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620 Green Valley Road <br />Sulte 302 <br />Greensboro, NC 27408 <br />Phone: 338-299-1339 <br />FAX: 336-298-1713 <br />E-Mail elamold(~bellsouth.net <br />Memo <br />To: Pam Dubois <br />From: Everette Amold L%° <br />CC: Tony Harris; Jenni Foxx <br />Dat®: 02-12-10 <br />Re: WC Reserves <br />Based on your Actuarial Report dated March 2008 and the loss data you supplied. <br />Plus the loss data sent from Compensation Claims Solutions. <br />My estimate is your WC Reserve Fund should have between $1,210,000.00 and <br />$1,500.000 with an Annual Budget for WC of $570.000.00. <br />Annual Budget: <br />Average paid losses for last four years 440,000. <br />Cast of Excess WC and Adjusting (trended + 5%) 130,000. <br />Total Annual Budget 570,000. <br />The Actuarial report did not project 2009 and 2010 losses, so I could only compare <br />2005 through 2008 projections with the actual losses paid. 2005 and 2007 <br />losses were close to projections, but 2006 actual was $150,000. over and <br />2008 actual was $200,000. over Actuarial average projections. <br />I added the Actuarial report 95% Confidence Level of $860,000. to the $350,000. <br />increase in losses aver the Actuarial projection and arrived at $1,210,000. <br />Due to medical cost increases that may arise over the next five years, I would <br />also trend the 95% Confidence Level projection by 25%. This would produce <br />$1,500,000. You need a reserve of between $1,210,000. and $1,500,000. <br />based on what you think medical inflation will be in the next five years. This <br />projection is based on a Retention of $350,000. if the excess carrier requires <br />a higher Retention, the Reserve would increase as well and the Excess WC <br />premium would decrease (but not as much as the added exposure on a <br />$400,000, or more Retention). <br />Attachment number 4 <br />G-3 Page 96 <br />