6
Full Year 2011 vs. 2010 Combined Ratio Analysis
2011 Pro Forma Results
Pro forma results exclude the impact of a one-time
replacement policy for one of our self-insured clients for
which we purchased a reinsurance policy from a third-
party reinsurer and transferred 100% of the risk; this
transaction did not impact underwriting profit or the
combined ratio
This transaction reduced our loss and LAE ratio by 0.4
points and increased our expense ratio by 0.4 points
For comparative purposes, we believe it is more relevant
to compare 2010 results to the 2011 pro forma, which
exclude the impact of the “replacement policy”.
Loss and LAE Ratio
The 2011 loss and LAE ratio includes 1.0 points of
unfavorable development compared to 4.7 points of
favorable development in 2010.
The 2011 loss and LAE ratio includes 1.2 points of
unusual 2011 storm losses.
Excluding the impact of storm losses and the
replacement policy, the pro forma 2011 accident year
loss and LAE ratio improved 1.6 points reflecting the
impact of underwriting and pricing actions taken.
Expense Ratio
The pro forma 2011 expense ratio decreased 0.6 points
in comparison to the same 2010 period. The decrease
reflects a reduction in performance based variable
compensation in 2011 as compared to 2010.
(1) As reported
(2) Pro forma, see “2011 Pro Forma Results” above for detail.
