2018 Member Informational Meeting

Transcription

1 2018 Member Informational Meeting March 19 th 2018 Tim East, SISF Chair Daniel Sovocool, Nixon Peabody Grant Heinitz, SISF Credit Risk Manager Jill Dulich, SISF Claims and Operations Manager 1

2 Mission Statement: "To provide continuity of workers' compensation benefits to injured workers of insolvent, private self-insured companies at the lowest overall long-term cost, equitably distributed to the self-insurance community." 2

3 Purpose: Ensure the timely payment of workers compensation claims to injured workers in the event of default by a member Founded: Organization: Authority: July 6, 1984 by the State of California 501(c)(6) non-profit CA Labor Code Sections Governance: Board of Trustees 7 elected by member companies 1 ex-officio from CA Department of Industrial Relations ( DIR ) Membership: All non-public entity CA employers self-insured for WC 548 self-insured entities $8.5 billion exposure 3

4 Board of Trustees Tim East, Chairperson, The Walt Disney Company Janice Murphy, Kaiser Permanente Steve Tolan, Nordstrom, Inc. Toni Allen, Monterey Mushrooms, Inc. John Smolk, Southern California Edison Company William Lyons, Recology, Inc. Stacy Bratcher, University of Southern California Lyn Asio-Booz, Chief, Self Insurance Plans (OSIP), DIR [ex officio] 4

5 Board and Committees Board of Trustees Tim East, The Walt Disney Co., Chairperson Janice Murphy, Kaiser Permanente Steve Tolan, Nordstrom, Inc. Toni Allen, Monterey Mushrooms, Inc. John Smolk, So Cal Edison Co. William Lyons, Recology, Inc. Stacy Bratcher, University of Southern California Lyn Asio-Booz, Director Delegate, DIR/OSIP Executive Committee Tim East, Chair Finance Committee Tim East, Chair Janice Murphy John Smolk Audit Committee Janice Murphy, Chair Bill Lyons Credit Committee Tim East, Chair Janice Murphy Bill Lyons Lyn Asio-Booz Claims Committee Steve Tolan, Chair Toni Allen Francisco Cano, So Cal Edison¹ Joel Sherman, Grimmway Farms¹ ¹ Advisory only 5

6 CA Self-Insurance Overview Entities Payroll Employees 548 (including 25 SIG s) $95 billion 2.3 million (1 in 8 in state) Source: Office of Self-Insurance Plans 6

7 Number of defaults Default History Number of Defaults Fiscal year data as of 1/31/18 (example: 2015 = 2015/16 ASP plan year) 7

8 Default History (cont d) Defaults generally in line with economic cycles Gross Outstanding w/ibnr SISF Payments Security Deposit SISF Payments are from date of Default to 12/31/17 (net of recoveries) 8

9 Estates and Workers Compensation Claims D Estates Total (1968 to date) Active (1984 to present) Claims Open 957 1, (as of 1/31) Claim Liability (net) Paid ( ) $386,302,296 $373,745,000 $12,557,296 Open Case Reserves (EFL) $45,111,000 $58,998,000 -$13,887,000 IBNR + ULAE (actuarial estimate as of 12/31) $39,432,000 $57,559,000 -$18,127,000 $470,845,296 $490,302,000 -$19,456,704 OSIP Deposits turned over to Fund $251,051,000 $251,051,000 $0 SISF total net assets (as of 12/31) $428,668,257 $342,772,345 $85,895,912 Projected annual costs - claims (net of excess) - claims admin - Total $10,500,000 $18,000,000 -$7,500,000 $2,500,000 $3,570,000 -$1,070,000 $13,000,000 $21,570,000 -$8,570,000 9

10 Investment returns IN $ DOLLARS 50,000,000 45,000,000 44,101,825 INVESTMENT RETURNS 40,000,000 35,000, % 30,000,000 27,616,614 25,000,000 20,000,000 15,000,000 23,388, % 6.7% 10,000,000 5,000,000-9,097,129 4,788,132 6,195, % 2.2% 1.6% FISCAL YEAR Last six fiscal years

11 Total Spending and investment returns IN $ DOLLARS 80,000,000 75,951,003 INVESTMENT RETURNS 70,000,000 66,727,186 65,252,991 66,848,910 TOTAL SPENDING (CLAIMS & ULAE PAID, G&A, HEDGING) 60,000,000 50,000,000 47,782,378 40,000,000 44,101,825 34,955,421 30,000,000 20,000,000 23,388,361 27,616,614 10,000,000-9,097,129 6,195,831 4,788, FISCAL YEAR Last six fiscal years

12 # OF OPEN CLAIMS Open claims count as of 12/31/2017 FISCAL YEAR Last six fiscal years

13 CLAIMS PAID IN $ Claims Paid 50,000,000 45,000,000 40,000,000 35,000,000 45,742,759 40,571,357 30,000,000 25,000,000 25,579,224 20,000,000 18,742,888 15,000,000 10,000,000 13,062,367 5,000, (PROJECTED) FISCAL YEAR Last six fiscal years, gross of excess

14 TOTAL CLAIMS AND ULAE EXPENSE IN $ Total Claims and ULAE Expense 60,000,000 52,635,400 50,000,000 46,983,511 40,000,000 30,000,000 33,069,386 29,525,322 22,182,860 20,000,000 10,000,000 15,528, (PROJECTED) FISCAL YEAR Last six fiscal years

15 RESERVE IN $ Estimated Future Liabilities for Claims and ULAE 400,000, ,000, ,353, ,000, ,000, ,000, ,140, ,940, ,758, ,020, ,000, ,000, ,779,970 50,000, FISCAL YEAR Last six fiscal years

16 Members by Status Active Revoked YTD Active Revoked Total Last six fiscal years

17 % Net Assets / Gross Assets (ASP Inception) 80% 75% 72% 73% 70% 66% 60% 55% 53% 59% 50% 47% 49% 43% 40% 32% 30% 20% 24% 10% 16% 0% -10% % CAP MSB HISIP FISCAL YEAR

18 Simplified Admission Requirements Expedited OSIP and SISF decision-making on entry into self-insurance Credit-based underwriting for new admission Credit-based, expedited decision-making for entry into ASP (no waiting period) 18

19 ASP Overview Successful implementation of 2017/18 Alternative Security Program 5 th year post SB863 ASP and Composite Deposit decreased slightly (-2.41%) and (-2.02%) Financial strength of Fund at highest level since inception¹ net $429 mill gross $550 mill Overall portfolio credit rating stable Baa1 Assessment decreased 15.0% ($36.6mm vs. $43.1mm) from the prior year ¹ SISF Monthly Financials 12/31/17 unaudited 19

20 ASP 2017/18 vs. 2003/ % ASP² 8, , , % Assets¹ Gross % Net (55.00) Assessments² $ (32.80) -45% ¹ SISF Monthly Financial 12/31/17 unaudited ² ASP liabilities and idealized assessment as of 7/1/17 20

21 New Self-Insurers

22 ASP Industry Distribution Industry exposure is relatively unchanged across all groups 2017/ % Medical Services 1.4% 1.5% 1.8% 1.3% 2.5% 1.4% 1.8% 2.8% 2.5% 3.0% 3.1% 3.2% 12.0% 2016/ % 32.4% Utilities Consumer Durables Retl / Whsl Food & Beverae Retl / Whsl Consumer Products Retl / Whsl Air Transportation Telephone Business Services 3.9% 3.7% 4.2% 3.5% 3.9% 4.1% 5.0% 11.0% Hotels & Restaurants Food & Beverage Broadcast Media Oil Refining Educational Services 4.8% 7.7% 7.8% 11.0% Aerospace & Defense Others < 1.3% 7.1% 7.9% Source: Moody s Analytics Industry Groups, SEC, Company financial statements 22

23 ASP Assessment Components The total assessment comprised of two elements ELP (Excess Liability Protection) fee DLF (Default Loss Fund) fee ELP - covers risk transfer expenses and partial admin costs - builds capital, covers partial admin costs, and pays current claims DLF Risk transfer Capital Placement Claims General administrative General administrative 23

24 Rate - basis points ASP Assessment Rates Considering the capital needs of the Fund and the current credit environment, assessment rates decreased for most levels Index Rating 2017/ /17 % Δ 1 Aaa / AAA % 2 Aa1 / AA % 3 Aa2 / AA % 4 Aa3 / AA % / / /2004 Assessment rates 5 A1 / A % 6 A2 / A % A3 / A % 8 Baa1 / BBB % Baa2 / BBB % 10 Baa3 / BBB % Ba1 / BB % 12 Ba2 / BB % Ba3 / BB % 14 B1 / B % 15 B2 / B % 16 B3 / B % Credit Index 24

25 Bps ASP Assessment vs. Surety Rates A comparison between surety and 2017/18 ASP assessment rates ASP vs. Surety Rates ASP¹ Surety ² Credit Levels I Investment Grade I Non-Investment Grade I ¹ Assessment rates 2017/18 ² JLT Specialty general market indications of available terms

26 ($ millions) ASP Financial Strength (Investments) Both gross and net assets continue to grow Net Gross (50) ¹ ¹ SISF Monthly Financials 12/31/17 unaudited Source: Audited SISF Financial Statements Jun

27 $ Millions $ Millions ASP Financial Strength Claim reserves and claim costs continue to decline Claims & Admin paid (LHS)² Investment Income (LHS) Gross Assets (RHS) Claim reserves, incl. IBNR (RHS) (0.3) (12.0) ¹ -200 ¹ SISF Monthly Financials 12/31/17 unaudited ² Per Claims & Admin YTD + full year projected (net of excess) Source: Audited SISF Financial Statements Jun

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