September 8, Hand Delivered

Transcription

1 September 8, 2017 Hand Delivered The Honorable Dave Jones Insurance Commissioner California Department of Insurance 45 Fremont Street, 23rd Floor San Francisco, CA Broadway, Suite 900 Oakland, CA Voice Fax Bill Mudge President & Chief Executive Officer RE: California Workers Compensation Insurance Proposed Advisory Pure Premium Rates Effective January 1, 2018 CDI File No. REG Dear Commissioner Jones: In the WCIRB s January 1, 2018 Pure Premium Rate Filing submitted on August 18, 2017 (hereinafter referred to as the August 18, 2017 Filing), the WCIRB recommended advisory pure premium rates effective January 1, 2018 that average $2.01 per $100 of payroll. In the August 18, 2017 Filing, the WCIRB advised that the WCIRB will be reviewing accident year experience valued as of June 30, 2017 once it is received and, if authorized by the WCIRB Governing Committee, will amend the pure premium rates proposed in this filing. Further, if legislative or regulatory changes are adopted prior to the public hearing on this filing, the WCIRB will evaluate the estimated cost impact of these actions and, to the extent appropriate, modify the pure premium rates proposed in its filing. There have been no legislative or regulatory changes enacted since the August 18, 2017 Filing that the WCIRB believes would have a significant impact on the cost levels underlying the 2018 advisory pure premium rates. 1 However, the WCIRB has completed its evaluation of June 30, 2017 experience and, as a result of that evaluation and as authorized by the WCIRB Governing Committee on September 6, 2017, the WCIRB is amending the advisory pure premium rates proposed in the August 18, 2017 Filing. Specifically, the WCIRB is recommending that the pure premium rates proposed to be effective for workers compensation policies with an effective date on or after January 1, 2018, as contained in Attachment A, be approved. These proposed advisory pure premium rates for the 502 standard classifications proposed to be effective January 1, 2018 average $1.96 per $100 of payroll. This average is 2.0% less than the average approved July 1, 2017 advisory pure premium rate of $2.00 and 16.1% less than the industry average filed pure premium rate of $2.34 as of July 1, The proposed advisory pure premium rates shown in Attachment A are based on (1) insurer losses incurred during accident year 2016 and prior accident years valued as of June 30, 2017, (2) insurer loss 1 Final regulations implementing the new drug formulary being developed by the Division of Workers Compensation (DWC) pursuant to Assembly Bill No remain pending. In any case, the initial DWC statewide savings estimate related to the new formulary of $23 million equates to only approximately 0.1% of the overall pure premium rate level.

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3 Attachment A Attachment A Proposed Pure Premium Rates This attachment sets forth the calculation of the proposed pure premium rates to be effective for workers compensation policies with an effective date on or after January 1, 2018 as amended based on June 30, 2017 loss experience. The pure premium rates shown in this attachment are based on the Selected (Unlimited) Loss to Payroll Ratio or, if applicable, the Selected Loss to Payroll Ratio (Restricted to 25% Change) shown on the classification relativity review sheets that were included in Part A, Section C, Appendix D of the WCIRB s January 1, 2018 Regulatory Filing submitted on June 27, 2017 (2018 Regulatory Filing). Specifically, in order to determine the proposed policy year 2018 pure premium rate for each classification, the selected loss to payroll ratios in Part A, Section C, Appendix D of the 2018 Regulatory Filing are adjusted to reflect (a) the overall indicated difference of -14.0% 1 in the level of losses projected for 2018 policies relative to that reflected in the industry average filed pure premium rate level as of July 1, 2017 (as computed in ), segregated into its indemnity and medical components, (b) the inclusion of loss adjustment expenses (LAE), (c) the impact of experience rating on pure premium. The projected policy year 2018 indemnity loss factor of is computed as the projected ratio of policy year 2018 indemnity losses to pure premium at the industry average filed pure premium rate level as of July 1, 2017 of (see, Exhibit 8, line 1) divided by the product of (a) the implied expected provision for indemnity losses in the July 1, 2017 advisory pure premium rates of and (b) the ratio of the average July 1, 2017 advisory pure premium rate of $2.00 per $100 of payroll to the industry average filed pure premium rate as of July 1, 2017 of $2.34 per $100 of payroll and with the resulting ratio multiplied by an adjustment to the average loss to payroll ratio underlying the projected average January 1, 2018 advisory pure premium rate (see, Exhibit 8) of The projected policy year 2018 medical loss factor of is computed as the projected ratio of policy year 2018 medical losses to pure premium at the industry average filed pure premium rate level as of July 1, 2017 of (see, Exhibit 8, line 1) divided by the product of (a) the implied expected provision for medical losses in the July 1, 2017 advisory pure premium rates of and (b) the ratio of the average July 1, 2017 advisory pure premium rate of $2.00 per $100 of payroll to the industry average filed pure premium rate as of July 1, 2017 of $2.34 of $100 of payroll and with the resulting ratio multiplied by an adjustment to the average loss to payroll ratio underlying the projected average January 1, 2018 advisory pure premium of that was also applicable to the indemnity loss factor. Shown below are the indemnity and medical composite factors, which are the projected indemnity and medical loss factors adjusted for the indicated policy year 2018 provision for loss adjustment expenses of 33.1% (see, Exhibit 9.6), the selected experience rating off-balance correction factor of (see Part A, Section C, Appendix B of the 2018 Regulatory Filing), and the estimated combined impact of Senate Bill No (SB 1160) and Assembly Bill No (AB 1244) of -0.6% (see Attachment C of the WCIRB s Amended January 1, 2017 Pure Premium Rate Filing). 1 The overall indicated difference of -16.1% consists of a -14.0% difference due to loss experience, an implied -0.8% difference due to the loss adjustment expense factor, a -1.1% difference due to the experience rating off-balance correction factor, and a -0.6% difference due to the impact of SB 1160 and AB This factor represents the loss provision in the July 1, 2017 advisory pure premium rates (i.e., 1/1.342) apportioned to indemnity based on the indemnity (0.416) and medical (0.584) split reflected in the overall selected 2018 loss to payroll ratios contained in Part A, Section C, Appendix D of the 2018 Regulatory Filing. 3 This factor represents the ratio of the average loss to payroll ratio based on the payroll weights underlying the projected January 1, 2018 advisory pure premium rate of $1.96 to the average loss to payroll ratio based on the payroll weights underlying the 2018 classification relativities contained in Part A, Section C, Appendix D of the 2018 Regulatory Filing. 4 This factor represents the loss provision in the July 1, 2017 advisory pure premium rates (i.e., 1/1.342) apportioned to medical based on the indemnity (0.416) and medical (0.584) split reflected in the overall selected 2018 loss to payroll ratios contained in Part A, Section C, Appendix D of the 2018 Regulatory Filing. A-1 Workers Compensation Insurance Rating Bureau of California

4 Attachment A (1) Projected Loss Factors Indemnity Medical (a) Projected Loss to Industry Average Filed Pure Premium Rate as of July 1, 2017 (b) Expected Loss Provision in July 1, 2017 Advisory Pure Premium Rates (c) Ratio of Average July 1, 2017 Advisory Pure Premium Rate to Industry Average Filed Pure Premium Rate as of July 1, (d) Adjustment to Average Loss to Payroll Ratio Underlying Projected January 1, 2018 Average Advisory Pure Premium Rate (e) Projected Loss Factors (a) x (d) / [(b) x (c)] (2) Loss Adjustment Expense Factor (3) Experience Rating Off-Balance Factor (4) Estimated Impact of SB 1160 and AB (5) Composite Factors: (1e) x (2) x (3) x (4) In summary, the proposed January 1, 2018 pure premium rates contained in this attachment are calculated by (a) multiplying the indemnity component shown on the Selected (Unlimited) Loss to Payroll Ratio or, if applicable, the Selected Loss to Payroll Ratio (Restricted to 25% Change) line on the classification relativity review sheets contained in Part A, Section C, Appendix D of the 2018 Regulatory Filing by the indemnity composite factor of shown above; (b) multiplying the medical component shown on the Selected (Unlimited) Loss to Payroll Ratio or, if applicable, the Selected Loss to Payroll Ratio (Restricted to 25% Change) line on the classification relativity review sheets contained in Part A, Section C, Appendix D of the 2018 Regulatory Filing by the medical composite factor of shown above; and (c) adding the resulting products. 7 For example, the proposed 2018 pure premium rate for Classification 4496, Plastics fabricated products mfg., of $8.14 per $100 of payroll is computed by multiplying the indemnity Selected (Unlimited) Loss to Payroll Ratio of (see Part A, Section C, Appendix D of the 2018 Regulatory Filing) by the indemnity composite factor of and adding that result to the product of the medical Selected (Unlimited) Loss to Payroll Ratio of (see Part A, Section C, Appendix D of the 2018 Regulatory Filing) and the medical composite factor of The ratio of the average July 1, 2017 advisory pure premium rate of $2.00 per $100 of payroll to the industry average filed pure premium rate as of July 1, 2017 of $2.34 of $100 of payroll. 6 The ratio of the average loss to payroll ratio based on the payroll weights underlying the projected January 1, 2018 advisory pure premium rate (1.474) to the average loss to payroll ratio based on the payroll weights underlying the 2018 classification relativities (1.495). 7 The proposed pure premium rate for Classification 8631, Racing Stables operation, which beginning in 2016 is predicated on a basis of premium based on a number of stalls occupied each day, is determined using the composite factors shown above and the indemnity and medical loss to exposure ratios shown in Section A, Appendix A, Exhibit 1 of the January 1, 2018 Pure Premium Rate Filing submitted on August 18, A-2 Workers Compensation Insurance Rating Bureau of California

5 Attachment A Proposed January 1, 2018 Pure Premium Rates (as amended September 8, 2017) Effective January 1, 2018 on New and Renewal Policies Effective on or after January 1, 2018 Class Code P.P. Class P.P. Class P.P. Class P.P. Class P.P. Class P.P. Class P.P. Rate* Code Rate* Code Rate* Code Rate* Code Rate* Code Rate* Code Rate* *Pure Premium Rates are per $100 of payroll unless otherwise noted. A-3

6 Attachment A Legend: Proposed January 1, 2018 Pure Premium Rates (as amended September 8, 2017) Effective January 1, 2018 on New and Renewal Policies Effective on or after January 1, 2018 (Continued) (A) See below Class P.P. Class P.P. Class P.P. Class P.P. Class P.P. Class P.P. Class P.P. Code Rate* Code Rate* Code Rate* Code Rate* Code Rate* Code Rate* Code Rate* (A) (A) (A) (A) Per Capita Classifications Class P.P. Firefighters, Police, Police Deputies, etc. Code Rate* Firefighting Operations - volunteers Police, Sheriffs - volunteers Horse Racing Classifications Class P.P. Horse Racing Code Rate* Jockeys or Harness Racing Drivers (per race) Racing Stables (per occupied stall day) *Pure Premium Rates are per $100 of payroll unless otherwise noted. A-4

7 Computation of Indicated Average Pure Premium Rate for 2018 Policies The computation of the indicated average pure premium rate for 2018 policies summarized in this attachment is based on statewide insurer experience through June 30, 2017 and supersedes the computation based on March 31, 2017 experience discussed in Section B of the WCIRB s January 1, 2018 Pure Premium Rate Filing submitted on August 18, 2017 (hereinafter referred to as the August 18, 2017 Filing). The projected policy year 2018 ratio of losses to premium at the industry average filed pure premium rate level as of July 1, 2017 based on experience through June 30, 2017 is 64.1%. The projected provision for loss adjustment expenses (LAE) is 33.1% of losses. In total, the projected loss and LAE as a percentage of premium at the industry average filed pure premium rate level as of July 1, 2017, prior to the estimated impact of Senate Bill No (SB 1160) and Assembly Bill No (AB 1244), is 85.3%. After reflecting a -1.1% indicated change in the experience rating off-balance correction factor for 2018 and the WCIRB s estimated impact of SB 1160 and AB 1244 of -0.6%, the result is an indicated -16.1% difference from the industry average filed pure premium rate as of July 1, 2017 of $2.34 per $100 of payroll. The resulting indicated policy year 2018 average pure premium rate is $1.96 per $100 of payroll. Computation of Projected Loss to Pure Premium Ratio The projected policy year 2018 ratio of loss to premium at the industry average filed pure premium rate level as of July 1, 2017 of 64.1% has been derived based on the following experience and actuarial methodologies: A. Calendar Year Experience The projected loss to pure premium ratio is based on an evaluation of calendar accident year experience through 2016, valued as of June 30, A summary of the 1985 through 2016 calendar year premiums and accident year losses is shown in Exhibit 1. The experience contained in this summary reflects the data reported by insurers representing almost 100% of the California workers compensation insurance market in (The June 30, 2017 experience of a number of insurers that were in liquidation by the second quarter of 2017 but may have written a significant portion of the market in prior accident years has not been reported to the WCIRB and is, therefore, not included in this analysis.) Exhibit 1 shows the earned premium, the indemnity paid losses and case reserves, and the medical paid losses and case reserves as of June 30, 2017 for accident years 1985 through Beginning with policies incepting on or after July 1, 2010, the California Workers Compensation Uniform Statistical Reporting Plan 1995 requires that the cost of medical cost containment programs (MCCP) be reported as allocated loss adjustment expense (ALAE) rather than as medical loss. As a result, portions of accident year 2010 and accident year 2011 MCCP costs are reported in medical loss and portions are reported in ALAE. In order to provide for a consistent comparison across more recent accident years, as in the August 18, 2017 Filing, the paid medical losses shown in Exhibit 1 for accident year 2011 have been adjusted to exclude all MCCP paid costs including the portion of MCCP costs reported in medical losses. 1 The paid medical losses shown in Exhibit 1 for accident years 2010 and prior continue to include all MCCP costs including the MCCP costs for the 2010 accident year reported as ALAE. 2 (A more complete discussion of the projection of policy year 2018 MCCP costs is included in Section B, Appendix C of the August 18, 2017 Filing.) 1 The amount of MCCP paid costs estimated to be reported in medical losses and excluded from the paid medical amount shown in Exhibit 1 for accident year 2011 is $39,263, The amount of MCCP paid costs reported as ALAE, but included in the paid medical amount for accident year 2010 is $55,806,755. B-1 Workers Compensation Insurance Rating Bureau of California

8 Exhibit 1 also shows, for informational purposes, the incurred but not reported (IBNR) losses reported by insurers as of June 30, 2017, the total incurred losses including IBNR losses, and the total loss ratio reported for each accident year. B. Loss Development The indemnity and medical losses paid and incurred (paid plus case reserves) shown in Exhibit 1 for each accident year are valued as of June 30, However, the amount of losses reported for the accidents that occur in a particular year will change over time, and the final cost of these accidents will not be known for many years. In general, the pure premium rates are intended to reflect the estimated final, or ultimate, cost of losses and loss adjustment expenses on all accidents that will occur during the period that the rates will be in effect. Consequently, the losses reported for each historical accident year as of June 30, 2017 are adjusted, or developed, to reflect the estimated final, or ultimate, cost of all accidents that have occurred during that year. The historical incurred age-to-age development factors for each annual evaluation period are shown in Exhibits and for indemnity and in Exhibits and for medical. The historical paid ageto-age development factors for each annual evaluation period are shown in Exhibits and for indemnity and Exhibits and for medical. These factors represent the historical year-to-year growth in the incurred and paid losses reported at consecutive June 30 evaluation periods. As in the August 18, 2017 Filing, incurred and paid medical loss development factors for accident years 2012 and later as shown in Exhibits and are exclusive of MCCP costs, while medical loss development factors for accident years 2011 and prior continue to include MCCP costs. The methodologies used to develop each year s reported losses to its ultimate level in this pure premium rate filing are based on the use of (a) latest year and three-year average paid loss development factors adjusted for the impact of Senate Bill No. 863 (SB 863) through 234 months and changes in claim settlement rates through 78 months, (b) six-year average incurred loss development factors from 234 months through 390 months, and (c) an inverse power curve fit for incurred loss development after 390 months (as shown in Exhibits through and through 2.6.8). These methodologies are identical to the methodologies used in the August 18, 2017 Filing as described in detail in Section B, Appendix A of that filing. Estimated Ultimate Loss Ratios The age-to-age development factors selected for each evaluation period are combined in Exhibits 3.1 (for indemnity) and 3.2 (for medical) to produce a cumulative development factor for each period. These factors reflect the ultimate amount of losses anticipated for each accident year relative to the reported paid or incurred losses evaluated as of June 30, These cumulative factors are then applied to the reported (undeveloped) paid indemnity and adjusted paid medical loss ratios as of June 30, 2017 for accident years 1999 and subsequent, and reported incurred indemnity and incurred medical loss ratios as of June 30, 2017 for accident years 1998 and prior to estimate an ultimate loss ratio for each accident year. 3 (The adjusted developed medical loss ratios shown in Column 5 of Exhibit 3.2 have been adjusted for the impact of SB 863 for the sole purpose of computing the indicated average January 1, 2018 pure premium rate and, as a result, do not reflect the actual WCIRB estimates of ultimate medical loss ratios for those accident years. Column 6 of Exhibit 3.2 shows, for informational purposes, the estimated ultimate medical loss ratio for each accident year.) C. Cost Level Adjustments to Losses Each year s historical losses, once developed to an ultimate basis, are adjusted to reflect various measurable economic or claims-related changes that have occurred since the time that year s claims 3 Medical loss ratios shown in Exhibit 3.2 for accident years 2011 and subsequent do not reflect MCCP costs. Ratios shown for accident years 2010 and prior do reflect MCCP costs. B-2 Workers Compensation Insurance Rating Bureau of California

9 were incurred. In this way, each year s adjusted, or on-level, ratios of losses to premium are on a more comparable basis and can be used to project future ratios of losses to premium. These adjustments, shown in Exhibits 4.1 through 4.4, are consistent with those included in the August 18, 2017 Filing as described in detail in Section B, Appendix B of that filing. D. Wage and Premium Adjustments As with accident year losses, each historical year s earned premium is adjusted to a common, or on-level, basis. The adjustments made to historical premium amounts, shown in Exhibits 5.1 and 5.2, are consistent with those included in the August 18, 2017 Filing as described in detail in Section B, Appendix B of that filing. E. Trending of On-Level Ratios The loss ratios shown for historical accident years, once adjusted to an ultimate and on-level basis, are used to project the policy year 2018 loss ratio at the industry average filed premium rate level as of July 1, As in the August 18, 2017 Filing, the WCIRB is recommending a trending methodology based on applying separate projections of growth in claim frequency and claim severity to the average of the latest two years on-level loss ratios. These trending methodologies are described in detail in Section B, Appendix B of the August 18, 2017 Filing. Exhibits 6.1 through 6.4 and 10 show the information upon which the separate frequency and severity projections are based. The WCIRB s projected changes in indemnity claim frequency are based on the estimated actual change in indemnity claim frequency for 2016 (as shown in Exhibit 10), the WCIRB s econometric indemnity claim frequency model projections for 2017 through 2019 (as shown in Exhibit 6.1) and are identical to the frequency projections reflected in the August 18, 2017 Filing. Exhibit 6.2 shows estimated ultimate and on-level indemnity severity by accident year. In the August 18, 2017 Filing, the WCIRB selected an on-level indemnity severity trend of 1.0% annually, which was primarily based on the changes in on-level indemnity severities for the most recent two accident years (2015 and 2016). As shown in Exhibit 6.2, with the favorable indemnity loss development experienced for 2015 and 2016 during the second quarter of 2017, the indicated on-level indemnity severity changes for these years based on June 30, 2017 experience have moderated from those reflected in the August 18, 2017 Filing. As a result, the WCIRB has selected an on-level indemnity severity trend of 0.7% annually (as shown in Exhibit 6.2) based on the average of the rates of growth for 2015 and 2016, compared to the 1.0% reflected in the August 18, 2017 Filing. Exhibit 6.3 shows estimated ultimate medical severities by accident year. As discussed above, medical losses shown for accident years 2011 and subsequent do not include MCCP costs while those for accident years 2010 and prior do include MCCP costs. In order to compare medical severity trends on a consistent basis, Exhibit 6.4 shows estimated ultimate medical severities with MCCP costs included in all years. Additionally, Exhibit 6.4 also shows estimated ultimate medical severities exclusive of MCCP costs for all years with estimated MCCP costs excluded from accident years 2010 and prior based on calendar year MCCP paid costs from WCIRB aggregate data calls. In the August 18, 2017 Filing, the WCIRB selected an on-level medical severity trend of 3.0% annually, which was primarily based on the longer-term rate of growth as well as the more significant growth indicated for the 2016 accident year. As shown in Exhibit 6.4, the estimated rate of growth in on-level medical severities (excluding MCCP costs) for accident year 2016 has moderated, but remains above the severity trend of 3.0% reflected in the August 18, 2017 Filing. In addition, a preliminary review of accident year 2017 medical severities through six months suggests medical severity growth in 2017 of a similar magnitude to that for 2016 and, as also shown in Exhibits 6.3 and 6.4, significant medical inflation has historically followed periods of reform-related medical cost reductions. As a result, the WCIRB continues to recommend an on-level medical severity trend of 3.0% annually (as shown in Exhibit 6.4). B-3 Workers Compensation Insurance Rating Bureau of California

10 Exhibits 7.1 through 7.4 summarize the computation of the projected on-level loss to pure premium ratio for policies incepting in Separate projections are made for the indemnity and medical components. As shown in Exhibits 7.1 and 7.3, the policy year 2018 indemnity and medical loss ratios projected based on the WCIRB s recommended methodologies are and 0.366, respectively. Computation of Projected Loss Adjustment Expenses The WCIRB s projection of the cost of loss adjustment expenses (including MCCP costs) on policies incepting in 2018 is shown in Exhibits 9.1 through 9.6. The methodologies used were identical to those reflected in the August 18, 2017 Filing, which are described in detail in Section B, Appendix C of that filing. As shown in Exhibit 9.6, based on unallocated loss adjustment expense experience through calendar year 2016, allocated loss adjustment expense and MCCP cost experience through March 31, 2017, and the LAE methodologies reflected in the August 18, 2017 Filing as well as updated loss projections based on June 30, 2017 experience, the WCIRB estimates that the policy year 2018 ratio of total loss adjustment expenses to losses is 33.1%. Computation of the Impact of SB 1160 and AB 1244 SB 1160 and AB 1244 were enacted in 2016 and addressed liens and utilization review. The WCIRB s evaluation of the impact of SB 1160 and AB 1244 on cost levels is included in Attachment C of the WCIRB s Amended January 1, 2017 Pure Premium Rate Filing. In total, the WCIRB estimates an overall reduction in costs of 0.6% due to SB 1160 and AB Computation of Experience Rating Off-Balance Factor The WCIRB s projection of the indicated experience rating off-balance factor for 2018 is discussed in Part A, Section C, Appendix B of the WCIRB s January 1, 2018 Regulatory Filing submitted on June 27, As indicated in that filing, the WCIRB projects a 2018 experience rating off-balance factor of 1.015, which is 1.1% below the 2017 experience rating off-balance factor. Computation of the Indicated 2018 Average Pure Premium Rate Line 1 of Exhibit 8 displays the estimated policy year 2018 ratios of ultimate indemnity and medical losses to premium at the industry average filed pure premium rate level as of July 1, 2017 as computed in Exhibits 7.1 and 7.3. The projected policy year 2018 ratio of total losses to premium at the industry average filed pure premium rate level as of July 1, 2017 is Line 2 of Exhibit 8 shows the estimated policy year 2018 loss adjustment expenses as 33.1% of losses (see Exhibit 9.6). Line 3 of Exhibit 8 shows the estimated policy year 2017 ultimate loss and loss adjustment expense ratio at the industry average filed pure premium rate level as of July 1, 2017 prior to the estimated impact of SB 1160 and AB 1244 of Line 4 of Exhibit 8 shows the estimated impact of SB 1160 and AB 1244 on policy year 2018 costs of -0.6% (see Attachment C of the WCIRB s Amended January 1, 2017 Pure Premium Rate Filing). Line 5 of Exhibit 8 shows the estimated policy year 2018 ultimate loss and loss adjustment expense ratio at the industry average filed pure premium rate level as of July 1, 2017 after the estimated impact of SB 1160 and AB 1244 of Line 6 of Exhibit 8 shows the -1.1% indicated change in the experience rating off-balance correction factor for 2018 (see Part A, Section C, Appendix B of the WCIRB s January 1, 2018 Regulatory Filing). Line 7 of Exhibit 8 shows the % difference in the indicated pure premium rate level from the industry average filed pure premium rate level as of July 1, Line 8 of Exhibit 8 shows the industry average filed pure premium rate as of July 1, 2017 of $2.34 per $100 of payroll, which is computed as described in Exhibit 1 of the Executive Summary to the August 18, 2017 Filing. Line 9 of Exhibit 8 shows the indicated average January 1, 2018 pure premium rate of $1.96 per $100 of payroll. B-4 Workers Compensation Insurance Rating Bureau of California

11 Exhibit 1 Earned Paid Indemnity Paid Medical Total Loss Year Premium Indemnity Reserves Medical** Reserves IBNR* Incurred** Ratio* ,872,481,605 1,278,308,881 3,956, ,218,072 22,339,240 19,069,547 2,307,892, ,506,609,097 1,381,690,793 5,405,747 1,133,045,524 32,851,170 58,492,141 2,611,485, ,374,085,383 1,503,966,597 7,235,039 1,325,593,821 46,468,783 31,400,626 2,914,664, ,173,049,472 1,700,747,543 7,987,532 1,529,675,606 47,618,952 43,529,240 3,329,558, ,674,529,942 1,936,680,015 9,511,947 1,784,168,775 62,577,397 47,455,839 3,840,393, ,698,665,461 2,253,926,769 9,201,766 2,028,738,288 64,471,878 68,898,282 4,425,236, ,863,319,243 2,468,994,840 17,802,200 2,180,319,320 70,676,631 69,955,763 4,807,748, ,681,466,382 1,970,135,533 15,280,072 1,740,964,330 71,313,380 63,801,036 3,861,494, ,928,480,359 1,687,997,835 16,021,256 1,490,763,438 91,116,258 56,555,097 3,342,453, ,022,749,028 1,620,173,219 23,570,167 1,448,746, ,403,221 60,276,419 3,255,169, ,778,975,599 1,752,825,901 32,615,565 1,590,847, ,684,796 69,088,294 3,573,061, ,736,857,547 1,937,334,818 40,322,895 1,681,066, ,764,587 74,997,788 3,873,486, ,916,944,392 2,296,028,604 51,099,691 1,974,572, ,946, ,422,189 4,615,069, ,322,051,270 2,746,593,698 63,939,731 2,584,617, ,604, ,723,229 5,876,478, ,537,629,086 3,024,534,488 63,738,289 2,963,146, ,592, ,030,938 6,591,042, ,905,419,052 3,384,555,782 87,726,987 3,485,601, ,404, ,181,944 7,707,471, ,094,684,192 4,775,567, ,148,627 5,224,571, ,369, ,489,719 11,328,146, ,405,893,679 4,703,215, ,630,190 5,342,317, ,685, ,914,901 11,586,762, ,429,675,115 4,456,085, ,171,647 4,900,202, ,201,186 1,362,348,024 11,375,008, ,043,963,090 3,136,461, ,772,269 3,915,312, ,541,037 1,429,645,737 9,054,732, ,350,709,483 2,456,737, ,939,069 3,504,667, ,918,516 1,197,233,690 7,696,496, ,209,009,327 2,534,861, ,048,675 3,598,336, ,344, ,161,659 7,576,753, ,256,259,568 2,649,301, ,245,923 3,830,640, ,787, ,546,121 8,016,521, ,748,217,184 2,675,924, ,822,715 3,814,571, ,649, ,939,825 7,928,907, ,885,303,850 2,522,696, ,945,007 3,589,178, ,055, ,141,198 7,540,017, ,411,101,176 2,519,138, ,891,530 3,636,391, ,088, ,838,918 7,712,349, ,146,407,076 2,422,163, ,048,816 3,212,643, ,655,248 1,049,290,342 7,544,801, ,718,349,189 2,377,243, ,497,925 3,012,987, ,113,986 1,948,400,491 8,325,243, ,186,071,217 2,294,604, ,658,203 2,737,128, ,289,413 2,755,171,830 8,945,852, ,014,478,353 2,105,474, ,210,818 2,380,918, ,870,983 3,705,120,083 9,700,595, ,055,735,027 1,633,981, ,544,614 1,884,608,990 1,217,597,447 4,867,011,515 10,457,744, ,955,232, ,515, ,852,128 1,187,773,733 1,408,979,748 6,268,729,066 10,615,849, * Shown for informational purposes only ** Paid medical for accident years 2011 and subsequent exclude the paid cost of medical cost containment programs (MCCP). Paid medical for accident years 2010 and prior include paid MCCP costs. Source: WCIRB quarterly experience calls California Workers' Compensation Year Experience as of June 30, 2017 B-5

12 Exhibit Incurred Indemnity Loss Development Factors Age-to-Age (in months) Year 30/18 42/30 54/42 66/54 78/66 90/78 102/90 114/ / / / / / / / Selected (a) Cumulative (a) Selections are latest year for the 18-to-30 month through 102-to-114 month factors and six-year average for the subsequent age-to-age factors. B-6

13 Exhibit Incurred Indemnity Loss Development Factors (Continued) Age-to-Age (in months) Year 210/ / / / / / / / / / / / / / / /378 ULT/390Inc (b) Selected (a) Cumulative (b) The ULT/390Inc tail factor was calculated based on an inverse power curve fit to a six-year average of the 114-to-126 through 342-to-354 factors, excluding the most recent evaluation, and extrapolated to 80 development years. B-7

14 Exhibit Incurred Medical Loss Development Factors Age-to-Age (in months) (b) Year 30/18 42/30 54/42 66/54 78/66 90/78 102/90 114/ / / / / / / / Selected (a) Cumulative (a) (b) Selections are latest year for the 18-to-30 month through 102-to-114 month factors and six-year average for the subsequent age-to-age factors. Incurred medical loss development factors include the paid cost of medical cost containment programs for accident years 2011 and prior. B-8

15 Exhibit Incurred Medical Loss Development Factors (Continued) Age-to-Age (in months) Year 210/ / / / / / / / / / / / / / / /378 ULT/390Inc (c) Selected (a) Cumulative (c) The ULT/390Inc tail factor was calculated based on an inverse power curve fit to a six-year average of the 114-to-126 through 342-to-354 factors, excluding the most recent evaluation, and extrapolated to 80 development years. B-9

16 Exhibit Paid Indemnity Loss Development Factors Age-to-Age (in months) Year 30/18 42/30 54/42 66/54 78/66 90/78 102/90 114/ / / / / / / / Selected (a) Cumulative Unadjusted for Impact of SB Cumulative Adjusted for Impact of SB 863 (b) (a) Selections are latest year for the 18-to-30 month through 102-to-114 month factors and three-year average for the subsequent age-to-age factors. (b) The 42-to-ultimate factor for accident year 2014 and the 54-to-ultimate factor for accident year 2013 have been adjusted by 6.0% and 2.0%, respectively, for the impacts of SB 863 on indemnity loss development. (See Impact of Senate Bill No. 863 on Loss Development Patterns, WCIRB, August 13, 2013.) B-10

17 Exhibit Paid Indemnity Loss Development Factors (Continued) Age-to-Age (in months) Year 210/ / / / / / / / / / / / / / / / Inc/390Pd (c) ULT/390Inc (d) Selected (a) Cumulative (c) Three-year averages of the 390Inc/390Pd factors are selected. (d) The ULT/390Inc tail factor was calculated based on an inverse power curve fit to a six-year average of the 114-to-126 through 342-to-354 factors, excluding the most recent evaluation, and extrapolated to 80 development years. B-11

18 Exhibit Paid Medical Loss Development Factors Unadjusted (a) Age-to-Age (in months) Year 30/18 42/30 54/42 66/54 78/66 90/78 102/90 114/ / / / / / / / Adjusted (b) Age-to-Age (in months) Year 30/18 42/30 54/42 66/54 78/66 90/78 102/90 114/ / / / / / / / Selected (c) Cumulative (a) (b) (c) Paid medical loss development factors include the paid cost of medical cost containment programs for accident years 2011 and prior. These factors are adjusted for the following impacts: (i) reduction of historical outstanding medical losses paid prior to January 1, 2013 by the estimated 4.2% cost savings due to applicable SB 863 provisions; (ii) adjustment to historical outstanding medical losses paid prior to January 1, 2014 by an estimated 2.1% decrease in costs, and losses paid prior to January 1, 2015 by an estimated 1.7% decrease in costs due to RBRVS. Selections are latest year for the 18-to-30 month through 102-to-114 month factors and three-year average for the subsequent age-to-age factors. B-12