Welcome to the

Second Annual Meeting

January 19, 2011

Contractor Self-Insurance Trust

Introductions Audited Financial Statement Review

◦ 9/30/10 Statement

Current Events for Self-Insurance Groups◦ Current Regulations◦ The Truth about “Trust to Trust” Liability◦ Future Plans

Safety◦ Introduction Packet Review◦ MQM™◦ Large Loss Report

Survey Results Questions and Answers

Agenda

Assets 2010

Cash 886,225

Contributions and other receivables 354,303

Investments 5,048,492

Prepaid Expenses 146,028

Receivable under reinsurance contract 185,409

Deferred income taxes 28,800

Total Assets 6,649,257

Financial Review Balance Sheet

Liabilities 2010

Unpaid losses and loss adjustment expense

Case-basis reserves 2,200,900

Incurred but not reported (IBNR) 1,738,100

Accounts Payable 45,370

Accrued WCB assessments 334,386

Accrued member dividends 609,997

Accrued management fee and insurance 55,453

Accrued income taxes -

Total Liabilities 4,984,206

Financial Review Balance Sheet

Members' Equity 2010

Members deposits 465,147

Retained earnings 1,213,807

Accumulated other comprehensive income (loss) (13,903)

Members' Equity 1,665,051

Financial Review Balance Sheet

Revenues 2010

Contributions Earned 2,452,270

Reinsurance Premiums (351,712)

Members Dividends 350,000

Net Contributions Earned 2,450,558

Investment Income 93,671

Total Revenues 2,544,229

Expenses 2010

Unpaid losses and loss adjustment 1,110,755

General and administrative 594,515

Workers Comp Board assessments 382,110

Total Expenses 2,087,380

Totals

Income before taxes 456,849

Provision for income taxes 159,500

Net Income 297,349

Financial Review Income Statement

Contractor Self-Insurance Trust Fully Funded

Trust Industry Shakeout

What we have learned from failed Trusts◦ Rates set too low

◦ Selection criteria failures

◦ Not enough AP & S services offered

◦ No member underwriting

◦ Trustees not involved enough

Current Events in the Self-Insurance World

In the past, not enough regulation

WCB actions to increase regulation◦ Trusts must be fully funded on a regulatory basis

◦ Definition moved from 90% to 100%

◦ Not all assets counted as regulatory

Statutory Security deposits

Assets pledged as collateral for bonds

A/R over 90 days old

Unearned premiums

Differed taxes and tax assets

Prepaid expenses

Current Regulations

◦ All Groups must now use a January 1 fiscal year

◦ Investment Restrictions

No limit on government obligations

Maximum of 25% in corporate stocks & bonds

Maximum of 5% in any one corporation

Maximum of 5% in foreign corporations

◦ Strict reporting requirements

◦ Before each fiscal year begins

Rate adequacy actuarial study required

Budget worksheet required

All fixed and variable expenses required

Budget must be approved 60 days prior to year start

Current Regulations (cont.)

◦ Year End Reporting

Financial Statements

Actuarial Reports

Payroll by codes

Trustee meeting minutes

◦ Dividend Distributions

WCB must approve

WCB distribution schedule (If period still fully funded)

Months after FY Amt allowed to be pd

24 25%

36 33%

48 50%

60 100%

Current Regulations (cont.)

Rumors about failed trusts bringing down healthy trust

Misunderstandings from carriers and agents

The Truth◦ NY Compensation system is paid for by assessments on self-

insurers and traditional insureds

25A: Reopened Cases

15-8: Second Injury Fund

151: Administrative Expenses of WCB

IDP: Funds studies by the DOH and DOL

50-5: Expenses of the SID of the WCB, including payments to

claimants of defaulted self-insurers

The Truth About “Trust to Trust” Liability

WCL Section 50-5

Assessment Trust's Trust audited 50-5 as %

Year Amount Share Premium of Premium

2003 6,210,191 2,388 2,750,747 0.1%

2004 7,297,434 3,595 2,928,007 0.1%

2005 8,078,400 3,114 3,491,866 0.1%

2006 8,838,600 4,152 3,194,084 0.1%

2007 19,045,273 8,368 3,430,836 0.2%

2008 33,144,000 89,933 3,254,575 2.8%

2009 18,200,000 50,168 2,787,329 1.8%

2010 12,400,000 35,327 2,452,270 1.4%

The Truth About “Trust to Trust” Liability (cont.)

Contractors Trust positioned very well◦ Fully Funded

◦ Rates remain low

◦ Payroll reporting method is unique

◦ AP & S Services

◦ MQM™ Program

Other challenges met◦ 2007 WC Reform Law

Reduced rates by 33% from 2006 levels

Maximum claimant benefit doubled from $400 to $800

Pharmaceutical and medical costs increased

Recession reduced payrolls and premiums

Future Plans

Future Optimism◦ 2010/2011 rates were increased 20% for our group

signaling a beginning to the end to the soft market.

◦ Medical Treatment Guidelines effective 12/1/10

◦ Articles on the difficulty in writing WC insurance and

carriers being disciplined in underwriting

◦ OUR members have been excellent in preventing

accidents and responding to our AP & S

recommendations.

Future Plans (cont.)

Introduction Packet Review◦ AP & S Services

◦ Tool Box Talks

◦ Housekeeping Inspections (shop only)

◦ Jobsite Inspections

◦ Job Safety Training Certificate Forms

◦ Accident Investigation Forms

◦ Avoid and Minimize Hearing Loss Claims

◦ Pre-Placement Physical Exams

◦ Sample Disciplinary Action Policies

◦ Safety Posters

Safety

MQM™ Program◦ Series of AP & S questions that are revised each year to

respond to the ongoing safety needs of a member

65% of scoring

◦ Combined with 5 year loss information

35% of scoring

◦ Can lead to SAFETY discounts or surcharges of:

10%

5%

0%

5% surcharge

◦ See current questions and score sheet.

Safety (cont.)

™

EMPLOYER NAME:

EVALUATION DATE: 5/26/2009 8/24/2009

NCA EVALUATOR: JM JM

MQM - Part II: Loss Ratio Score (1/3 weight)*

Total Points Points

Element Available Scored

1 Responsibility & Accountability 15 15 Year Premium Losses Loss Ratio Loss Ratio % of points

2 Safety Meetings & Communications 15 5 2008 15,796 - 0% <10% 100%

3 Accident Investigations 10 10 2007 17,219 - 0% 10 to 25% 75%

4 Occupational Health Program 20 20 2006 19,883 - 0% >25 to 50% 50%

5 Safe Working Conditions & Practices 5 5 2005 16,827 - 0% >50% 0%

TOTAL 65 55 2004 13,461 - 0%

Time Total Points Actual % of points Points

Period Available Loss Ratio (%) scored Scored

1 Year 7 0.0 100% 7

3 Years 11 0.0 100% 11

5 Years 17 0.0 100% 17

TOTAL 35 35

* Final loss ratio score for 2009 will be based on losses as of 8/1/2009.

The most recent loss information provided to NCA at time of sign-up

was used for members not in the Trust during the 5 yr period.

AP& S Prog. Loss Ratio Total GRADING CURVE: Under

Points Scored 55 35 90 Review Good Better Best

Distribution of members 5.1% 46.7% 29.2% 19.0%

Score bands

From 0 pts.

To 45 pts.

From 45 pts.

To 74 pts.

From 75 pts.

To 89 pts.

From 90 pts.

To 100 pts.

10% PREMIUM CREDITS: -5% 0% 5% 10%

MQM - Part I: AP&S Program Assmt. (2/3 weight)

2009 PREMIUM CREDIT EARNED:

Actual Experience for past 5 full years Score formula

This scorecard measures a member's quality by applying a score to the quality of their accident prevention & safety (AP&S) program and their actual loss ratio over 1, 3 and 5 year periods.

The grades are good, better, best and "under review". Under review means the employer needs action to get them to the minimalacceptable Trust Fund standards. Members who are scored "under review" may be subject to surcharged premiums.

Scores of:

90 – 100 earning 10%; 21 members

75 – 90 earning 5%; 53 members

45 – 75 earning 0%; 44 members

0 – 45 earning -5%; 14 members

MQMTM 2010 Results

11

8

43

2 2

Body Part

Safety (cont.)

Large Losses Report

10%3%

7%

14%

30%

23%

13%

Age Range of Claiments

18-25 26-30 31-35 36-40 41-45 46-50 51-61

Safety (cont.)

Large Losses Report

27%

10%

13%10%

10%

10%

20%

Time Working for Company

6 Mos or Less 6 Mos to a Year 1-2 Years 3-5 Years 6-12 Years 15 Years or More Unknown

Actual Time for 6 Months or Less.

1 - 3 Days2 - 2 Weeks1 - 2 Months3- 3 Months1 - 4 Months

Safety (cont.)

Large Losses Report

82%

9%

9%

Cause of Back Claims

Lifting Operating Machinery Fall from Height

Safety (cont.)

Large Losses Report

Lifting Causes◦ Lifting 80 lbs bag

◦ Moving pool heater

◦ Moving ladder

◦ Moving saw

◦ Lifting door frame (2)

◦ Struck with 2 x 6 from above

◦ Lifting lid and turned wrong

◦ Fell from ladder

◦ Others (2)

Safety (cont.)

Large Losses Report

Summary of what to do to prevent a large loss◦ Excellent hiring practices

◦ Pre-placement Physicals

◦ Proper Training of new employees

◦ Proper Lifting Training

◦ When lifting something heavy “Ask for Help!”

Safety (cont.)

Large Losses Report

97.4% 97.4%

96.8% 96.7%96.1%

95.6%95.2%

94.7%

93.8%93.3%

92.9%

91.2% 91.1%

90.4%90.0%

Examiner

Professionalism

AP&S Examiner

Contact

Examiner

Knowledge of

Claims

Examiner

Responsiveness

Availability

AP&S

Newsletter Audits Claim

Reporting

Loss

Runs/Certs

Professionalism

of Reception

Billing

Procedures

Availability

Upper

Management

Accounting

Staff

Quotes

NCAComp Service Quality Total Scores

Customer Survey Results

Questions

Complete Questionnaire

Lunch

Questions and Answers