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Title Slide
JUN 8 – 10, 2015
www.bermudacaptive.bm
Getting Employee Benefits and Getting Employee Benefits and Pension Programs into your CaptivePension Programs into your Captive
HIGHLY RESTRICTED
Captive Financing For Employee
Benefit Obligations
Strategic Overview
▀ Use our captive insurance companies to reinsure employee benefit obligations– US post retirement medical (PRM)– International pension plans (PenCap Program)– International life, disability and medical insurance (IEB Program)
Captive Overview
CCRSL Red Disk Red Re Red Life Re
Established 1992 1994 2006 2013
Type Reinsurance Direct/Reinsurance Direct/Reinsurance Reinsurance
Domicile Dublin Dublin South Carolina Bermuda
GWP PC - 2014 N/A $34 M $90 M N/A
GWP EB / Pensions - 2014 $0* N/A $81 M $0+
Tot PC Assets @ YE 14 N/A $112 M $439 M N/A
Tot EB Assets @ YE 14 $1,294 M N/A Incl. $740 M
Lines of Coverage
• Pensions – UK, Ireland, Germany
• Global Property• Int’l Casualty • EU XS Liability• XS of Integrated• Exec Liability
• US Casualty• WW Terrorism• Int’l EB• TV Wrap Up• US Life
• Pensions – Canada
* Pension premium written in 2011 = $659 M.+ Pension premium written in 2013 = $466 M.
Transaction Structure for PenCap
Consolidated Group
Corporate Pension Plans
Solvency Capital
Reserves Reinsurance
Contract
Coca-Cola
CCRSLCoca-Cola Reinsurance Services Limited
Dividends
Premium
Annuity Contract
Fronter
Premium less charges
Capital Contribution
Strategic Overview – PenCap Program
▀ Increases scale by consolidating plan assets– Generates increased asset returns & lower investment manager fees– Centralizes control of investment strategies – Improves management of investment risk
▀ Allows funding up of pension plans with No risk of trapped assets
International Pension Plans
First 4 international pension plan targets completed
▀ Germany: approved 2009 ($278MM)
▀ UK and Ireland: approved 2010 ($630MM)
▀ Canada: approved 2013 ($595MM)
What now?
▀ Novate from Ireland to Bermuda
▀ Readiness for Sol II
▀ Move to Cash Balance Plans reduces targets
▀ Size matters: can we replicate transactions efficiently?
▀ Monitoring U.S.: discount rates, discount rates, discount rates
Transaction Structure for PRM
Policy payment
VEBA
Stop Loss Policy premium
Insurer
Reinsurance payment
Reinsurancepremium
Red Re
TCCC
Payment to cover member claims
Company Contributionto fund VEBA
Retiree Medical Background
Plan Overview• Medical, dental
and life benefits for retired US and certain globally mobile associates hired prior to 2009
• TCCC currently pays a substantial portion of the premiums (in some case, the entire cost)
What are the
“Caps”?
• In 2007, TCCC announced it was limiting its contributions towards retiree medical and dental premiums
When are the Caps Expected to Apply?
• 2017 for medical• Dental caps are not expected to apply for several years
What will Be the
Impact?• Any medical or
dental cost in excess of their respective limits would be paid by the retirees
• Once the caps apply, retiree premiums will increase substantially
What has TCCC Done
to Help?
• Communication campaign in 2007
• In 2008 retirees received an increase in their pension in order to offset future medical costs
• Reminders in annual open enrollment
• Managed costs, resulting in a delay in the cap applying
What are our financing options?
PRM Financing Considerations
Company sponsoredVS
Exchanges
Manage P&L efficiently
What will be development of healthcare in U.S. with
ACA?
Stop Loss VS
Annutiy
Funding flexibility
Strategic Overview - IEB Program
Finance non-U.S. employee risk benefits in a captive insurance company, leveraging the existing risk management model with the following key objectives: Improve control over the management and financing of risk benefits
Reduced insurance costs by removing or reducing profit margins
Detailed data on experience to better manage the underlying drivers of cost
Potentially leverage opportunities for “system”
Flexibility to offer benefits driven by company philosophy, outside market norms
Improves management of investment risk and provides efficient tax treatment of captive 3rd party business
IEB Program – What have we Done?
Running since 2006
Initial savings: 15 – 20%
169 policies covering 84 operations in 68 countries will cede US$60MM of premiums into the Captive for 2015
Have been able to hold life and disability premiums level
Have been able to hold medical premium increases to at or below local medical inflation
Recent additions: U.S. Life, Mobile population medical/dental
Other considerations: U.S. infinity benefits, U.S. Medical Stop Loss decided not needed
Structure of IEB Program
Program includes Life, Disability, Medical, Accident, Voluntary or employee-paid insurances as well as other benefits, where possible.
Uses two fronting companies to issue local policies and provide local administration – MetLife and Generali.
Captive assumes risk and holds 100% of the premiums and reserves (where legally possible).
Local operations continue to determine benefit design in line with HR philosophies (local and global).
Experience is reviewed periodically based on the coverage.
Benefits Pricing within the IEB Program
The IEB Program is designed to run on a “not for profit” basis, easing or removing insurance profits.
Annual premiums determined by Captive based on experience risk philosophy.
Experience tracked by contract such that each business “pays its own way”.
Insurance pricing is based on local market conditions and plan utilization
IEB Program – Annual Renewal Process Key Dates
September 15 – Local offices receive census data requests from the vendor
October 15 – Census data as of September 30 is due back to the vendors.
November 1 – Renewal rates finalized and communicated during the month
December 1 – Premium invoices issued locally by vendors
January 15 – Annual premiums paid. All invoices must be paid on time and as issued without exception by January 15