421 | 866,636 | 858,661 | 874,015 | 836,479 | 848,368 | 834,987 | ||||||||||||||||||||||||||||||
Jun-04 | 1,273,559 | 1,032,051 | 895,131 | 827,142 | 819,180 | 787,061 | 741,515 | 750,787 | 725,020 | 687,127 | ||||||||||||||||||||||||||||||
Sep-04 | 950,170 | 902,377 | 796,609 | 748,899 | 725,726 | 705,040 | 698,794 | 692,021 | 674,166 | 674,166 | ||||||||||||||||||||||||||||||
Dec-04 | 945,192 | 904,793 | 884,895 | 836,910 | 796,854 | 766,037 | 749,239 | 745,902 | 745,902 | |||||||||||||||||||||||||||||||
Mar-05 | 905,649 | 794,721 | 860,296 | 820,179 | 805,707 | 803,143 | 832,359 | 833,632 | ||||||||||||||||||||||||||||||||
Jun-05 | 473,607 | 400,046 | 393,187 | 374,912 | 353,414 | 326,284 | 320,368 | |||||||||||||||||||||||||||||||||
Sep-05 | 523,663 | 444,461 | 382,911 | 458,488 | 390,422 | 372,461 | ||||||||||||||||||||||||||||||||||
Dec-05 | 772,190 | 700,711 | 604,762 | 577,760 | 524,747 | |||||||||||||||||||||||||||||||||||
Mar-06 | 553,743 | 496,540 | 466,983 | 414,268 | ||||||||||||||||||||||||||||||||||||
Jun-06 | 559,263 | 621,759 | 508,232 | |||||||||||||||||||||||||||||||||||||
Sep-06 | 673,829 | 527,186 | ||||||||||||||||||||||||||||||||||||||
0-1 | 1-2 | 2-3 | 3-4 | 4-5 | 5-6 | 6-7 | 7-8 | 8-9 | ||||||||||||||||||||||||||||||||
Sep-02 | 1.043 | 0.909 | 1.017 | 0.928 | 0.999 | 0.977 | 0.975 | 0.997 | 0.973 | |||||||||||||||||||||||||||||||
Dec-02 | 1.071 | 0.952 | 1.015 | 0.916 | 0.976 | 0.997 | 0.983 | 0.994 | 0.990 | |||||||||||||||||||||||||||||||
Mar-03 | 1.032 | 0.944 | 1.057 | 1.047 | 1.154 | 0.973 | 1.011 | 1.009 | 0.973 | |||||||||||||||||||||||||||||||
Jun-03 | 1.072 | 0.943 | 1.148 | 0.968 | 0.952 | 0.891 | 1.061 | 0.985 | 0.970 | |||||||||||||||||||||||||||||||
Sep-03 | 0.974 | 0.957 | 0.981 | 0.882 | 0.973 | 0.982 | 0.988 | 0.991 | 0.992 | |||||||||||||||||||||||||||||||
Dec-03 | 1.018 | 0.929 | 0.965 | 0.954 | 0.995 | 1.004 | 0.998 | 0.992 | 0.991 | |||||||||||||||||||||||||||||||
Mar-04 | 0.946 | 0.863 | 0.944 | 0.974 | 0.991 | 1.018 | 0.957 | 1.014 | 0.990 | |||||||||||||||||||||||||||||||
Jun-04 | 0.810 | 0.867 | 0.924 | 0.990 | 0.961 | 0.942 | 1.013 | 0.966 | 0.948 | |||||||||||||||||||||||||||||||
Sep-04 | 0.950 | 0.883 | 0.940 | 0.969 | 0.971 | 0.991 | 0.990 | 0.974 | ||||||||||||||||||||||||||||||||
Dec-04 | 0.957 | 0.978 | 0.946 | 0.952 | 0.961 | 0.978 | 0.996 | |||||||||||||||||||||||||||||||||
Mar-05 | 0.878 | 1.083 | 0.953 | 0.982 | 0.997 | 1.036 | ||||||||||||||||||||||||||||||||||
Jun-05 | 0.845 | 0.983 | 0.954 | 0.943 | 0.923 | |||||||||||||||||||||||||||||||||||
Sep-05 | 0.849 | 0.862 | 1.197 | 0.852 | ||||||||||||||||||||||||||||||||||||
Dec-05 | 0.907 | 0.863 | 0.955 | |||||||||||||||||||||||||||||||||||||
Mar-06 | 0.897 | 0.940 | ||||||||||||||||||||||||||||||||||||||
Jun-06 | 1.112 | |||||||||||||||||||||||||||||||||||||||
Straight Avg | 0.963 | 0.919 | 0.973 | 0.954 | 0.970 | 0.999 | 0.997 | 1.008 | 1.009 | |||||||||||||||||||||||||||||||
Avg x HiLo | 0.963 | 0.918 | 0.971 | 0.951 | 0.968 | 0.990 | 0.996 | 1.004 | 1.001 | |||||||||||||||||||||||||||||||
Wtd Avg All | 0.957 | 0.921 | 0.975 | 0.959 | 0.980 | 0.988 | 1.000 | 1.000 | 0.998 | |||||||||||||||||||||||||||||||
Avg Last 8 | 0.924 | 0.932 | 0.977 | 0.952 | 0.972 | 0.980 | 1.002 | 0.991 | 0.978 | |||||||||||||||||||||||||||||||
Wt Avg.8 | 0.926 | 0.931 | 0.961 | 0.959 | 0.977 | 0.980 | 1.002 | 0.991 | 0.979 | |||||||||||||||||||||||||||||||
Avg Last 4 | 0.941 | 0.912 | 1.015 | 0.932 | 0.963 | 0.987 | 0.989 | 0.986 | 0.980 | |||||||||||||||||||||||||||||||
Wt Avg.4 | 0.940 | 0.905 | 0.996 | 0.942 | 0.970 | 0.987 | 0.987 | 0.988 | 0.981 | |||||||||||||||||||||||||||||||
Select | 0.957 | 0.921 | 0.977 | 0.952 | 0.972 | 0.980 | 1.002 | 1.000 | 1.000 | |||||||||||||||||||||||||||||||
Cumulative | 0.782 | 0.817 | 0.887 | 0.908 | 0.954 | 0.982 | 1.002 | 1.000 | 1.000 | |||||||||||||||||||||||||||||||
Ultimate Loss | 527,186 | 508,232 | 414,268 | 524,747 | 372,461 | 320,368 | 833,632 | 745,902 | 674,166 | |||||||||||||||||||||||||||||||
Page 7
Page 2
Quarterly | ||||||||||||||||||||||||||||||||
Rec w/n Acc | ||||||||||||||||||||||||||||||||
Periods | ||||||||||||||||||||||||||||||||
Ending | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | ||||||||||||||||||||||||
Sep-02 | 2,618,475 | 402,689 | 137,687 | 20,484 | 35,110 | 5,112 | 24,319 | 22,365 | ||||||||||||||||||||||||
Dec-02 | 3,340,158 | 496,017 | 226,614 | 96,699 | 34,548 | 22,026 | 19,872 | 9,514 | ||||||||||||||||||||||||
Mar-03 | 3,930,469 | 841,951 | 89,797 | 359,298 | 79,781 | 80,585 | 26,712 | 17,874 | ||||||||||||||||||||||||
Jun-03 | 4,092,147 | 893,998 | 255,026 | 144,934 | 117,008 | 50,989 | 28,301 | 19,937 | ||||||||||||||||||||||||
Sep-03 | 5,225,296 | 559,296 | 185,020 | 191,422 | 36,711 | 59,504 | 107,033 | 21,442 | ||||||||||||||||||||||||
Dec-03 | 4,830,247 | 1,182,188 | 250,533 | 281,475 | 42,245 | 32,341 | 16,295 | 10,619 | ||||||||||||||||||||||||
Mar-04 | 6,405,308 | 834,987 | 128,883 | 112,328 | 34,996 | 119,103 | 89,602 | 6,863 | ||||||||||||||||||||||||
Jun-04 | 4,924,350 | 687,127 | 134,681 | 169,119 | 91,889 | (58,356 | ) | 81,906 | 14,844 | |||||||||||||||||||||||
Sep-04 | 4,186,260 | 674,166 | 139,948 | 115,327 | 17,039 | 14,286 | 13,298 | 21,573 | ||||||||||||||||||||||||
Dec-04 | 4,028,433 | 745,902 | 69,329 | 30,049 | 35,935 | 15,788 | 17,576 | 7,043 | ||||||||||||||||||||||||
Mar-05 | 4,370,268 | 833,632 | 189,272 | 37,264 | 24,374 | 16,504 | 29,907 | 15,153 | ||||||||||||||||||||||||
Jun-05 | 3,946,033 | 320,368 | 77,327 | 52,106 | 13,905 | 23,755 | 16,108 | |||||||||||||||||||||||||
Sep-05 | 3,375,799 | 372,461 | 34,944 | 53,028 | 29,579 | 8,235 | ||||||||||||||||||||||||||
Dec-05 | 3,252,471 | 524,747 | 40,514 | 48,554 | 33,479 | |||||||||||||||||||||||||||
Mar-06 | 3,751,012 | 414,268 | 106,068 | 54,175 | ||||||||||||||||||||||||||||
Jun-06 | 3,283,120 | 508,232 | 61,886 | |||||||||||||||||||||||||||||
Sep-06 | 3,631,092 | 527,186 | ||||||||||||||||||||||||||||||
Dec-06 | 3,209,628 | |||||||||||||||||||||||||||||||
Avg 3 Emergence | 3,374,613 | 483,229 | 69,489 | 51,919 | 25,654 | 16,165 | 21,197 | 14,590 |
Quarterly | ||||||||||||||||||||||||||||||||
Rec w/n Acc | ||||||||||||||||||||||||||||||||
Periods | ||||||||||||||||||||||||||||||||
Ending | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | ||||||||||||||||||||||||
Sep-02 | 3,093,429 | 471,089 | 159,503 | 23,498 | 39,883 | 5,750 | 27,089 | 24,669 | ||||||||||||||||||||||||
Dec-02 | 3,907,512 | 574,608 | 259,958 | 109,845 | 38,862 | 24,535 | 21,919 | 10,392 | ||||||||||||||||||||||||
Mar-03 | 4,553,228 | 965,836 | 102,005 | 404,161 | 88,867 | 88,887 | 29,176 | 19,333 | ||||||||||||||||||||||||
Jun-03 | 4,694,268 | 1,015,535 | 286,870 | 161,440 | 129,062 | 55,693 | 30,610 | 21,353 | ||||||||||||||||||||||||
Sep-03 | 5,935,663 | 629,132 | 206,092 | 211,142 | 40,098 | 64,360 | 114,637 | 22,741 | ||||||||||||||||||||||||
Dec-03 | 5,433,371 | 1,316,826 | 276,343 | 307,443 | 45,692 | 34,639 | 17,282 | 11,153 | ||||||||||||||||||||||||
Mar-04 | 7,134,798 | 921,007 | 140,773 | 121,494 | 37,482 | 126,320 | 94,104 | 7,138 | ||||||||||||||||||||||||
Jun-04 | 5,431,656 | 750,520 | 145,671 | 181,134 | 97,457 | (61,288 | ) | 85,182 | 15,287 | |||||||||||||||||||||||
Sep-04 | 4,572,474 | 729,178 | 149,891 | 122,315 | 17,895 | 14,857 | 13,695 | 22,000 | ||||||||||||||||||||||||
Dec-04 | 4,357,153 | 798,896 | 73,530 | 31,559 | 37,372 | 16,259 | 17,924 | 7,112 | ||||||||||||||||||||||||
Mar-05 | 4,680,760 | 884,147 | 198,782 | 38,755 | 25,102 | 16,831 | 30,202 | 15,153 | ||||||||||||||||||||||||
Jun-05 | 4,185,147 | 336,466 | 80,420 | 53,661 | 14,180 | 23,989 | 16,108 | |||||||||||||||||||||||||
Sep-05 | 3,545,425 | 387,359 | 35,987 | 54,078 | 29,870 | 8,235 | ||||||||||||||||||||||||||
Dec-05 | 3,382,570 | 540,412 | 41,316 | 49,032 | 33,479 | |||||||||||||||||||||||||||
Mar-06 | 3,862,989 | 422,472 | 107,113 | 54,175 | ||||||||||||||||||||||||||||
Jun-06 | 3,348,139 | 513,240 | 61,886 | |||||||||||||||||||||||||||||
Sep-06 | 3,666,871 | 527,186 | ||||||||||||||||||||||||||||||
Dec-06 | 3,209,628 |
Page 8
Page 3
Quarterly | ||||||||||||||||||||||||||||||||
Rec w/n Acc | INFLATED INCURRED LOSSES QUARTERLY LAG 0-7 PURE PREMIUMS — IBNR ANALYSIS | |||||||||||||||||||||||||||||||
Periods | ||||||||||||||||||||||||||||||||
Ending | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | ||||||||||||||||||||||||
Sep-02 | 139.957 | 21.314 | 7.216 | 1.063 | 1.804 | 0.260 | 1.226 | 1.116 | ||||||||||||||||||||||||
Dec-02 | 167.954 | 24.698 | 11.174 | 4.721 | 1.670 | 1.055 | 0.942 | 0.447 | ||||||||||||||||||||||||
Mar-03 | 184.538 | 39.144 | 4.134 | 16.380 | 3.602 | 3.602 | 1.182 | 0.784 | ||||||||||||||||||||||||
Jun-03 | 167.842 | 36.310 | 10.257 | 5.772 | 4.615 | 1.991 | 1.094 | 0.763 | ||||||||||||||||||||||||
Sep-03 | 193.022 | 20.459 | 6.702 | 6.866 | 1.304 | 2.093 | 3.728 | 0.740 | ||||||||||||||||||||||||
Dec-03 | 169.390 | 41.053 | 8.615 | 9.585 | 1.424 | 1.080 | 0.539 | 0.348 | ||||||||||||||||||||||||
Mar-04 | 224.248 | 28.947 | 4.425 | 3.819 | 1.178 | 3.970 | 2.958 | 0.224 | ||||||||||||||||||||||||
Jun-04 | 175.682 | 24.275 | 4.712 | 5.859 | 3.152 | (1.982 | ) | 2.755 | 0.494 | |||||||||||||||||||||||
Sep-04 | 157.611 | 25.134 | 5.167 | 4.216 | 0.617 | 0.512 | 0.472 | 0.758 | ||||||||||||||||||||||||
Dec-04 | 159.741 | 29.289 | 2.696 | 1.157 | 1.370 | 0.596 | 0.657 | 0.261 | ||||||||||||||||||||||||
Mar-05 | 176.618 | 33.361 | 7.501 | 1.462 | 0.947 | 0.635 | 1.140 | 0.572 | ||||||||||||||||||||||||
Jun-05 | 171.668 | 13.801 | 3.299 | 2.201 | 0.582 | 0.984 | 0.661 | |||||||||||||||||||||||||
Sep-05 | 145.453 | 15.892 | 1.476 | 2.219 | 1.225 | 0.338 | ||||||||||||||||||||||||||
Dec-05 | 145.225 | 23.202 | 1.774 | 2.105 | 1.437 | |||||||||||||||||||||||||||
Mar-06 | 174.614 | 19.096 | 4.842 | 2.449 | ||||||||||||||||||||||||||||
Jun-06 | 147.619 | 22.629 | 2.729 | |||||||||||||||||||||||||||||
Sep-06 | 145.414 | 20.906 | ||||||||||||||||||||||||||||||
Dec-06 | 119.133 | |||||||||||||||||||||||||||||||
Straight Avg | 166.289 | 25.495 | 5.461 | 4.640 | 2.019 | 1.118 | 1.387 | 0.575 | ||||||||||||||||||||||||
Avg x HiLo | 165.689 | 25.268 | 5.352 | 4.096 | 1.936 | 1.137 | 1.269 | 0.557 | ||||||||||||||||||||||||
Avg Last 8 | 153.218 | 22.272 | 3.685 | 2.708 | 1.314 | 0.767 | 1.614 | 0.520 | ||||||||||||||||||||||||
Avg Last 4 | 146.695 | 21.458 | 2.705 | 2.243 | 1.048 | 0.638 | 0.732 | 0.521 | ||||||||||||||||||||||||
Select | 146.695 | 21.458 | 2.705 | 2.243 | 1.048 | 0.638 | 0.732 | 0.521 | ||||||||||||||||||||||||
Quarterly | ||||||||||||||||||||||||||||||||||||||||
Rec w/n Acc | FUTURE PURE PREMIUMS BY QUARTERLY LAG, INFLATED | Total | ||||||||||||||||||||||||||||||||||||||
Periods | Future | |||||||||||||||||||||||||||||||||||||||
Ending | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 - 27 | Pure Prem | ||||||||||||||||||||||||||||||
Sep-02 | 0.596 | 0.60 | ||||||||||||||||||||||||||||||||||||||
Dec-02 | 0.784 | 0.78 | ||||||||||||||||||||||||||||||||||||||
Mar-03 | 0.975 | 0.98 | ||||||||||||||||||||||||||||||||||||||
Jun-03 | 1.161 | 1.16 | ||||||||||||||||||||||||||||||||||||||
Sep-03 | 1.350 | 1.35 | ||||||||||||||||||||||||||||||||||||||
Dec-03 | 1.540 | 1.54 | ||||||||||||||||||||||||||||||||||||||
Mar-04 | 1.731 | 1.73 | ||||||||||||||||||||||||||||||||||||||
Jun-04 | 2.153 | 2.15 | ||||||||||||||||||||||||||||||||||||||
Sep-04 | 2.578 | 2.58 | ||||||||||||||||||||||||||||||||||||||
Dec-04 | 3.008 | 3.01 | ||||||||||||||||||||||||||||||||||||||
Mar-05 | 3.442 | 3.44 | ||||||||||||||||||||||||||||||||||||||
Jun-05 | 0.526 | 3.476 | 4.00 | |||||||||||||||||||||||||||||||||||||
Sep-05 | 0.740 | 0.532 | 3.510 | 4.78 | ||||||||||||||||||||||||||||||||||||
Dec-05 | 0.645 | 0.747 | 0.537 | 3.545 | 5.47 | |||||||||||||||||||||||||||||||||||
Mar-06 | 1.058 | 0.651 | 0.754 | 0.542 | 3.580 | 6.59 | ||||||||||||||||||||||||||||||||||
Jun-06 | 2.266 | 1.069 | 0.657 | 0.762 | 0.548 | 3.615 | 8.92 | |||||||||||||||||||||||||||||||||
Sep-06 | 2.732 | 2.288 | 1.079 | 0.664 | 0.769 | 0.553 | 3.651 | 11.74 | ||||||||||||||||||||||||||||||||
Dec-06 | 21.670 | 2.759 | 2.310 | 1.090 | 0.670 | 0.777 | 0.558 | 3.687 | 33.52 | |||||||||||||||||||||||||||||||
Inflation rate used in IBNR calculation: | 4.0 | % |
Page 9
• | COLUMNS (1) – (6):Estimated ultimate losses resulting from six different sets of projections, along with the resulting required reserves and reserve adequacy for each respective projection, as well as the adequacy that would have resulted using 3 different types of “default” selections of loss development factors for four of the projections | |
• | COLUMNS (7) and (8):Cumulative adjuster-incurred losses (i.e., paid losses plus adjuster-set reserves) and paid losses as of the evaluation date of 12/31/2006 | |
• | COLUMN (9):Indicated ultimate losses which have been judgmentally selected by the loss reserving area considering all information obtained during the analysis, along with the resulting required reserves and reserve adequacy | |
• | COLUMNS (10) and (11):Estimated ultimate average paid and average incurred severities, based upon the projections of average paid and average incurred losses | |
• | COLUMN (12):Average adjuster case reserves, as of the first evaluation point (i.e. the evaluation date is the end-date of each respective accident semester, which is at 6 months development) | |
• | COLUMN (13):Closure Rate @ 6 months = [(The number of claims closed with payment) at 6 months development] divided by [Selected ultimate incurred claim count] | |
• | COLUMNS (14) and (15):CWP Rate (i.e. percentage of reported claims which are closed without payment), as of the first evaluation point (6 months), and projection to ultimate | |
• | COLUMNS (16) – (19):Estimated ultimate incurred counts resulting from four different sets of projections | |
• | COLUMN (20):Indicated ultimate incurred counts which have been judgmentally selected by the loss reserving area, considering all of the information obtained during the analysis | |
• | COLUMNS (21) and (22):Indicated ultimate severities which result from the ultimate selections of losses and counts, along with the change from period to period, and the 4-point and 8-point fitted exponential trends. Fitted exponential trends tell us the estimated average annual change in severity (or another parameter) considering our selections over the past two years (4 points) and four years (8 points). The year over year change is also presented for the most recent semester | |
• | COLUMNS (23) and (24):Indicated ultimate frequencies which result from the selected ultimate counts, along with the change from period to period, the 4-point and 8-point fitted exponential trends, and the year over year change |
Page 10
• | COLUMNS (25) and (26):The pure premiums and loss ratios which result from the selected ultimate losses, along with the 4-point and 8-point fitted exponential pure premium trends | |
• | COLUMNS (27) – (30):Earned premium and earned exposures, which are used in some of the other calculations, along with average earned premium, changes in average earned premium, and the 4-point and 8-point fitted exponential trends for average earned premium |
Page 11
(5)=(11)X(20) | ||||||||||||||||||||||||||
(1) | (2)=(10)X(20) | (3) | (4) | (see Exhibit B) | (6) | |||||||||||||||||||||
Accident | Paid | Avg. Paid | BF Paid | Incurred | Avg. Incurred | BF Incurred | ||||||||||||||||||||
Semesters | Projection | Projection | Method | Projection | Projection | Method | ||||||||||||||||||||
Ending | Ult ($000) | Ult ($000) | Ult ($000) | Ult ($000) | Ult ($000) | Ult ($000) | ||||||||||||||||||||
PRIOR 3 yrs | 35,427 | 35,385 | 35,427 | 35,395 | 35,347 | 35,395 | ||||||||||||||||||||
Jun-2003 | 10,930 | 10,940 | 10,931 | 11,193 | 11,170 | 11,193 | ||||||||||||||||||||
Dec-2003 | 13,257 | 13,163 | 13,254 | 13,249 | 13,273 | 13,250 | ||||||||||||||||||||
Jun-2004 | 13,534 | 13,781 | 13,603 | 14,012 | 13,985 | 14,141 | ||||||||||||||||||||
Dec-2004 | 9,962 | 9,868 | 9,954 | 10,324 | 10,304 | 10,324 | ||||||||||||||||||||
Jun-2005 | 9,485 | 9,492 | 9,435 | 10,149 | 10,100 | 10,127 | ||||||||||||||||||||
Dec-2005 | 7,187 | 6,928 | 8,001 | 8,181 | 8,129 | 8,216 | ||||||||||||||||||||
Jun-2006 | 9,689 | 8,667 | 9,207 | 8,842 | 8,727 | 8,846 | ||||||||||||||||||||
Dec-2006 | 11,020 | 12,069 | 10,285 | 9,665 | 9,673 | 9,748 | ||||||||||||||||||||
Tot Ult Loss | 120,492 | 120,293 | 120,095 | 121,011 | 120,708 | 121,241 | ||||||||||||||||||||
Tot Paid Loss | 93,602 | 93,602 | 93,602 | 93,602 | 93,602 | 93,602 | ||||||||||||||||||||
Required Reserves | 26,890 | 26,691 | 26,494 | 27,409 | 27,106 | 27,639 | ||||||||||||||||||||
Held Reserves | 28,038 | 28,038 | 28,038 | 28,038 | 28,038 | 28,038 | ||||||||||||||||||||
Reserve Adequacy | 1,148 | 1,347 | 1,545 | 629 | 932 | 400 | ||||||||||||||||||||
Avg Last 4 | 3,132 | (2,025 | ) | 3,261 | 3,835 | |||||||||||||||||||||
2nd to Last Diag | 2,865 | (3,318 | ) | 624 | 1,951 | |||||||||||||||||||||
Last Diag | (7,001 | ) | (6,264 | ) | 3,470 | 3,154 | ||||||||||||||||||||
Page 12
Total Ultimate Losses | — | Total Paid Losses | = | Required Reserves | ||||
Held Reserves | — | Required Reserves | = | Reserve Adequacy |
Each data point in the | (Paid Counts= Claim features | |||||
Average Paid Loss | = | [Paid Loss Dollars] | (closed or open) with loss | |||
development triangle | [Paid Counts] | payment) | ||||
Each data point in the | (Incurred counts= Claim features | |||||
Average Incurred Loss | = | [Incurred Loss Dollars] | closed with loss payment + open | |||
development triangle | [Incurred Counts] | features.) |
Ultimate Lossesfor the | [Ultimate Average | |||||||
Average Incurred Projection | = | Incurred Severity] | X | [Indicated Ultimate Counts] | ||||
(column (5) of exhibit A) | (11) | (20) |
Page 13
(10) | (20) | (2)=(10)X(20) | (11) | (20) | (5)=(11)X(20) | ||||||||||||||||||||
Accident | Indicated | Avg. Paid | [Per Exh B] | Indicated | Avg. Incr | ||||||||||||||||||||
Semesters | Avg. Paid | Ultimate | Projection | Avg. Incr | Ultimate | Projection | |||||||||||||||||||
Ending | Severity | Counts | Ult ($000) | Severity | Counts | Ult ($000) | |||||||||||||||||||
PRIOR 3 yrs | 5,863 | 6,035 | 35,385 | 5,857 | 6,035 | 35,347 | |||||||||||||||||||
Jun-2003 | 5,796 | 1,888 | 10,940 | 5,918 | 1,888 | 11,170 | |||||||||||||||||||
Dec-2003 | 6,141 | 2,144 | 13,163 | 6,192 | 2,144 | 13,273 | |||||||||||||||||||
Jun-2004 | 6,342 | 2,173 | 13,781 | 6,436 | 2,173 | 13,985 | |||||||||||||||||||
Dec-2004 | 5,404 | 1,826 | 9,868 | 5,643 | 1,826 | 10,304 | |||||||||||||||||||
Jun-2005 | 6,280 | 1,512 | 9,492 | 6,682 | 1,512 | 10,100 | |||||||||||||||||||
Dec-2005 | 5,686 | 1,219 | 6,928 | 6,671 | 1,219 | 8,129 | |||||||||||||||||||
Jun-2006 | 7,449 | 1,164 | 8,667 | 7,501 | 1,164 | 8,727 | |||||||||||||||||||
Dec-2006 | 8,940 | 1,350 | 12,069 | 7,165 | 1,350 | 9,673 |
[# of Claims Closed w/ Payment] | |||||
Closure Rate | = | [Selected Ultimate Incurred Claim Count] |
Page 14
(Data) | (20) | (13) | ||||||||||
Accident | Features | Indicated | =(Data)/(20) | |||||||||
Semesters | Closed w/ Pay | Ultimate | Closure Rate | |||||||||
Ending | @ 6 Months | Counts | @ 6 Months | |||||||||
Jun-2003 | 636 | 1,888 | 33.7 | % | ||||||||
Dec-2003 | 613 | 2,144 | 28.6 | % | ||||||||
Jun-2004 | 568 | 2,173 | 26.1 | % | ||||||||
Dec-2004 | 589 | 1,826 | 32.3 | % | ||||||||
Jun-2005 | 466 | 1,512 | 30.8 | % | ||||||||
Dec-2005 | 322 | 1,219 | 26.4 | % | ||||||||
Jun-2006 | 273 | 1,164 | 23.5 | % | ||||||||
Dec-2006 | 290 | 1,350 | 21.5 | % |
Page 15
Page 16
Assume: | (1) | All open claims are reserved at their ultimate payment amount | |
(2) | The lower severity claims close before the higher severity claims | ||
(3) | The distribution of claims is as follows: |
Total Incurred | ||||||||||||||||
# of Claims: | 25 | 25 | 50 | 100 | ||||||||||||
Severity: | 5,000 | 10,000 | 16,000 | 11,750 | ||||||||||||
Incurred Loss: | 125,000 | 250,000 | 800,000 | 1,175,000 |
Closed | Open | Total Incurred | ||||||||||
# of Claims: | 50 | 50 | 100 | |||||||||
Severity: | 7,500 | 16,000 | 11,750 | |||||||||
Incurred Loss: | 375,000 | 800,000 | 1,175,000 |
Closed | Open | Total Incurred | ||||||||||
# of Claims: | 25 | 75 | 100 | |||||||||
Severity: | 5,000 | 14,000 | 11,750 | |||||||||
Incurred Loss: | 125,000 | 1,050,000 | 1,175,000 |
Page 17
(12) | (13) | ||||||||
Accident | Avg. Adjuster | ||||||||
Semesters | Case Reserves | Closure Rate | |||||||
Ending | @ 6 Months | @ 6 Months | |||||||
Jun-2003 | 4,207 | 33.7 | % | ||||||
Dec-2003 | 4,321 | 28.6 | % | ||||||
Jun-2004 | 5,341 | 26.1 | % | ||||||
Dec-2004 | 5,291 | 32.3 | % | ||||||
Jun-2005 | 5,462 | 30.8 | % | ||||||
Dec-2005 | 5,213 | 26.4 | % | ||||||
Jun-2006 | 4,606 | 23.5 | % | ||||||
Dec-2006 | 4,153 | 21.5 | % |
• | There may have been a lower percentage of large claims | |
• | There may have been a significant change in the mix of business by limit | |
• | We may have made changes to the averages in the case tables that caused part of the decrease | |
• | There may have been process changes, causing: |
o | Adjusters to leave claims at the case table average for a longer period of time before assigning their own estimates | ||
o | Adjusters to estimate the value of the claims differently | ||
o | Higher severity claims to settle more quickly |
• | There may have been external (legal, regulatory, or environmental) forces causing severity of open claims (or all claims) to decrease |
Page 18
Accident | ||||||
Semester | ||||||
Bornhuetter-Ferguson using Incurred Loss Development | Ending Dec-06 | |||||
(a) | Earned Premium (column (27)) | 16,161,630 | ||||
(b) | Expected Loss Ratio (judgment) | 63.0 | % | |||
(c)=(a)X(b) | Expected Ultimate Losses | 10,181,827 | ||||
Cumulative Loss Development Factor (6 mo to Ultimate) | ||||||
(d) | Per Incurred Loss Development | 1.192 | ||||
(e)=1-1/(d) | % Unreported | 16.1 | % | |||
(f) | Actual Incurred Loss @ 12/31/06 (column (7)) | 8,106,511 | ||||
(f)+((c)X(e)) | Estimated Ultimate Loss (column (6)) | 9,748,218 |
Page 19
(9) | (20) | (21) | (22) | (25) | (26) | |||||||||||||||||||||||
Accident | Indicated | Indicated | =(9)/(20) | Semi-Annual | ||||||||||||||||||||||||
Semesters | Ultimate | Ultimate | Ultimate | Change In | Pure | Loss | ||||||||||||||||||||||
Ending | Loss ($000) | Counts | Severity | Severity | Premium | Ratio | ||||||||||||||||||||||
PRIOR 3 yrs | 35,379 | 6,035 | 5,862 | 189 | 49.1 | % | ||||||||||||||||||||||
Jun-2003 | 11,186 | 1,888 | 5,926 | 212 | 64.6 | % | ||||||||||||||||||||||
Dec-2003 | 13,257 | 2,144 | 6,185 | 4.4 | % | 211 | 70.7 | % | ||||||||||||||||||||
Jun-2004 | 14,046 | 2,173 | 6,464 | 4.5 | % | 224 | 79.5 | % | ||||||||||||||||||||
Dec-2004 | 10,318 | 1,826 | 5,650 | -12.6 | % | 183 | 65.9 | % | ||||||||||||||||||||
Jun-2005 | 10,125 | 1,512 | 6,699 | 18.6 | % | 199 | 68.6 | % | ||||||||||||||||||||
Dec-2005 | 8,175 | 1,219 | 6,709 | 0.2 | % | 172 | 56.2 | % | ||||||||||||||||||||
Jun-2006 | 8,805 | 1,164 | 7,568 | 12.8 | % | 197 | 61.9 | % | ||||||||||||||||||||
Dec-2006 | 9,695 | 1,350 | 7,182 | -5.1 | % | 186 | 60.0 | % | ||||||||||||||||||||
Total | 120,987 | 19,309 | 6.8 | % | 4 pt ann exp trend | -1.4 | % | |||||||||||||||||||||
6.5 | % | 8 pt ann exp trend | -4.7 | % | ||||||||||||||||||||||||
Tot Paid Loss | 93,602 | |||||||||||||||||||||||||||
Required Reserves | 27,385 | |||||||||||||||||||||||||||
Held Reserves | 28,038 | |||||||||||||||||||||||||||
Reserve Adequacy | 654 | 2.4 | % | ç Percent of required reserves | ||||||||||||||||||||||||
Page 20
[Required Reserves] | = | [Total Ultimate Losses] | — | [Total Paid Losses] | = | 27,385 | ||||||
[Reserve Adequacy] | = | [Held Reserves] | — | [Required Reserves] | = | 654 |
(14) | (15) | (16) | (17) | (18) | (19) | ||||||||||||||||||||
Accident | Paid | Closed w/ Pay | Incurred | Recorded | |||||||||||||||||||||
Semesters | CWP Rate | Ultimate | Counts | Counts | Counts | Counts | |||||||||||||||||||
Ending | @ 6 Months | CWP Rate | Projection | Projection | Projection | Projection | |||||||||||||||||||
PRIOR 3 yrs | 6,030 | 6,029 | 6,032 | 6,035 | |||||||||||||||||||||
Jun-2003 | 26.3 | % | 37.9 | % | 1,885 | 1,886 | 1,888 | 1,887 | |||||||||||||||||
Dec-2003 | 29.4 | % | 40.4 | % | 2,144 | 2,145 | 2,145 | 2,142 | |||||||||||||||||
Jun-2004 | 27.6 | % | 41.3 | % | 2,132 | 2,134 | 2,175 | 2,171 | |||||||||||||||||
Dec-2004 | 26.3 | % | 39.8 | % | 1,821 | 1,822 | 1,827 | 1,825 | |||||||||||||||||
Jun-2005 | 30.7 | % | 41.8 | % | 1,483 | 1,486 | 1,514 | 1,509 | |||||||||||||||||
Dec-2005 | 29.2 | % | 42.5 | % | 1,198 | 1,196 | 1,222 | 1,215 | |||||||||||||||||
Jun-2006 | 32.4 | % | 47.2 | % | 1,080 | 1,074 | 1,179 | 1,148 | |||||||||||||||||
Dec-2006 | 28.7 | % | 43.1 | % | 1,177 | 1,104 | 1,449 | 1,379 | |||||||||||||||||
Total | 18,950 | 18,876 | 19,431 | 19,311 |
• | ThePaid Count Projection(column (16)) uses feature counts for claims that have had loss payments, whether the features are currently open or closed. |
• | TheClosed With Pay Count Projection(column (17)) uses only feature counts for claims that have closed with loss payment. |
Page 21
• | TheIncurred Count Projection(column (18)) uses feature counts for claims that have closed with loss payment, plus claims that are currently open (whether or not there have been payments on them). |
• | TheRecorded Count Projection(column (19)) uses feature counts for all claims that have been recorded. The projected ultimate recorded counts are multiplied by [100% minus the ultimate CWP rates in column (15)] for the same respective accident periods to derive the ultimate counts in column (19). We do this to get the ultimate counts for claims with loss payment. |
(20) | (23) | (24) | |||||||||||||||||
Accident | Indicated | (28) | = (20) / (28) | Semi-Annual | |||||||||||||||
Semesters | Ultimate | Earned | Ultimate | Change In | |||||||||||||||
Ending | Counts | Exposures | Frequency | Frequency | |||||||||||||||
PRIOR 3 yrs | 6,035 | 187,526 | 3.22 | % | |||||||||||||||
Jun-2003 | 1,888 | 52,642 | 3.59 | % | |||||||||||||||
Dec-2003 | 2,144 | 62,827 | 3.41 | % | -4.8 | % | |||||||||||||
Jun-2004 | 2,173 | 62,734 | 3.46 | % | 1.5 | % | |||||||||||||
Dec-2004 | 1,826 | 56,287 | 3.24 | % | -6.3 | % | |||||||||||||
Jun-2005 | 1,512 | 50,881 | 2.97 | % | -8.4 | % | |||||||||||||
Dec-2005 | 1,219 | 47,667 | 2.56 | % | -13.9 | % | |||||||||||||
Jun-2006 | 1,164 | 44,804 | 2.60 | % | 1.6 | % | |||||||||||||
Dec-2006 | 1,350 | 52,158 | 2.59 | % | -0.3 | % | |||||||||||||
Total | 19,309 | 617,528 | -7.6 | % | 4 pt annual exp trend | ||||||||||||||
-10.5 | % | 8 pt annual exp trend |
Page 22
Page 23
Semiannual | ||||||||||||||||||||||||||||||||||||
Accident | AVERAGE INCURRED LOSSES - ACCIDENT PERIOD ANALYSIS | |||||||||||||||||||||||||||||||||||
Periods | Ultimate | |||||||||||||||||||||||||||||||||||
Ending | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | Severity | |||||||||||||||||||||||||||
Jun-03 | 4,315 | 5,241 | 5,457 | 5,704 | 5,786 | 5,787 | 5,822 | 5,865 | 5,918 | |||||||||||||||||||||||||||
Dec-03 | 4,830 | 5,839 | 5,985 | 5,975 | 6,088 | 6,058 | 6,068 | 6,136 | 6,192 | |||||||||||||||||||||||||||
Jun-04 | 6,277 | 6,306 | 6,180 | 6,140 | 6,283 | 6,269 | 6,307 | 6,378 | 6,436 | |||||||||||||||||||||||||||
Dec-04 | 5,440 | 5,411 | 5,274 | 5,440 | 5,456 | 5,497 | 5,530 | 5,592 | 5,643 | |||||||||||||||||||||||||||
Jun-05 | 6,155 | 6,126 | 6,269 | 6,366 | 6,461 | 6,509 | 6,548 | 6,622 | 6,682 | |||||||||||||||||||||||||||
Dec-05 | 5,657 | 5,850 | 6,189 | 6,356 | 6,451 | 6,499 | 6,538 | 6,611 | 6,671 | |||||||||||||||||||||||||||
Jun-06 | 5,513 | 6,756 | 6,959 | 7,147 | 7,253 | 7,307 | 7,351 | 7,434 | 7,501 | |||||||||||||||||||||||||||
Dec-06 | 5,289 | 6,453 | 6,647 | 6,826 | 6,928 | 6,979 | 7,021 | 7,100 | 7,165 | |||||||||||||||||||||||||||
Each data point in the | (Incurred counts= claim | |||||
Average Incurred Loss | = | [Incurred Loss Dollars] | features closed with loss | |||
development triangle | [Incurred Counts] | payment + open features.) |
Page 24
Accident Semester | Evaluated at Month-End | |||||||||||||
Ending Dec-05 | Dec, 2005 | Jun, 2006 | Dec, 2006 | |||||||||||
(a) | Paid Losses ($000) | 646 | 2,414 | 4,238 | ||||||||||
(b) | Adjuster Case Reserves ($000) | 6,719 | 5,295 | 3,653 | ||||||||||
(c)=(a)+(b) | Incurred Losses ($000) | 7,365 | 7,709 | 7,891 | ||||||||||
(d) | Features closed w/ Payment | 322 | 677 | 969 | ||||||||||
(e) | Open features | 980 | 641 | 307 | ||||||||||
(f)=(d)+(e) | Incurred Count | 1,302 | 1,318 | 1,275 | ||||||||||
(g)=(c)/(f) | Average Incurred Loss ($) | 5,657 | 5,850 | 6,189 |
Page 25
Semiannual | Average Incurred Losses | |||||||||||||||||||||||||||
Accident | Age-to-Age Development Factors | |||||||||||||||||||||||||||
Periods | ||||||||||||||||||||||||||||
Ending | 1-2 | 2-3 | 3-4 | 4-5 | 5-6 | 6-7 | 7-8 | |||||||||||||||||||||
Jun-03 | 1.215 | 1.041 | 1.045 | 1.014 | 1.000 | 1.006 | 1.007 | |||||||||||||||||||||
Dec-03 | 1.209 | 1.025 | 0.998 | 1.019 | 0.995 | 1.002 | ||||||||||||||||||||||
Jun-04 | 1.005 | 0.980 | 0.993 | 1.023 | 0.998 | |||||||||||||||||||||||
Dec-04 | 0.995 | 0.975 | 1.031 | 1.003 | ||||||||||||||||||||||||
Jun-05 | 0.995 | 1.023 | 1.016 | |||||||||||||||||||||||||
Dec-05 | 1.034 | 1.058 | ||||||||||||||||||||||||||
Jun-06 | 1.225 | |||||||||||||||||||||||||||
Average Factors and Selected Factors | ||||||||||||||||||||||||||||
1-2 | 2-3 | 3-4 | 4-5 | 5-6 | 6-7 | 7-8 | ||||||||||||||||||||||
Avg. Last 4 | 1.062 | 1.009 | 1.010 | 1.015 | 0.996 | 1.009 | 1.005 | |||||||||||||||||||||
Prior Select @ 6 Months | 1.014 | 1.001 | 1.022 | 1.016 | 1.002 | 1.008 | 1.003 | |||||||||||||||||||||
Prior Select @ 3 Months | 1.130 | 1.030 | 1.007 | 1.021 | 1.007 | 1.011 | 1.009 | |||||||||||||||||||||
Selected Factor (a) | 1.220 | 1.030 | 1.027 | 1.015 | 1.007 | 1.006 | 1.011 | |||||||||||||||||||||
Cumulative Factor (b) = (next (b)) X (a) | 1.355 | 1.110 | 1.078 | 1.050 | 1.034 | 1.027 | 1.020 |
Accident Semester Ending | ||||||||||||||||||||||||||||
Dec-06 | Jun-06 | Dec-05 | Jun-05 | Dec-04 | Jun-04 | Dec-03 | ||||||||||||||||||||||
Last Diagonal (c) (from Average Incurred Loss Triangle) | 5,289 | 6,756 | 6,189 | 6,366 | 5,456 | 6,269 | 6,068 | |||||||||||||||||||||
Ultimate Severity (d) = (b) X (c) | 7,165 | 7,501 | 6,671 | 6,682 | 5,643 | 6,436 | 6,192 |
For example, for the 1-2 development interval,
�� | ||||||||||||||
Avg. Last 4 | = | (0.995+0.995+1.034+1.225) | = | 1.062 |
Page 26
Reserve Adequacy = Held Reserves — Required Reserves
Reserve Adequacy based on defaulted and actual selections of loss development factors using Average Incurred Development | ||||
Adequacy | ||||
Loss Development Factors | ($000) | |||
Average Last 4 | 3,835 | |||
2ndto Last Diagonal | 1,951 | |||
Last Diagonal | 3,154 | |||
Selected Avg Inc Indication | 932 | |||
Selected Ultimate Indication | 654 | |||
Page 27
Page 28
(5) | (6) | |||||||||||||||||||||||||||
(1) | (2) | (3) | (4) | Avg. | BF | |||||||||||||||||||||||
Paid | Avg. Paid | BF Paid | Incurred | Incurred | Incurred | (9) | ||||||||||||||||||||||
Reserve | Projection | Projection | Method | Projection | Projection | Method | Indicated | |||||||||||||||||||||
Adequacy | ($000) | ($000) | ($000) | ($000) | ($000) | ($000) | ($000) | |||||||||||||||||||||
Accident Period Analysis (Exhibit A) | ||||||||||||||||||||||||||||
Selected | 1,148 | 1,347 | 1,545 | 629 | 932 | 400 | 654 | |||||||||||||||||||||
Avg Last 4 | 3,132 | (2,025 | ) | 3,261 | 3,835 | |||||||||||||||||||||||
2nd Last Diag | 2,865 | (3,318 | ) | 624 | 1,951 | |||||||||||||||||||||||
Last Diag | (7,001 | ) | (6,264 | ) | 3,470 | 3,154 | ||||||||||||||||||||||
Record Period Analysis (Exhibit C) | ||||||||||||||||||||||||||||
Selected | (882 | ) | (116 | ) | (1,079 | ) | (1,108 | ) | (1,029 | ) | ||||||||||||||||||
Avg Last 4 | 1,021 | (2,991 | ) | 559 | 1,378 | |||||||||||||||||||||||
2nd Last Diag | 1,284 | (3,280 | ) | (1,436 | ) | 242 | ||||||||||||||||||||||
Last Diag | (8,089 | ) | (7,008 | ) | 1,646 | 1,614 |
Page 29
Ultimate Severity | ||||||||
Exh A (21) | Exh C (12) | |||||||
Semesters | Accident | Record | ||||||
Ending | Periods | Periods | ||||||
Jun-2003 | 5,926 | 5,404 | ||||||
Dec-2003 | 6,185 | 6,265 | ||||||
Jun-2004 | 6,464 | 6,651 | ||||||
Dec-2004 | 5,650 | 5,521 | ||||||
Jun-2005 | 6,699 | 6,770 | ||||||
Dec-2005 | 6,709 | 6,618 | ||||||
Jun-2006 | 7,568 | 7,333 | ||||||
Dec-2006 | 7,182 | 6,622 |
Page 30
Adequacy of total reserves, per accident period analysis | = | 654 | ||||||
Adequacy of case reserves, per record period analysis | = | (1,029 | ) |
Adequacy of | ||||||||||||||
IBNR Reserves | = | [Total Reserves Adequacy] | — | [Case Reserves Adequacy] | ||||||||||
= | 654 | — | (1,029 | ) | ||||||||||
= | 1683 |
Page 31
Column | Description | Amount | ||||
(1) | Prior Review Future Pure Premium | $ | 35.65 | |||
(2) | Calculated Pure Premium using 6-mo. Emerged | $ | 34.05 | |||
(3) | Quarterly Record w/in Accident Period Ending | Dec-2006 | ||||
(4) | Total Future Pure Premium | $ | 33.52 | |||
(5) | Earned Exposures | 26,942 | ||||
(6) | Earned Premium | $ | 8,437,252 | |||
(7) | Indicated IBNR =(4) X (5) | $ | 903,099 | |||
(8) | Indicated IBNR Factor =(7) / (6) | 10.7 | % | |||
(9) | Current IBNR Factor | 11.6 | % |
Page 32
Column | Data for Acc Qtr Jun-2006 | Amount | ||||
(10) | IBNR Emerged since Jun-2006 | $ | 570,118 | |||
(7) | Estimated Future Indicated IBNR | $ | 202,219 | |||
(sum) | Retrospective Indicated IBNR @ Jun-06 =(10)+(7) | $ | 772,337 | |||
(6) | Earned Premium | $ | 7,197,385 | |||
(11) | Retro Indicated IBNR Factor @ Jun-06 =(sum)/(6) | 10.7 | % | |||
(5) | Earned Exposures | 22,681 | ||||
Dec-06 (2) | Retro 6 month emerged pure premium =(sum)/(5) | $ | 34.05 |
(2) | (3) | (4) | ||||||||||
(1) | Calculated | Quarterly | Selected | |||||||||
Prior Review | Pure Premium | Record within | Total | |||||||||
Future | Using 6 month | Accident Periods | Future | |||||||||
Pure Premium | Emerged | Ending | Pure Prem | |||||||||
5.14 | 3.62 | Mar-2005 | 3.44 | |||||||||
5.69 | 4.11 | Jun-2005 | 4.00 | |||||||||
6.81 | 5.14 | Sep-2005 | 4.78 | |||||||||
7.58 | 5.64 | Dec-2005 | 5.47 | |||||||||
8.95 | 6.33 | Mar-2006 | 6.59 | |||||||||
11.31 | 9.00 | Jun-2006 | 8.92 | |||||||||
15.82 | 13.83 | Sep-2006 | 11.74 | |||||||||
35.65 | 34.05 | Dec-2006 | 33.52 |
• | Fewer claims than expected were reported (i.e., lower frequency than expected) | |
• | The severity of the “late reported claims” has been lower than expected | |
• | There may have been a process change that impacts the timing of claim reporting and/or the severity of late reported claims | |
• | There may be external forces that impact timing of claim reporting and/or the severity of the late reported claims |
Page 33
(3) | ||||||||||||||||||||||||
Quarterly | (4) | (8)=(7)/(6) | (9) | |||||||||||||||||||||
Rec w/n Acc | Total | (5) | (6) | (7)=(4)X(5) | Indicated | Current | ||||||||||||||||||
Periods | Future | Earned | Earned | Indicated | IBNR | IBNR | ||||||||||||||||||
Ending | Pure Prem | Exposures | Premium | IBNR | Factors | Factors | ||||||||||||||||||
Mar-2005 | 3.44 | 26,502 | 7,425,622 | 91,225 | 1.2 | % | 3.1 | % | ||||||||||||||||
Jun-2005 | 4.00 | 24,379 | 7,323,851 | 97,579 | 1.3 | % | 3.0 | % | ||||||||||||||||
Sep-2005 | 4.78 | 24,375 | 7,367,666 | 116,551 | 1.6 | % | 4.1 | % | ||||||||||||||||
Dec-2005 | 5.47 | 23,292 | 7,189,243 | 127,483 | 1.8 | % | 4.5 | % | ||||||||||||||||
Mar-2006 | 6.59 | 22,123 | 7,035,903 | 145,689 | 2.1 | % | 4.9 | % | ||||||||||||||||
Jun-2006 | 8.92 | 22,681 | 7,197,385 | 202,219 | 2.8 | % | 5.7 | % | ||||||||||||||||
Sep-2006 | 11.74 | 25,217 | 7,724,378 | 295,929 | 3.8 | % | 6.9 | % | ||||||||||||||||
Dec-2006 | 33.52 | 26,942 | 8,437,252 | 903,099 | 10.7 | % | 11.6 | % |
Indicated IBNR | = | [Future Pure Premium] | X | [Earned Exposures] | ||||||||||
= | 33.52 | X | 26,942 | |||||||||||
= | 903,099 |
Indicated IBNR Factor | = | [Indicated IBNR] | ||||
[Earned Premium] | ||||||
= | 903,099 | |||||
8,437,252 | ||||||
= | 10.7 | % |
Page 34
(11) | ||||||||
(3) | 6-mo | |||||||
Quarterly | (8) | Emerged | ||||||
Record within | Indicated | Indicated | ||||||
Accident Periods | IBNR | IBNR | ||||||
Ending | Factors | Factors | ||||||
Sep-2004 | 1.3 | % | ||||||
Dec-2004 | 1.5 | % | ||||||
Mar-2005 | 1.2 | % | 1.8 | % | ||||
Jun-2005 | 1.3 | % | 1.9 | % | ||||
Sep-2005 | 1.6 | % | 2.1 | % | ||||
Dec-2005 | 1.8 | % | 2.9 | % | ||||
Mar-2006 | 2.1 | % | 4.3 | % | ||||
Jun-2006 | 2.8 | % | 10.7 | % | ||||
Sep-2006 | 3.8 | % | ||||||
Dec-2006 | 10.7 | % |
($000) | IBNR Reserves | |
2,437 | Indicated (Sum column 7) | |
4,452 | Held IBNR | |
2,015 | Adequacy = Held – Indicated |
Page 35
Expected IBNR | [Adequacy of Total Reserves] | [Adequacy of Case Reserves] | ||||||||||
Reserve Adequacy | = | (Exhibit A) | — | (Exhibit C) | ||||||||
(per the accident | = | 654 | — | (1,029 | ) | |||||||
period and record | ||||||||||||
period analyses) | = | 1,683 | ||||||||||
Difference in | [Adequacy per Accident and Record | |||||||||||
IBNR Adequacy | = | [Adequacy per IBNR Analysis] | — | Period Analyses] | ||||||||
(Per separate | = | 2,015 | — | 1,683 | ||||||||
analyses) | = | 332 |
Page 36
Quarterly | ||||||||||||||||||||||||
Record w/in Accident | INCURRED LOSSES QUARTERLY LAG 1 - IBNR ANALYSIS | |||||||||||||||||||||||
Period End | 0 | 1 | 2 | 3 | 4 | Ultimate | ||||||||||||||||||
Jun-05 | 473,607 | 400,046 | 393,187 | 374,912 | 353,414 | 320,368 | ||||||||||||||||||
Sep-05 | 523,663 | 444,461 | 382,911 | 458,488 | 390,422 | 372,461 | ||||||||||||||||||
Dec-05 | 772,190 | 700,711 | 604,762 | 577,760 | 524,747 | |||||||||||||||||||
Mar-06 | 553,743 | 496,540 | 466,983 | 414,268 | ||||||||||||||||||||
Jun-06 | 559,263 | 621,759 | 508,232 | |||||||||||||||||||||
Sep-06 | 673,829 | 527,186 |
Loss Development | ||||||||||||||||||||
Factors (LDF) | 0-1 | 1-2 | 2-3 | 3-4 | 4-5 | |||||||||||||||
Jun-05 | 0.845 | 0.983 | 0.954 | 0.943 | 0.923 | |||||||||||||||
Sep-05 | 0.849 | 0.862 | 1.197 | 0.852 | ||||||||||||||||
Dec-05 | 0.907 | 0.863 | 0.955 | |||||||||||||||||
Mar-06 | 0.897 | 0.940 | ||||||||||||||||||
Jun-06 | 1.112 | |||||||||||||||||||
Average Last 4 | 0.941 | 0.912 | 1.015 | 0.932 | 0.963 | |||||||||||||||
Weighted Avg. Last 4 | 0.940 | 0.905 | 0.996 | 0.942 | 0.970 | |||||||||||||||
Select | 0.957 | 0.921 | 0.977 | 0.952 | 0.972 | |||||||||||||||
Cumulative | 0.782 | 0.817 | 0.887 | 0.908 | 0.954 | |||||||||||||||
Ultimate Loss = [Incurred Loss (last diag)] X [Cumulative LDF] | 527,186 | 508,232 | 414,268 | 524,747 | 372,461 |
Page 37
Quarterly | ||||||||||||||||||||||||
Rec w/n Acc | ||||||||||||||||||||||||
Periods | ULTIMATE LOSSES QUARTERLY LAG 1-6 EMERGENCE | |||||||||||||||||||||||
Ending | 1 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||
Jun-05 | 320,368 | 77,327 | 52,106 | 13,905 | 23,755 | 16,108 | ||||||||||||||||||
Sep-05 | 372,461 | 34,944 | 53,028 | 29,579 | 8,235 | |||||||||||||||||||
Dec-05 | 524,747 | 40,514 | 48,554 | 33,479 | ||||||||||||||||||||
Mar-06 | 414,268 | 106,068 | 54,175 | |||||||||||||||||||||
Jun-06 | 508,232 | 61,886 | ||||||||||||||||||||||
Sep-06 | 527,186 |
Quarterly | ||||||||||||||||||||||||
Rec w/n Acc | INFLATED ULTIMATE LOSSES QUARTERLY LAG 1-6 EMERGENCE | |||||||||||||||||||||||
Periods | (using a +4.0% Pure Premium Trend) | |||||||||||||||||||||||
Ending | 1 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||
Jun-05 | 336,466 | 80,420 | 53,661 | 14,180 | 23,989 | 16,108 | ||||||||||||||||||
Sep-05 | 387,359 | 35,987 | 54,078 | 29,870 | 8,235 | |||||||||||||||||||
Dec-05 | 540,412 | 41,316 | 49,032 | 33,479 | ||||||||||||||||||||
Mar-06 | 422,472 | 107,113 | 54,175 | |||||||||||||||||||||
Jun-06 | 513,240 | 61,886 | ||||||||||||||||||||||
Sep-06 | 527,186 |
Page 38
[From col (5) | Quarterly | |||||||||||||||||||||||||
of Exh D] | Rec w/n Acc | INFLATED PURE PREMIUMS - QTRLY LAG 1-6 | ||||||||||||||||||||||||
Earned | Periods | (Inflated Ultimate Losses / Earned Exposures) | ||||||||||||||||||||||||
Exposures | Ending | 1 | 2 | 3 | 4 | 5 | 6 | |||||||||||||||||||
24,379 | Jun-05 | 13.801 | 3.299 | 2.201 | 0.582 | 0.984 | 0.661 | |||||||||||||||||||
24,375 | Sep-05 | 15.892 | 1.476 | 2.219 | 1.225 | 0.338 | ||||||||||||||||||||
23,292 | Dec-05 | 23.202 | 1.774 | 2.105 | 1.437 | |||||||||||||||||||||
22,123 | Mar-06 | 19.096 | 4.842 | 2.449 | ||||||||||||||||||||||
22,681 | Jun-06 | 22.629 | 2.729 | |||||||||||||||||||||||
25,217 | Sep-06 | 20.906 | ||||||||||||||||||||||||
Avg Last 8 | 22.272 | 3.685 | 2.708 | 1.314 | 0.767 | 1.614 | ||||||||||||||||||||
Avg Last 4 | 21.458 | 2.705 | 2.243 | 1.048 | 0.638 | 0.732 | ||||||||||||||||||||
Select | 21.458 | 2.705 | 2.243 | 1.048 | 0.638 | 0.732 | ||||||||||||||||||||
Page 39
21.458 | 2.705 | 2.243 | 1.048 | 0.638 | 0.732 | 0.521 | ||||||||||||||||||||||||||||
Quarterly | ||||||||||||||||||||||||||||||||||
Rec w/n Acc | FUTURE PURE PREMIUMS BY QUARTERLY LAG, INFLATED | Total | ||||||||||||||||||||||||||||||||
Periods | Future | |||||||||||||||||||||||||||||||||
Ending | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 - 27 | Pure Prem | |||||||||||||||||||||||||
Jun-05 | 0.526 | 3.476 | 4.00 | |||||||||||||||||||||||||||||||
Sep-05 | 0.740 | 0.532 | 3.510 | 4.78 | ||||||||||||||||||||||||||||||
Dec-05 | 0.645 | 0.747 | 0.537 | 3.545 | 5.47 | |||||||||||||||||||||||||||||
Mar-06 | 1.058 | 0.651 | 0.754 | 0.542 | 3.580 | 6.59 | ||||||||||||||||||||||||||||
Jun-06 | 2.266 | 1.069 | 0.657 | 0.762 | 0.548 | 3.615 | 8.92 | |||||||||||||||||||||||||||
Sep-06 | 2.732 | 2.288 | 1.079 | 0.664 | 0.769 | 0.553 | 3.651 | 11.74 | ||||||||||||||||||||||||||
Dec-06 | 21.670 | 2.759 | 2.310 | 1.090 | 0.670 | 0.777 | 0.558 | 3.687 | 33.52 | |||||||||||||||||||||||||
Selected Pure Premiums from chart above: |
Page 40
Lag 1 | = | Claims expected to be recorded in the first quarter of 2007 | ||
= | Future pure premium of21.670 | |||
Lag 2 | = | Claims expected to be recorded in the second quarter of 2007 | ||
= | Future pure premium of2.759 |
Page 41
• | “Defense and Cost Containment” (DCC) Expenses. This category is comparable to, but not exactly the same as, what was called Allocated Loss Adjustment Expenses (ALAE) prior to the definition change by the National Association of Insurance Commissioners (NAIC) in 1998. Since 1998, this category includes: |
o | Defense and litigation-related expenses, whether internal or external | ||
o | Medical cost containment | ||
o | Other related expenses incurred in the defense of claims |
• | “Adjusting & Other” (A&O) Expenses. This category is comparable to, but not exactly the same as, what was called Unallocated Loss Adjustment Expenses (ULAE) prior to the definition change by the NAIC in 1998. Since 1998, this category includes: |
o | Fees of external vendors involved in adjusting our claims | ||
o | Salaries and related overhead expenses relative to Company employees involved in a claim adjusting function | ||
o | Other related expenses incurred in determination of coverage |
• | ReviseCase LAE Reservesby changing: |
o | Average reservesfor DCC and/or A&O, which are applied to open claims below the threshold. (Note that the threshold for DCC expense reserves is usually $15,000 per claim, although very few case reserve amounts exceed that threshold. There is no threshold for A&O expense reserves). | ||
o | Theinflation factor, which can differ between DCC and A&O and which is applied to the averages in subsequent months |
• | ReviseIBNR LAE Reservesby changing: |
o | IBNR factorsfor DCC and/or A&O, which are applied to earned premium |
Page 42
Page 43
ESTIMATED ULTIMATE DCC — ACCIDENT PERIOD ANALYSIS
(2)= | (3)= | (6)= | (7)= | (8) | ||||||||||||||||||||||||||
(1) | (12) X (21) | (27) X (16) | (4) | (5) | (15)X(17)X(24) | (14)x(17)x(23) | use (1),(2),(3) | (9) | (10) | (12) | (13)= | (14) | (15) | |||||||||||||||||
Semiannual | (Proj Pd Trgl) | Avg | Paid DCC | Paid | Paid | Indicated | Indicated | Selected | (Proj Ct Trgl) | (Proj Util Trgl) | (11)= | use (9),(11) | (12) / (17) | (Proj Util Trgl) | (Proj Util Trgl) | |||||||||||||||
Accident | Paid DCC | Paid DCC | to Paid Loss | Total DCC | Att. & Legal | Ultimate | Ultimate | Ultimate | Ultimate | Ultimate | (17) X (10) | Selected | Selected | Indicated | Indicated | |||||||||||||||
Periods | Projection | Projection | Projection | To Date | To Date | Med & Oth | Att. & Legal | DCC Total | DCC | Projected | Projected | DCC | Total | Attorney | Medical | |||||||||||||||
Ending | Ult ($000) | Ult ($000) | Ult ($000) | ($000) | ($000) | ($000) | ($000) | ($000) | Counts | Utilization | Counts | Counts | Utilization | Utilization | Utilization | |||||||||||||||
Prior 3 Years | 3,178 | 3,178 | 3,184 | 3,119 | 2,925 | 184 | 2,811 | 3,180 | 2,149 | 2,149 | 2,149 | 18.1% | ||||||||||||||||||
Mar-2003 | 646 | 646 | 656 | 569 | 535 | 33 | 576 | 650 | 448 | 26.4% | 448 | 448 | 26.4% | 14.7% | 13.3% | |||||||||||||||
Sep-2003 | 956 | 956 | 988 | 766 | 729 | 38 | 865 | 967 | 373 | 20.8% | 373 | 373 | 20.8% | 10.4% | 11.0% | |||||||||||||||
Mar-2004 | 943 | 943 | 998 | 634 | 595 | 44 | 845 | 961 | 491 | 25.1% | 491 | 491 | 25.2% | 14.7% | 12.6% | |||||||||||||||
Sep-2004 | 1,165 | 1,165 | 1,218 | 554 | 519 | 47 | 1,054 | 1,183 | 492 | 26.5% | 492 | 492 | 26.5% | 14.4% | 14.5% | |||||||||||||||
Mar-2005 | 921 | 921 | 897 | 284 | 261 | 43 | 827 | 913 | 342 | 17.2% | 342 | 342 | 17.2% | 10.0% | 8.6% | |||||||||||||||
Sep-2005 | 1,071 | 1,069 | 1,091 | 178 | 157 | 59 | 991 | 1,077 | 416 | 21.4% | 416 | 416 | 21.4% | 12.2% | 12.6% | |||||||||||||||
Mar-2006 | 1,125 | 1,214 | 1,123 | 68 | 57 | 73 | 1,151 | 1,154 | 483 | 20.5% | 463 | 500 | 22.2% | 12.0% | 12.4% | |||||||||||||||
Sep-2006 | 1,612 | 1,560 | 1,667 | 10 | 5 | 81 | 1,575 | 1,613 | 599 | 26.4% | 631 | 615 | 25.8% | 15.0% | 12.5% | |||||||||||||||
Total | 11,617 | 11,653 | 11,823 | 6,182 | 5,784 | 602 | 10,694 | 11,698 | 5,793 | 5,804 | 5,826 | 21.0% | ||||||||||||||||||
Paid DCC | 6,182 | 6,182 | 6,182 | 398 | 5,784 | 6,182 | ||||||||||||||||||||||||
Required Reserves | TOTAL | ATTORNEY | MEDICAL | |||||||||||||||||||||||||||
204 | 4,911 | DCC | & LEGAL | & OTHER | ||||||||||||||||||||||||||
5,436 | 5,471 | 5,641 | Required Reserves | 5,115 | 5,516 | |||||||||||||||||||||||||
5,089 | 5,089 | 5,089 | Held Reserves | (Med. & Oth) + (Att & Legal) | 5,089 | |||||||||||||||||||||||||
(346) | (382) | (552) | Reserve Adequacy | (427) | ||||||||||||||||||||||||||
(16) | (17) | |||||||||||||||||||||||||||||
(Proj Loss Trgl) | (Proj Ct Trgl) | (21) | (22)= | (23) | (24) | |||||||||||||||||||||||||
Semiannual | Indicated | Indicated | (18) | (Proj Sev Trgl) | (8) / (12) | (Proj Sev Trgl) | (Proj Sev Trgl) | |||||||||||||||||||||||
Accident | Ultimate | Ultimate | Earned | (19) | Projected | Selected | Indicated | Indicated | ||||||||||||||||||||||
Periods | Loss | Loss | Premium | Earned | Paid DCC | Total DCC | Att. & Legal | Med. & Oth. | ||||||||||||||||||||||
Ending | ($000) | Counts | ($000) | Exposures | Severity | Severity | Severity | Severity | ||||||||||||||||||||||
Prior 3 Years | 55,956 | 11,858 | 110,303 | 415,310 | 1,480 | |||||||||||||||||||||||||
Mar-2003 | 7,375 | 1,695 | 16,893 | 65,209 | (20) | 1,442 | 1,450 | 2,308 | 148 | |||||||||||||||||||||
Sep-2003 | 7,944 | 1,796 | 17,808 | 71,798 | DCC Reserves / Loss Reserves | 2,562 | 2,591 | 4,621 | 193 | |||||||||||||||||||||
Mar-2004 | 9,849 | 1,951 | 19,990 | 81,197 | Current: | 16.4% | 1,922 | 1,958 | 2,949 | 180 | ||||||||||||||||||||
Sep-2004 | 11,640 | 1,855 | 22,326 | 86,394 | Indicated: | 19.0% | 2,368 | 2,404 | 3,942 | 177 | ||||||||||||||||||||
Mar-2005 | 9,877 | 1,985 | 23,173 | 88,720 | 2,693 | 2,669 | 4,174 | 251 | ||||||||||||||||||||||
Sep-2005 | 10,969 | 1,939 | 23,898 | 95,008 | 2,571 | 2,591 | 4,200 | 241 | ||||||||||||||||||||||
Mar-2006 | 11,142 | 2,256 | 24,471 | 103,970 | 2,428 | 2,308 | 4,250 | 260 | ||||||||||||||||||||||
Sep-2006 | 13,091 | 2,387 | 27,766 | 119,015 | 2,537 | 2,623 | 4,400 | 270 | ||||||||||||||||||||||
Total | 137,843 | 27,722 | 241,210 | 955,611 | 4 pt Ann Exp Trend | -4.63% | -3.30% | 3.46% | 5.99% | |||||||||||||||||||||
8 pt Ann Exp Trend | 11.81% | 11.35% | 13.23% | 17.95% | ||||||||||||||||||||||||||
(25)= | (26)= | (27) | CWAPO = Closed With DCC (ALAE) Payment Only | (34)= | (35)= | (36)= | ||||||||||||||||||||||||
Semiannual | (1) / (16) | (2) / (16) | (Proj Pd/Pd) | (28) | (29) | (30) | (31) | (32) | (33) | (8) / (16) | (7) / (16) | (6) / (16) | ||||||||||||||||||
Accident | Average | Paid | CWAPO | Ultimate | Ultimate | Ultimate | % Outside | % Inside | Selected | Indicated | Indicated | |||||||||||||||||||
Periods | Paid Ult | Paid Ult | to Paid Ult | Count Ratio | CWAPO | CWAPO Ct / | CWAPO $ / | Attorney Per | Attorney Per | Total | Att. & Legal | Med. & Oth. | ||||||||||||||||||
Ending | DCC/Loss | DCC/Loss | DCC/Loss | @ 6 Mths | Severity | DCC Count | DCC Amt | Tot. Att. Feat. | Tot. Att. Feat. | DCC/Loss $ | / Loss $ | / Loss $ | ||||||||||||||||||
Prior 3 Years | 633 | |||||||||||||||||||||||||||||
Mar-2003 | 8.76% | 8.76% | 8.90% | 0.6% | 196 | 9.6% | 1.3% | 49.8% | 50.2% | 8.81% | 7.80% | 0.45% | ||||||||||||||||||
Sep-2003 | 12.04% | 12.04% | 12.44% | 0.7% | 558 | 7.1% | 1.5% | 28.0% | 72.0% | 12.17% | 10.89% | 0.48% | ||||||||||||||||||
Mar-2004 | 9.57% | 9.58% | 10.13% | 0.5% | 334 | 7.1% | 1.2% | 27.0% | 73.0% | 9.76% | 8.58% | 0.45% | ||||||||||||||||||
Sep-2004 | 10.01% | 10.01% | 10.47% | 0.5% | 808 | 7.1% | 2.4% | 27.1% | 72.9% | 10.16% | 9.05% | 0.41% | ||||||||||||||||||
Mar-2005 | 9.32% | 9.33% | 9.08% | 0.1% | 981 | 5.1% | 1.9% | 34.5% | 65.5% | 9.24% | 8.37% | 0.43% | ||||||||||||||||||
Sep-2005 | 9.76% | 9.75% | 9.95% | 0.4% | 691 | 6.6% | 1.8% | 22.8% | 77.2% | 9.82% | 9.03% | 0.53% | ||||||||||||||||||
Mar-2006 | 10.10% | 10.90% | 10.08% | 0.1% | 262 | 3.0% | 0.3% | 33.1% | 66.9% | 10.36% | 10.33% | 0.65% | ||||||||||||||||||
Sep-2006 | 12.31% | 11.92% | 12.73% | 0.1% | 1,807 | 2.4% | 1.7% | 34.6% | 65.4% | 12.32% | 12.03% | 0.62% |
Page 44
(1) | (2)= | (3)= | (8) | |||||||||
(Proj Pd Trgl) | (12) X (21) | (27) X (16) | (4) | use (1),(2),(3) | ||||||||
Semiannual | Avg | Paid DCC | Paid | Selected | ||||||||
Accident | Paid DCC | Paid DCC | to Paid Loss | Total DCC | Ultimate | |||||||
Periods | Projection | Projection | Projection | To Date | DCC Total | |||||||
Ending | Ult ($000) | Ult ($000) | Ult ($000) | ($000) | ($000) | |||||||
Mar-2003 | 646 | 646 | 656 | 569 | 650 | |||||||
Sep-2003 | 956 | 956 | 988 | 766 | 967 | |||||||
Mar-2004 | 943 | 943 | 998 | 634 | 961 | |||||||
Sep-2004 | 1,165 | 1,165 | 1,218 | 554 | 1,183 | |||||||
Mar-2005 | 921 | 921 | 897 | 284 | 913 | |||||||
Sep-2005 | 1,071 | 1,069 | 1,091 | 178 | 1,077 | |||||||
Mar-2006 | 1,125 | 1,214 | 1,123 | 68 | 1,154 | |||||||
Sep-2006 | 1,612 | 1,560 | 1,667 | 10 | 1,613 | |||||||
Total | 11,617 | 11,653 | 11,823 | 6,182 | 11,698 | |||||||
Paid DCC | 6,182 | 6,182 | 6,182 | 6,182 | ||||||||
5,436 | 5,471 | 5,641 | Required Reserves | 5,516 | ||||||||
5,089 | 5,089 | 5,089 | Held Reserves | 5,089 | ||||||||
(346) | (382) | (552) | Reserve Adequacy | (427) | ||||||||
Page 45
Each data point in the | (Paid DCC Countsare claim | |||||||
Average Paid DCC | = | [Paid DCC expense dollars] | features (closed or open)with | |||||
development triangle | DCC Payment) |
(2)= | ||||||
(12) | (21) | (12) X (21) | ||||
Semiannual | (Proj Sev Trgl) | Avg | ||||
Accident | Selected | Projected | Paid DCC | |||
Periods | DCC | Paid DCC | Projection | |||
Ending | Counts | Severity | Ult ($000) | |||
Mar-2003 | 448 | 1,442 | 646 | |||
Sep-2003 | 373 | 2,562 | 956 | |||
Mar-2004 | 491 | 1,922 | 943 | |||
Sep-2004 | 492 | 2,368 | 1,165 | |||
Mar-2005 | 342 | 2,693 | 921 | |||
Sep-2005 | 416 | 2,571 | 1,069 | |||
Mar-2006 | 500 | 2,428 | 1,214 | |||
Sep-2006 | 615 | 2,537 | 1,560 |
Page 46
(3)= | ||||||
(27) | (16) | (27) X (16) | ||||
Semiannual | (Proj Pd/Pd) | (Proj Loss Trgl) | Paid DCC | |||
Accident | Paid | Indicated | to Paid Loss | |||
Periods | to Paid Ult | Ultimate Loss | Projection | |||
Ending | DCC/Loss | ($000) | Ult ($000) | |||
Mar-2003 | 8.90% | 7,375 | 656 | |||
Sep-2003 | 12.44% | 7,944 | 988 | |||
Mar-2004 | 10.13% | 9,849 | 998 | |||
Sep-2004 | 10.47% | 11,640 | 1,218 | |||
Mar-2005 | 9.08% | 9,877 | 897 | |||
Sep-2005 | 9.95% | 10,969 | 1,091 | |||
Mar-2006 | 10.08% | 11,142 | 1,123 | |||
Sep-2006 | 12.73% | 13,091 | 1,667 |
[Total Indicated Ultimate DCC Expenses] — [Total Paid DCC Expenses]
[Held DCC Expense Reserves] — [Required DCC Expense Reserves]
Page 47
(16) | (25)= | (26)= | (27) | (34)= | ||||||
Indicated | Semiannual | (1) / (16) | (2) / (16) | (Proj Pd/Pd) | (8) / (16) | |||||
Ultimate | Accident | Average | Paid | Selected | ||||||
Loss | Periods | Paid Ult | Paid Ult | to Paid Ult | Ultimate | |||||
($000) | Ending | DCC/Loss | DCC/Loss | DCC/Loss | DCC/Loss | |||||
7,375 | Mar-2003 | 8.76% | 8.76% | 8.90% | 8.81% | |||||
7,944 | Sep-2003 | 12.04% | 12.04% | 12.44% | 12.17% | |||||
9,849 | Mar-2004 | 9.57% | 9.58% | 10.13% | 9.76% | |||||
11,640 | Sep-2004 | 10.01% | 10.01% | 10.47% | 10.16% | |||||
9,877 | Mar-2005 | 9.32% | 9.33% | 9.08% | 9.24% | |||||
10,969 | Sep-2005 | 9.76% | 9.75% | 9.95% | 9.82% | |||||
11,142 | Mar-2006 | 10.10% | 10.90% | 10.08% | 10.36% | |||||
13,091 | Sep-2006 | 12.31% | 11.92% | 12.73% | 12.32% | |||||
Each of the | = | [Ultimate DCC Dollars for the Period*] | * from each of the | |||
DCC/Loss Ratios | [Ultimate Loss Dollars for the Period] | projections |
Utilization Ratio | = | [Ultimate DCC counts] |
Page 48
(17) | (9) | (10) | (11)= | (12) | (13)= | ||||||||||||||||||||||||||
(Proj Ct Trgl) | Semiannual | (Proj Ct Trgl) | (Proj Util Trgl) | (17) X (10) | use (9),(11) | (12) / (17) | |||||||||||||||||||||||||
Indicated | Accident | Ultimate | Ultimate | Projected | Selected | Selected | |||||||||||||||||||||||||
Ultimate | Periods | DCC | Projected | DCC | DCC | Ultimate | |||||||||||||||||||||||||
Loss Counts | Ending | Counts | Utilization | Counts | Counts | Utilization | |||||||||||||||||||||||||
1,695 | Mar-2003 | 448 | 26.4 | % | 448 | 448 | 26.4 | % | |||||||||||||||||||||||
1,796 | Sep-2003 | 373 | 20.8 | % | 373 | 373 | 20.8 | % | |||||||||||||||||||||||
1,951 | Mar-2004 | 491 | 25.1 | % | 491 | 491 | 25.2 | % | |||||||||||||||||||||||
1,855 | Sep-2004 | 492 | 26.5 | % | 492 | 492 | 26.5 | % | |||||||||||||||||||||||
1,985 | Mar-2005 | 342 | 17.2 | % | 342 | 342 | 17.2 | % | |||||||||||||||||||||||
1,939 | Sep-2005 | 416 | 21.4 | % | 416 | 416 | 21.4 | % | |||||||||||||||||||||||
2,256 | Mar-2006 | 483 | 20.5 | % | 463 | 500 | 22.2 | % | |||||||||||||||||||||||
2,387 | Sep-2006 | 599 | 26.4 | % | 631 | 615 | 25.8 | % | |||||||||||||||||||||||
27,722 | Total | 5,793 | 5,804 | 5,826 | 21.0 | % | |||||||||||||||||||||||||
[Paid DCC expense counts] divided by [Paid loss counts].
Page 49
(21) | (22)= | |||||||||||
Semiannual | (Proj Sev Trgl) | (8) / (12) | ||||||||||
Accident | Projected | Selected | ||||||||||
Periods | Paid DCC | Total DCC | ||||||||||
Ending | Severity | Severity | ||||||||||
Mar-2003 | 1,442 | 1,450 | ||||||||||
Sep-2003 | 2,562 | 2,591 | ||||||||||
Mar-2004 | 1,922 | 1,958 | ||||||||||
Sep-2004 | 2,368 | 2,404 | ||||||||||
Mar-2005 | 2,693 | 2,669 | ||||||||||
Sep-2005 | 2,571 | 2,591 | ||||||||||
Mar-2006 | 2,428 | 2,308 | ||||||||||
Sep-2006 | 2,537 | 2,623 | ||||||||||
Page 50
(13)= | (14) | (15) | ||||||||||||||
Semiannual | (12) / (17) | (Proj Util Trgl) | (Proj Util Trgl) | |||||||||||||
Accident | Selected | Indicated | Indicated | |||||||||||||
Periods | Total | Attorney | Medical | |||||||||||||
Ending | Utilization | Utilization | Utilization | |||||||||||||
Mar-2003 | 26.4 | % | 14.7 | % | 13.3 | % | ||||||||||
Sep-2003 | 20.8 | % | 10.4 | % | 11.0 | % | ||||||||||
Mar-2004 | 25.2 | % | 14.7 | % | 12.6 | % | ||||||||||
Sep-2004 | 26.5 | % | 14.4 | % | 14.5 | % | ||||||||||
Mar-2005 | 17.2 | % | 10.0 | % | 8.6 | % | ||||||||||
Sep-2005 | 21.4 | % | 12.2 | % | 12.6 | % | ||||||||||
Mar-2006 | 22.2 | % | 12.0 | % | 12.4 | % | ||||||||||
Sep-2006 | 25.8 | % | 15.0 | % | 12.5 | % | ||||||||||
Page 51
(22)= | (23) | (24) | ||||||||||||||||
Semiannual | (8) / (12) | (Proj Sev Trgl) | (Proj Sev Trgl) | |||||||||||||||
Accident | Selected | Indicated | Indicated | |||||||||||||||
Periods | Total DCC | Att. & Legal | Med. & Oth. | |||||||||||||||
Ending | Severity | Severity | Severity | |||||||||||||||
Mar-2003 | 1,450 | 2,308 | 148 | |||||||||||||||
Sep-2003 | 2,591 | 4,621 | 193 | |||||||||||||||
Mar-2004 | 1,958 | 2,949 | 180 | |||||||||||||||
Sep-2004 | 2,404 | 3,942 | 177 | |||||||||||||||
Mar-2005 | 2,669 | 4,174 | 251 | |||||||||||||||
Sep-2005 | 2,591 | 4,200 | 241 | |||||||||||||||
Mar-2006 | 2,308 | 4,250 | 260 | |||||||||||||||
Sep-2006 | 2,623 | 4,400 | 270 | |||||||||||||||
4 pt Ann Exp Trend | -3.30 | % | 3.46 | % | 5.99 | % | ||||||||||||
8 pt Ann Exp Trend | 11.35 | % | 13.23 | % | 17.95 | % |
(14) | (17) | (23) | (7)= | |||||||||||||||||
Semiannual | (Proj Util Trgl) | (Proj Ct Trgl) | (Proj Sev Trgl) | (14)x(17)x(23) | ||||||||||||||||
Accident | Indicated | Indicated | Indicated | Indicated Ult. | ||||||||||||||||
Periods | Attorney | Ultimate | Att. & Legal | Att. & Legal | ||||||||||||||||
Ending | Utilization | Loss Counts | Severity | ($000) | ||||||||||||||||
Mar-2003 | 14.7 | % | 1,695 | 2,308 | 576 | |||||||||||||||
Sep-2003 | 10.4 | % | 1,796 | 4,621 | 865 | |||||||||||||||
Mar-2004 | 14.7 | % | 1,951 | 2,949 | 845 | |||||||||||||||
Sep-2004 | 14.4 | % | 1,855 | 3,942 | 1,054 | |||||||||||||||
Mar-2005 | 10.0 | % | 1,985 | 4,174 | 827 | |||||||||||||||
Sep-2005 | 12.2 | % | 1,939 | 4,200 | 991 | |||||||||||||||
Mar-2006 | 12.0 | % | 2,256 | 4,250 | 1,151 | |||||||||||||||
Sep-2006 | 15.0 | % | 2,387 | 4,400 | 1,575 | |||||||||||||||
Expense Count | = | [Utilization Ratio] X [Loss Count] | = | (14) X (17) | ||||||
Expense Severity | = | [Expense Dollars] [Expense Count] | = | (23 | ) | |||||
Expense Dollars | = | [Expense Count] X [Expense Severity] | = | (14) X (17) X (23) |
Page 52
(6) | (7) | (8) | ||||||||||||||
($000) | Medical & Other | Attorney & Legal | Sum | Total DCC | ||||||||||||
Ultimate DCC | 602 | 10,694 | 11,296 | 11,698 | ||||||||||||
– Paid DCC | 398 | 5,784 | 6,182 | 6,182 | ||||||||||||
= Reqd DCC Resv | 204 | 4,911 | 5,115 | 5,516 |
Held DCC Reserves | 5,089 | |||
DCC Reserve Adequacy = [Held] – [Required] | (427 | ) |
(34)= | (35)= | (36)= | ||||||||||||||||
Semiannual | (8) / (16) | (7) / (16) | (6) / (16) | |||||||||||||||
Accident | Selected | Indicated | Indicated | |||||||||||||||
Periods | Total | Att. & Legal | Med. & Oth. | |||||||||||||||
Ending | DCC/Loss $ | / Loss $ | / Loss $ | |||||||||||||||
Mar-2003 | 8.81 | % | 7.80 | % | 0.45 | % | ||||||||||||
Sep-2003 | 12.17 | % | 10.89 | % | 0.48 | % | ||||||||||||
Mar-2004 | 9.76 | % | 8.58 | % | 0.45 | % | ||||||||||||
Sep-2004 | 10.16 | % | 9.05 | % | 0.41 | % | ||||||||||||
Mar-2005 | 9.24 | % | 8.37 | % | 0.43 | % | ||||||||||||
Sep-2005 | 9.82 | % | 9.03 | % | 0.53 | % | ||||||||||||
Mar-2006 | 10.36 | % | 10.33 | % | 0.65 | % | ||||||||||||
Sep-2006 | 12.32 | % | 12.03 | % | 0.62 | % | ||||||||||||
Page 53
Semiannual | (28) | (29) | (30) | (31) | ||||||||||||||||
Accident | CWAPO | Ultimate | Ultimate | Ultimate | ||||||||||||||||
Periods | Count Ratio | CWAPO | CWAPO Ct / | CWAPO $ / | ||||||||||||||||
Ending | @ 6 Mths | Severity | DCC Count | DCC Amt | ||||||||||||||||
Mar-2003 | 0.6 | % | 196 | 9.6 | % | 1.3 | % | |||||||||||||
Sep-2003 | 0.7 | % | 558 | 7.1 | % | 1.5 | % | |||||||||||||
Mar-2004 | 0.5 | % | 334 | 7.1 | % | 1.2 | % | |||||||||||||
Sep-2004 | 0.5 | % | 808 | 7.1 | % | 2.4 | % | |||||||||||||
Mar-2005 | 0.1 | % | 981 | 5.1 | % | 1.9 | % | |||||||||||||
Sep-2005 | 0.4 | % | 691 | 6.6 | % | 1.8 | % | |||||||||||||
Mar-2006 | 0.1 | % | 262 | 3.0 | % | 0.3 | % | |||||||||||||
Sep-2006 | 0.1 | % | 1,807 | 2.4 | % | 1.7 | % | |||||||||||||
Semiannual | (32) | (33) | ||||||||||
Accident | % Outside | % Inside | ||||||||||
Periods | Attorney Per | Attorney Per | ||||||||||
Ending | Tot. Att. Feat. | Tot. Att. Feat. | ||||||||||
Mar-2003 | 49.8 | % | 50.2 | % | ||||||||
Sep-2003 | 28.0 | % | 72.0 | % | ||||||||
Mar-2004 | 27.0 | % | 73.0 | % | ||||||||
Sep-2004 | 27.1 | % | 72.9 | % | ||||||||
Mar-2005 | 34.5 | % | 65.5 | % | ||||||||
Sep-2005 | 22.8 | % | 77.2 | % | ||||||||
Mar-2006 | 33.1 | % | 66.9 | % | ||||||||
Sep-2006 | 34.6 | % | 65.4 | % | ||||||||
Page 54
(20) | ||||
DCC Reserves / Loss Reserves | ||||
Current: | 16.4 | % | ||
Indicated: | 19.0 | % |
Page 55
State LMN Auto BI Adjusting & Other (ULAE) as of September 30, 2006
(5) | (6) | (7) | ||||||||||||||||||||||||||||||
A&O | [Apply to Case] | [Apply to IBNR] | ||||||||||||||||||||||||||||||
(1) | (2) | (4) | Charged | Ratio of A&O | Ratio of A&O | |||||||||||||||||||||||||||
Quarterly | Adjusted | Paid Loss | (3) | Total | Per A&O | to Capped | to Uncapped | |||||||||||||||||||||||||
Calendar | A&O | Capped | Paid Loss | A&O | Count | Paid Loss | Paid Loss | |||||||||||||||||||||||||
End dates | Counts* | @50,000 | Uncapped | Charged | (4) / (1) | (4) / (2) | (4) / (3) | |||||||||||||||||||||||||
Dec-03 | 1,228 | 3,714,400 | 4,054,400 | 760,093 | 619 | 20.5 | % | 18.7 | % | |||||||||||||||||||||||
Mar-04 | 1,318 | 3,926,551 | 4,096,439 | 868,607 | 659 | 22.1 | % | 21.2 | % | |||||||||||||||||||||||
Jun-04 | 1,269 | 3,198,123 | 3,246,026 | 898,269 | 708 | 28.1 | % | 27.7 | % | |||||||||||||||||||||||
Sep-04 | 1,202 | 3,629,395 | 3,910,898 | 959,142 | 798 | 26.4 | % | 24.5 | % | |||||||||||||||||||||||
Dec-04 | 1,339 | 4,446,527 | 4,672,314 | 1,074,649 | 803 | 24.2 | % | 23.0 | % | |||||||||||||||||||||||
Mar-05 | 1,181 | 4,155,283 | 4,656,783 | 1,124,520 | 952 | 27.1 | % | 24.1 | % | |||||||||||||||||||||||
Jun-05 | 1,383 | 4,847,742 | 5,038,990 | 1,047,989 | 758 | 21.6 | % | 20.8 | % | |||||||||||||||||||||||
Sep-05 | 1,250 | 4,721,039 | 5,202,139 | 1,032,713 | 826 | 21.9 | % | 19.9 | % | |||||||||||||||||||||||
Dec-05 | 1,400 | 5,586,462 | 5,841,462 | 1,162,756 | 831 | 20.8 | % | 19.9 | % | |||||||||||||||||||||||
Mar-06 | 1,319 | 5,169,460 | 5,585,959 | 1,182,213 | 896 | 22.9 | % | 21.2 | % | |||||||||||||||||||||||
Jun-06 | 1,442 | 5,776,331 | 6,051,731 | 1,267,469 | 879 | 21.9 | % | 20.9 | % | |||||||||||||||||||||||
Sep-06 | 1,535 | 5,694,208 | 5,978,108 | 1,305,950 | 851 | 22.9 | % | 21.8 | % | |||||||||||||||||||||||
Wtd Avg for Oct-03 thru Sep-04 | 695 | 24.1 | % | 22.8 | % | |||||||||||||||||||||||||||
Wtd Avg for Oct-04 thru Sep-05 | 831 | 23.6 | % | 21.9 | % | |||||||||||||||||||||||||||
Wtd Avg for Oct-05 thru Sep-06 | 864 | 22.1 | % | 21.0 | % | |||||||||||||||||||||||||||
Selected @ Sep-06 (current rev) | 22.1 | % | 21.0 | % | ||||||||||||||||||||||||||||
Selected @ Mar-06 (prior rev) | 21.5 | % | 20.4 | % | ||||||||||||||||||||||||||||
Carried A&O Paid to Paid Ratio | 22.1 | % |
* | Adjusted A&O Counts are a weighted average of the Number Recorded (60%) and Number Paid (40%). |
(11)= | (13)= | |||||||||||||||||||||||||||||||
(6) & (7) | (9)= | (9) X (10) | (12) | (12) - (11) | (14) | |||||||||||||||||||||||||||
Selected | (8) | (8) X {(6) or (7)} | (10) | Indicated | Carried | Reserve | # A&O | |||||||||||||||||||||||||
Pd to Pd Ratios | Loss Reserves | Incurred A&O | % Unpaid | A&O Reserve | A&O Reserve | Adequacy | Reserves | |||||||||||||||||||||||||
Capped Case | 22.1 | % | 24,823,202 | 5,485,928 | 50 | % | 2,742,964 | 2,897,707 | 154,743 | 3,046 | ||||||||||||||||||||||
IBNR Reserve | 21.0 | % | 4,493,977 | 943,735 | 90 | % | 849,362 | 853,906 | 4,544 | |||||||||||||||||||||||
Total | 29,317,179 | 6,429,663 | 3,592,325 | 3,751,613 | 159,287 |
Page 56
(6) | (7) | |||||||||||||||||||||||
[Apply to Case] | [Apply to IBNR] | |||||||||||||||||||||||
(2) | (4) | Ratio of A&O | Ratio of A&O | |||||||||||||||||||||
Quarterly | Paid Loss | (3) | Total | to Capped | to Uncapped | |||||||||||||||||||
Calendar | Capped | Paid Loss | A&O | Paid Loss | Paid Loss | |||||||||||||||||||
End Dates | @ 50,000 | Uncapped | Charged | (4) / (2) | (4) / (3) | |||||||||||||||||||
Dec-04 | 4,446,527 | 4,672,314 | 1,074,649 | 24.2 | % | 23.0 | % | |||||||||||||||||
Mar-05 | 4,155,283 | 4,656,783 | 1,124,520 | 27.1 | % | 24.1 | % | |||||||||||||||||
Jun-05 | 4,847,742 | 5,038,990 | 1,047,989 | 21.6 | % | 20.8 | % | |||||||||||||||||
Sep-05 | 4,721,039 | 5,202,139 | 1,032,713 | 21.9 | % | 19.9 | % | |||||||||||||||||
Dec-05 | 5,586,462 | 5,841,462 | 1,162,756 | 20.8 | % | 19.9 | % | |||||||||||||||||
Mar-06 | 5,169,460 | 5,585,959 | 1,182,213 | 22.9 | % | 21.2 | % | |||||||||||||||||
Jun-06 | 5,776,331 | 6,051,731 | 1,267,469 | 21.9 | % | 20.9 | % | |||||||||||||||||
Sep-06 | 5,694,208 | 5,978,108 | 1,305,950 | 22.9 | % | 21.8 | % | |||||||||||||||||
Wtd Avg for Oct-03 thru Sep-04 | 24.1 | % | 22.8 | % | ||||||||||||||||||||
Wtd Avg for Oct-04 thru Sep-05 | 23.6 | % | 21.9 | % | ||||||||||||||||||||
Wtd Avg for Oct-05 thru Sep-06 | 22.1 | % | 21.0 | % | ||||||||||||||||||||
Select @ Sep-06 (current rev) | 22.1 | % | 21.0 | % | ||||||||||||||||||||
Select @ Mar-06 (prior rev) | 21.5 | % | 20.4 | % | ||||||||||||||||||||
Carried A&O Paid to Paid Ratio | 22.1 | % |
Page 57
(5) | ||||||||||||
A&O | ||||||||||||
(1) | (4) | Charged | ||||||||||
Quarterly | Adjusted | Total | Per A&O | |||||||||
Calendar | A&O | A&O | Count | |||||||||
End Dates | Counts | Charged | (4) / (1) | |||||||||
Dec-04 | 1,339 | 1,074,649 | 803 | |||||||||
Mar-05 | 1,181 | 1,124,520 | 952 | |||||||||
Jun-05 | 1,383 | 1,047,989 | 758 | |||||||||
Sep-05 | 1,250 | 1,032,713 | 826 | |||||||||
Dec-05 | 1,400 | 1,162,756 | 831 | |||||||||
Mar-06 | 1,319 | 1,182,213 | 896 | |||||||||
Jun-06 | 1,442 | 1,267,469 | 879 | |||||||||
Sep-06 | 1,535 | 1,305,950 | 851 | |||||||||
Wtd Avg for Oct-03 thru Sep-04 | 695 | |||||||||||
Wtd Avg for Oct-04 thru Sep-05 | 831 | |||||||||||
Wtd Avg for Oct-05 thru Sep-06 | 864 |
Page 58
(11)= | ||||||||||||||||||||||||||||
(6) & (7) | (9) X (10) | (12) | (13)= | |||||||||||||||||||||||||
Selected | (8) | (9)= | (10) | Indicated | Carried | (12) – (11) | ||||||||||||||||||||||
Pd to Pd | Loss | (8) X {(6) or (7)} | % | A&O | A&O | Reserve | ||||||||||||||||||||||
Ratios | Reserves | Incurred A&O | Unpaid | Reserve | Reserve | Adequacy | ||||||||||||||||||||||
Capped Case | 22.1 | % | 24,823,202 | 5,485,928 | 50 | % | 2,742,964 | 2,897,707 | 154,743 | |||||||||||||||||||
IBNR Reserve | 21.0 | % | 4,493,977 | 943,735 | 90 | % | 849,362 | 853,906 | 4,544 | |||||||||||||||||||
Total | 29,317,179 | 6,429,663 | 3,592,325 | 3,751,613 | 159,287 |
For currently open claims: | ||||||||
Incurred A&O | = | [Selected capped Paid-to-Paid ratio] 22.1% (column (6)) | X | [Current Case Loss Reserves capped at $50,000] (column (8)) | ||||
For claims not yet reported: | ||||||||
Incurred A&O | = | [Selected uncapped Paid-to-Paid ratio] 21.0% (column (7)) | X | [Current IBNR Loss Reserves] (column (8)) | ||||
For segments w/ significant slavage or subrogation recoveries, | ||||||||
(whether claims are currently open or not yet reported): | ||||||||
Incurred A&O | = | [Selected Gross Paid-to-Paid ratio] | X | [Current Gross IBNR Loss Reserves] |
Page 59
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