Elizabeth Long, ACAS, FCA, MAAA 9 Forrest Blend …...9 Forrest Blend Drive . Titusville, NJ 08560 ....

Elizabeth Long, ACAS, FCA, MAAAConsulting Actuary9 Forrest Blend DriveTitusville, NJ 08560P:609.737.2102 F:[email protected]

9 Forrest Blend Drive . Titusville, NJ 08560 . 609.737.2102 . 609.737.2741 [email protected] . www.bynac.com

July 11, 2013 Mr. Steven B. Gidwitz Chief Operating Officer NCAComp, Inc. 14 Lafayette Square, Suite 700 Buffalo, NY 14203 Dear Mr. Gidwitz: Enclosed are two bound copies of the actuarial report prepared for Long Term Care Risk Management Group (LTCRMG) at your request. This report estimates the required reserves as of 12/31/12 for claims incurred prior to that date. The estimates contained in this report are based on data provided by NCAComp, Inc (NCAComp). These data and the associated assumptions should be reviewed for their consistency with the internal records of LTCRMG. Any discrepancy in the completeness, interpretation, or accuracy of the information used may require a revision to this report. If you have any questions, please call or write. It is a pleasure to be of service to NCAComp. Sincerely,

Elizabeth Long, ACAS, FCA, MAAA Consulting Actuary

Lisa Dennison, FCAS, FCA, MAAA President and Consulting Actuary

enclosure

LONG TERM CARE RISK MANAGEMENT GROUP

ACTUARIAL REPORT

TABLE OF CONTENTS

PURPOSE ........................................................................................................................... 1

FINDINGS .......................................................................................................................... 3

ESTIMATED REQUIRED RESERVES ........................................................................ 3 COMPARISON TO PRIOR REPORT ........................................................................... 4

ASSUMPTIONS ................................................................................................................. 7

DEFINITIONS ................................................................................................................ 7 HISTORICAL INFORMATION .................................................................................... 7 RETENTIONS ................................................................................................................ 8

RESERVE ANALYSIS ...................................................................................................... 9

OVERVIEW ................................................................................................................... 9 INCURRED LOSS DEVELOPMENT ......................................................................... 10 PAID LOSS DEVELOPMENT .................................................................................... 14 INCURRED BORNHUETTER-FERGUSON .............................................................. 14 PAID BORNHUETTER-FERGUSON ......................................................................... 19 SELECTED ESTIMATED ULTIMATE INCURRED LOSSES ................................. 19 ESTIMATED REQUIRED RESERVES ...................................................................... 19 ESTIMATED PAYOUT SCHEDULE ......................................................................... 25

HISTORICAL PROFITABILITY ANALYSIS ............................................................... 28

QUALIFICATIONS AND LIMITATIONS ..................................................................... 34

CONSULTATION ............................................................................................................ 36

APPENDICES

INCURRED LOSSES $250,000 AND GREATER .......................................................... 37

SUPPORT EXHIBITS ...................................................................................................... 40

ESTIMATED UNLIMITED AND ALAE RESERVES................................................... 43

ESTIMATED REQUIRED RESERVES AS OF 12/31/12 - HIGH ................................. 48

COMPARISON TO PRIOR REPORTS ........................................................................... 55

1


ACTUARIAL REPORT

PURPOSE

By the Numbers Actuarial Consulting, Inc. (BYNAC) prepared this actuarial report to present a

professional analysis of the required reserves retained by Long Term Care Risk Management

Group (LTCRMG) as of 12/31/12 for claims incurred from 10/1/92 through 12/31/09.

LTCRMG is a self-insurance group trust established in 1992 to provide workers compensation

insurance for employees of long-term care organizations in the state of New York. The trust

ceased writing business on 12/31/09. The required reserves are estimated excluding the effects

of anticipated investment income earned on the reserves until they are paid.

The required reserves estimated in this report represent the unpaid claim estimate. The unpaid

claim estimate is an estimate of the obligation for future payment from claims due to past events.

The estimated required reserves are based on estimates of ultimate incurred losses. Ultimate

incurred losses are defined to be the amounts that will be paid to settle all claims occurring

during a policy period. These estimates include a provision for the subsequent development of

known claims and for claims incurred but not yet reported. Incurred but not reported (IBNR)

losses are defined throughout this report to include the additional development on known claims

in addition to claims incurred but not yet reported.

The estimated required reserves at the expected level represent the actuarial central estimate.

The actuarial central estimate is an expected value over the range of reasonably possible

2

outcomes. The range around the actuarial central estimate which reflects the low and high

expected values is noted in the report.

The information contained in this report has been prepared by Liz Long, ACAS, FCA, MAAA,

in accordance with applicable Actuarial Standards of Practice as promulgated by the Actuarial

Standards Board. Ms. Long meets the Qualification Standards of the American Academy of

Actuaries.

3

FINDINGS

The findings are the product of loss experience, actuarial assumptions, quantitative analysis, and

professional judgment. The estimated required reserves are expressed in terms of ranges that

indicate the reliance on assumptions believed to be reasonable and are subject to all the

limitations expressed herein.

ESTIMATED REQUIRED RESERVES

The required reserves shown in the following table should be used for financial statement

reporting as of that date. These estimates reflect the terms of the specific excess insurance

purchased for the policy periods reviewed. However, until all the claims that occurred on or

before 12/31/09 are closed, the actual reserve need remains an estimate. While the experience of

LTCRMG indicates that the required reserves will fall within the range established in this report,

the possibility exists that extraordinary or unexpected circumstances could cause the actual

reserve need to be less than or greater than the range. Therefore, the findings cannot be

warranted or guaranteed.

ESTIMATED UNDISCOUNTED RESERVESINCLUDING IBNR FOR 10/1/92-12/31/09 AS OF 12/31/12

(Losses Including ALAE Limited to Specific and Aggregate Retentions)

Low Expected High

Loss and ALAE $14,700,000 $16,170,000 $17,890,000

The low and high figures are judgmental and not intended to establish absolute minimums or

maximums on the estimates, but rather to depict a reasonable range for the establishment of loss

4

reserves in this particular situation. Figure 1 contains a graphical representation of the estimated

retained loss experience as of 12/31/12 including the undiscounted expected loss reserves for

LTCRMG.

COMPARISON TO PRIOR REPORT

The ultimate incurred losses estimated in this report are compared to the 5/11/12 actuarial report

in the following table and Figure 2. As shown, the estimates increased $541,847 or 0.8% from

12/31/11 to 12/31/12. The increases in the 1/1-12/31/06 through 1/1-12/31/09 policy periods is

mostly due to large loss activity. See Appendix A for details on specific claims.

COMPARISON OF ESTIMATED ULTIMATE INCURREDLOSSES TO PRIOR REPORT


Current 5/11/12Policy Report Report PercentPeriod (Table 7) (Table 7) Change Change

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 0 0.0%1/1-12/31/93 1,377,939 1,386,460 ( 8,521) ( 0.6%)1/1-12/31/94 2,762,705 2,761,369 1,336 0.0%1/1-12/31/95 3,107,732 3,002,961 104,771 3.5%1/1-12/31/96 2,546,319 2,530,814 15,505 0.6%1/1-12/31/97 3,413,001 3,402,702 10,299 0.3%1/1-12/31/98 2,998,746 3,018,054 ( 19,308) ( 0.6%)1/1-12/31/99 2,492,691 2,512,014 ( 19,323) ( 0.8%)1/1-12/31/00 4,043,356 4,038,311 5,045 0.1%1/1-12/31/01 4,670,273 4,689,363 ( 19,090) ( 0.4%)1/1-12/31/02 4,414,760 4,480,855 ( 66,095) ( 1.5%)1/1-12/31/03 6,205,899 6,270,211 ( 64,312) ( 1.0%)1/1-12/31/04 4,854,443 5,002,052 ( 147,609) ( 3.0%)1/1-12/31/05 6,260,156 6,477,964 ( 217,808) ( 3.4%)1/1-12/31/06 4,952,812 4,585,663 367,149 8.0%1/1-12/31/07 3,767,174 3,595,952 171,222 4.8%1/1-12/31/08 3,330,896 3,082,031 248,865 8.1%1/1-12/31/09 3,552,746 3,373,025 179,721 5.3%

Period $64,942,546 $64,400,699 $541,847 0.8%

5

Figure 1


WORKERS COMPENSATION

ESTIMATED ULTIMATE INCURRED LOSSES AS OF 12/31/12(Losses Including ALAE Limited to Specific and Aggregate Retentions)

0.2

1.4

2.8

3.1

2.5

3.4

3.0

2.5

4.0

4.7

4.4

6.2

4.9

6.3

5.0

3.8

3.33.6

1.0

2.0

3.0

4.0

5.0

6.0

7.0

$ M

illio

ns

Policy Period

Paid Case IBNR

6

Figure 2



COMPARISON TO PRIOR ACTUARIAL REPORTS(Losses Including ALAE Limited to Specific and Aggregate Retentions)

0.2

1.4

2.8

3.1

2.5

3.4

3.0

2.5

4.0

4.7

4.4

6.2

4.9

6.3

5.0

3.8

3.3 3.

6

0.2

1.4

2.8 3.

0

2.5

3.4

3.0

2.5

4.0

4.7

4.5

6.3

5.0

6.5

4.6

3.6

3.1

3.4

1.0

2.0

3.0

4.0

5.0

6.0

7.0

$ M

illio

ns

Policy Period

Current Paid Current Case Current IBNRPrior Paid Prior Case Prior IBNR

7

ASSUMPTIONS

DEFINITIONS

Losses in this report include ALAE. ALAE are those expenses that can be directly attributed to a

specific claim, such as litigation costs. Loss adjustment expenses that cannot be directly

associated with an individual claim are known as ULAE. Reserves for unearned premiums,

unpaid administrative expenses, contingencies, catastrophes, or future premium deficiencies are

not included in the estimates.

HISTORICAL INFORMATION

For the periods under review, LTCRMG has assumed its members’ losses according to the New

York workers compensation statutes. LTCRMG’s unique development patterns are used in

conjunction with industry experience to estimate the ultimate losses expected to be incurred by

LTCRMG for the periods analyzed in this report. The industry data includes experience of other

New York self-insured workers compensation groups and information published by the National

Council on Compensation Insurance, Inc. (NCCI) in the 2012 edition of the Annual Statistical

Bulletin. This methodology assumes that the historical and industry development patterns are

indicative of the future development expected for the periods considered.

All data are based on information provided by NCAComp, Inc (NCAComp). The unpaid claim

estimate as of 12/31/12 is based on data evaluated as of 12/31/12 and additional information

provided through 5/21/13. These data were reviewed for reasonableness and used without audit.

It is assumed that all data provided is complete and accurate.

8

First Niagara Risk Management handled the claims for LTCRMG until 12/31/09. As of 1/1/10,

FCS Administrators, Inc. took over the claims handling. Effective 4/14/11, NCAComp became

the claims administrator.

RETENTIONS

LTCRMG’s specific and aggregate retentions are summarized in the following table. As of

12/31/12, there are numerous claims reported in excess of the specific retention. The aggregate

retentions are expected to be exceeded in the 1/1-12/31/03 and 1/1-12/31/05 periods.

EXCESS INSURANCE SUMMARY

Policy Specific Aggregate AggregatePeriod Retention Retention Limit

10/1/92-12/31/92 $ 500,0001/1-12/31/93 500,0001/1-12/31/94 500,0001/1-12/31/95 500,0001/1-12/31/96 500,0001/1-12/31/97 500,0001/1-12/31/98 300,0001/1-12/31/99 300,0001/1-12/31/00 300,000 $4,721,901 $1,000,0001/1-12/31/01 300,000 5,132,689 1,000,0001/1-12/31/02 300,000 5,855,870 1,000,0001/1-12/31/03 300,000 6,205,899 1,000,0001/1-12/31/04 400,000 5,605,343 1,000,0001/1-12/31/05 400,000 6,260,156 1,000,0001/1-12/31/06 400,000 6,192,337 1,000,0001/1-12/31/07 400,000 6,088,601 1,000,0001/1-12/31/08 400,000 5,795,034 1,000,0001/1-12/31/09 400,000 4,488,193 1,000,000

The retentions are a critical part of this analysis. It is assumed that the excess insurance will be

collectible on all claims that ultimately develop beyond the retentions. An analysis of the

collectibility of the excess insurance is beyond the scope of this report.

9

RESERVE ANALYSIS

OVERVIEW

To estimate the required reserves, it is first necessary to estimate the ultimate value of the prior

periods based on the current evaluation of loss after limiting the losses to the appropriate

retention. Required reserves are estimated as the difference between the ultimate incurred and

paid losses.

Four procedures are used to estimate the ultimate incurred losses to provide a check for

reasonableness and consistency. Following is a brief description of each method and the

circumstances under which each works best.

Incurred loss development is the most widely used method of estimating ultimate incurred losses.

By using the reserves on a claim-by-claim basis, the most recent claims adjusters’ estimates are

included in the analysis in addition to the cumulative paid losses. Inherent in the incurred loss

development technique is the assumption that there are no changes in reserving practices.

A paid loss approach attempts to eliminate distortions that can occur in incurred methods when

there is a suspected change in reserving procedures. Inherent in paid loss development

techniques is the assumption that there are no changes in claims settlement practices.

The incurred Bornhuetter-Ferguson technique estimates ultimate incurred losses based on the

expected losses and reporting pattern of incurred losses. This method is dependent on the

10

accuracy of these two parameters in addition to the considerations discussed for the incurred

method.

The last method, the paid Bornhuetter-Ferguson approach, estimates ultimate incurred losses

based on the expected losses and payment pattern. Similar to the incurred Bornhuetter-Ferguson

method, this approach is dependent on the accuracy of these two parameters in addition to the

considerations for the paid method.

INCURRED LOSS DEVELOPMENT

The ultimate cost of claims incurred for a specific time period is usually not known until several

years after the close of that period. Loss development factors project the additional cost

expected on claims. These factors quantify the late developing aspects of certain losses, such as

claims involving medical complications not recognized in the early stages of treatment or verdict

values for litigated claims that are different than the amount previously reserved to pay the

claims. They also account for losses that occurred during the policy period but are not reported

until a later date.

The calculation and selection of development factors to be applied to incurred losses are shown

in Table 1, beginning with LTCRMG’s losses including ALAE limited to the specific retentions

as of different evaluation dates. For example, Section A of the table shows losses incurred

during the 1/1-12/31/09 period evaluated as of 12, 24, 36, and 48 months after the inception of

that period. In general, the value of incurred losses increases from one evaluation to the next as a

result of IBNR.

11

Table 1



INCURRED LOSS DEVELOPMENT FACTORS(Losses Including ALAE Limited to Specific Retentions)

A. INCURRED LOSSES

Age of Policy PeriodPolicy 12 24 36 48 60 72 84 96 108 120Period Months Months Months Months Months Months Months Months Months Months

10/1/92-12/31/92 200,000 201,000 238,000 239,000 243,000 201,000 227,0001/1-12/31/93 1,307,000 1,574,000 1,734,000 1,685,000 1,614,000 1,575,000 1,570,000 1,511,0001/1-12/31/94 1,520,000 1,819,000 2,535,000 2,889,000 2,720,000 2,605,000 2,762,000 2,724,000 2,511,0001/1-12/31/95 1,472,000 1,727,000 2,170,000 2,679,000 2,850,000 2,852,000 2,727,000 2,839,000 2,855,000 2,813,0001/1-12/31/96 835,000 1,451,000 2,162,000 2,100,000 2,280,000 2,212,000 2,171,000 2,271,000 2,266,000 2,378,0001/1-12/31/97 987,000 1,777,000 2,088,000 2,079,000 2,317,000 2,537,000 2,639,000 2,777,000 2,899,000 2,865,0001/1-12/31/98 991,000 2,039,000 1,944,000 1,926,000 1,962,000 1,985,000 2,265,000 2,367,000 2,400,000 2,491,0001/1-12/31/99 1,239,000 1,583,000 1,444,000 1,527,000 1,603,000 1,719,000 2,031,000 2,131,000 2,155,000 2,317,0001/1-12/31/00 1,223,000 1,898,000 2,805,000 3,194,000 3,509,000 3,584,000 3,724,000 3,918,000 3,981,000 4,086,0181/1-12/31/01 1,030,000 1,794,000 2,152,000 2,680,000 3,012,000 3,235,000 3,400,000 3,708,000 3,804,373 4,271,5831/1-12/31/02 1,356,000 2,023,000 2,544,000 2,887,000 3,210,000 3,280,000 3,395,000 3,764,942 3,803,939 4,134,1311/1-12/31/03 1,269,000 2,132,000 2,894,000 3,319,000 3,695,000 4,011,000 4,656,971 4,940,498 5,931,712 5,696,751

1/1-12/31/04 1,226,000 2,249,000 2,487,000 2,832,000 3,237,000 3,531,225 3,944,608 4,444,534 4,230,0351/1-12/31/05 1,205,000 1,795,000 2,111,000 2,566,000 3,351,494 3,802,425 5,834,451 6,002,8411/1-12/31/06 959,000 1,651,000 2,197,000 2,821,966 2,898,865 3,827,686 4,409,6391/1-12/31/07 777,000 1,439,000 1,980,991 2,353,193 3,022,354 3,235,7111/1-12/31/08 1,089,000 1,532,225 1,717,479 2,327,595 2,756,0411/1-12/31/09 651,706 1,403,238 2,618,007 2,937,480

B. AGE-TO-AGE FACTORS

Policy 12 to 24 24 to 36 36 to 48 48 to 60 60 to 72 72 to 84 84 to 96 96 to 108 108 to 120 120 toPeriod Months Months Months Months Months Months Months Months Months Ultimate

10/1/92-12/31/92 1.005 1.184 1.004 1.017 0.827 1.1291/1-12/31/93 1.204 1.102 0.972 0.958 0.976 0.997 0.9621/1-12/31/94 1.197 1.394 1.140 0.942 0.958 1.060 0.986 0.9221/1-12/31/95 1.173 1.257 1.235 1.064 1.001 0.956 1.041 1.006 0.9851/1-12/31/96 1.738 1.490 0.971 1.086 0.970 0.981 1.046 0.998 1.0491/1-12/31/97 1.800 1.175 0.996 1.114 1.095 1.040 1.052 1.044 0.9881/1-12/31/98 2.058 0.953 0.991 1.019 1.012 1.141 1.045 1.014 1.0381/1-12/31/99 1.278 0.912 1.057 1.050 1.072 1.182 1.049 1.011 1.0751/1-12/31/00 1.552 1.478 1.139 1.099 1.021 1.039 1.052 1.016 1.0261/1-12/31/01 1.742 1.200 1.245 1.124 1.074 1.051 1.091 1.026 1.1231/1-12/31/02 1.492 1.258 1.135 1.112 1.022 1.035 1.109 1.010 1.0871/1-12/31/03 1.680 1.357 1.147 1.113 1.086 1.161 1.061 1.201 0.9601/1-12/31/04 1.834 1.106 1.139 1.143 1.091 1.117 1.127 0.9521/1-12/31/05 1.490 1.176 1.216 1.306 1.135 1.534 1.0291/1-12/31/06 1.722 1.331 1.284 1.027 1.320 1.1521/1-12/31/07 1.852 1.377 1.188 1.284 1.0711/1-12/31/08 1.407 1.121 1.355 1.1841/1-12/31/09 2.153 1.866 1.122

Average 1.665 1.266 1.166 1.116 1.067 1.087 1.054 1.007 1.029Wtd Avg 1.624 1.254 1.162 1.124 1.064 1.108 1.061 1.029 1.0213 Yr Avg 1.804 1.455 1.222 1.165 1.175 1.268 1.072 1.054 1.0575 Yr Mid Avg 1.688 1.295 1.229 1.204 1.104 1.143 1.087 1.017 1.063NY NCCI 1.596 1.260 1.131 1.077 1.056 1.047 1.037 1.047 1.039 1.131NY Groups 1.540 1.220 1.120 1.070 1.045 1.040 1.035 1.030 1.025 1.050Prior 1.070 1.045 1.040 1.035 1.030 1.025 1.050Selected 1.070 1.045 1.040 1.035 1.030 1.025 1.050

C. INCURRED LOSS DEVELOPMENT FACTORS

48 to 60 to 72 to 84 to 96 to 108 to 120 toUltimate Ultimate Ultimate Ultimate Ultimate Ultimate Ultimate

1.334 1.247 1.193 1.147 1.108 1.076 1.050

12

Section B displays age-to-age factors, the rates by which losses develop from year to year. For

example, the 12 to 24 age-to-age factor for the 1/1-12/31/09 period is 2.153. This is the 24

month incurred amount of $1,403,238 divided by the 12 month incurred amount of $651,706.

The age-to-age factor of 2.153 means that losses incurred during the 1/1-12/31/09 period

increased by 115.3% during the 12 to 24 month interval. A loss development factor less than

1.000 indicates that the value of incurred losses declined, possibly due to claims settling for

amounts less than previously reserved.

Averages of the age-to-age factors are shown at the bottom of Section B. The average is the

mean of all the age-to-age factors. The weighted average weights the factors for individual years

by the magnitude of losses for that given year, giving more weight to periods with higher losses.

The weighted average is the sum of the losses from one age divided by the sum of the losses

from the previous age for corresponding periods. The three-year average is the average of the

three most recent factors. The five-year mid average is the average of the five most recent

factors excluding the high and low values. The NY NCCI factor is the factor for New York

published by the NCCI. The NY Groups factor is based on experience of other New York

workers compensation self-insured groups. The prior factor is from the 5/11/12 actuarial report.

The averages are evaluated, and the factors selected as most representative of LTCRMG’s

expected loss development are shown. The historical and expected loss development patterns are

graphically illustrated in Figure 3 by thick and thin lines, respectively.

13

Figure 3



HISTORICAL AND EXPECTED DEVELOPMENT OF INCURRED LOSSES(Losses Including ALAE Limited to Specific Retentions)

* Additional development of 5.0% expected after 120 months.

1/1-12/31/02

1/1-12/31/03

1/1-12/31/04

1/1-12/31/05

1/1-12/31/06

1/1-12/31/07

1/1-12/31/08

1/1-12/31/09

1.0

2.0

3.0

4.0

5.0

6.0

7.0

12 24 36 48 60 72 84 96 108 120*

$ M

illio

ns

Age of Policy Period in Months

14

Computation of the loss development factors in Section C is based on the selected age-to-age

factors. For instance, the 48 to ultimate factor is calculated by multiplying the 48 to 60 month

age-to-age factor by the 60 to ultimate loss development factor (1.334 = 1.070 x 1.247).

In Section A of Table 2, incurred losses are limited to the specific retentions. As shown,

numerous claims are currently reported excess of the retention. Ultimate incurred losses are

estimated in Section B by multiplying the limited incurred losses by the loss development

factors. For example, limited incurred losses for the 1/1-12/31/06 period evaluated at $4,409,639

on 12/31/12 are estimated to ultimately cost $5,057,856 ($4,409,639 x 1.147). The loss

development factor of 1.147 means that the losses are expected to ultimately cost 14.7% more

than incurred losses evaluated on 12/31/12.

PAID LOSS DEVELOPMENT

The paid loss procedure employs an analysis similar to the previous method, but based on paid

loss data. This estimation technique is not influenced by changes in the loss reserve estimates of

the adjusters. However, larger development factors are required at a given age than the incurred

method. This analysis is shown in Table 3, Figure 4, and Table 4.

INCURRED BORNHUETTER-FERGUSON

The incurred Bornhuetter-Ferguson method for developing an estimate of ultimate incurred

losses requires two parameters, the expected losses and reporting pattern. The accuracy of this

method depends on these parameters.

15

Table 2



ESTIMATED ULTIMATE INCURRED LOSSESINCURRED LOSS DEVELOPMENT

A. LOSSES LIMITED TO SPECIFIC RETENTION

Unlimited Number of LimitedIncurred Claims in Incurred in Incurred

Policy Losses as Specific Excess of Excess of Losses as

Period of 12/31/12 Retention Retention Retention of 12/31/12

10/1/92-12/31/92 $ 190,898 $ 500,000 0 $ 0 $ 190,8981/1-12/31/93 1,377,939 500,000 0 0 1,377,9391/1-12/31/94 2,762,705 500,000 0 0 2,762,7051/1-12/31/95 3,107,732 500,000 0 0 3,107,7321/1-12/31/96 2,546,319 500,000 0 0 2,546,3191/1-12/31/97 3,468,880 500,000 1 55,879 3,413,0011/1-12/31/98 3,636,664 300,000 2 732,022 2,904,6421/1-12/31/99 2,948,516 300,000 2 471,088 2,477,4281/1-12/31/00 4,237,520 300,000 1 502,758 3,734,7621/1-12/31/01 6,941,348 300,000 4 2,542,328 4,399,0201/1-12/31/02 4,483,728 300,000 1 382,303 4,101,425

1/1-12/31/03 10,317,684 300,000 6 4,620,933 5,696,7511/1-12/31/04 5,116,698 400,000 2 886,663 4,230,0351/1-12/31/05 8,051,555 400,000 7 2,048,714 6,002,8411/1-12/31/06 4,409,639 400,000 0 0 4,409,6391/1-12/31/07 3,275,050 400,000 1 39,339 3,235,7111/1-12/31/08 2,883,408 400,000 1 127,367 2,756,0411/1-12/31/09 2,969,201 400,000 1 31,721 2,937,480

Total $72,725,484 29 $12,441,115 $60,284,369

B. ESTIMATED ULTIMATE INCURRED LOSSES

Limited Age of Incurred EstimatedIncurred Policy Loss Ultimate

Policy Losses as Period in Development IncurredPeriod of 12/31/12 Months Factor Losses^

10/1/92-12/31/92 $ 190,898 247.5 1.000 $ 190,8981/1-12/31/93 1,377,939 240.0 1.000 1,377,9391/1-12/31/94 2,762,705 228.0 1.000 2,762,7051/1-12/31/95 3,107,732 216.0 1.000 3,107,7321/1-12/31/96 2,546,319 204.0 1.000 2,546,3191/1-12/31/97 3,413,001 192.0 1.000 3,413,0011/1-12/31/98 2,904,642 180.0 1.000 2,904,6421/1-12/31/99 2,477,428 168.0 1.007 2,490,5701/1-12/31/00 3,734,762 156.0 1.015 3,786,2831/1-12/31/01 4,399,020 144.0 1.025 4,478,9961/1-12/31/02 4,101,425 132.0 1.036 4,238,2761/1-12/31/03 5,696,751 120.0 1.050 5,891,5891/1-12/31/04 4,230,035 108.0 1.076 4,490,7181/1-12/31/05 6,002,841 96.0 1.108 6,348,7481/1-12/31/06 4,409,639 84.0 1.147 5,057,8561/1-12/31/07 3,235,711 72.0 1.193 3,783,0031/1-12/31/08 2,756,041 60.0 1.247 3,337,9831/1-12/31/09 2,937,480 48.0 1.334 3,784,998

Total $60,284,369 $63,992,256`

^ Limited losses are not developed above the retention.

16

Table 3



PAID LOSS DEVELOPMENT FACTORS(Losses Including ALAE Limited to Specific Retentions)

A. PAID LOSSES


10/1/92-12/31/92 156,000 171,000 186,000 191,000 196,000 199,000 219,0001/1-12/31/93 986,000 1,172,000 1,335,000 1,405,000 1,454,000 1,446,000 1,481,000 1,481,0001/1-12/31/94 1,081,000 1,498,000 1,772,000 2,032,000 2,177,000 2,291,000 2,512,000 2,513,000 2,250,0001/1-12/31/95 602,000 1,093,000 1,454,000 1,703,000 1,943,000 2,194,000 2,346,000 2,556,000 2,512,000 2,605,0001/1-12/31/96 348,000 871,000 1,221,000 1,444,000 1,635,000 1,755,000 1,854,000 1,966,000 2,031,000 2,069,0001/1-12/31/97 372,000 989,000 1,300,000 1,600,000 1,860,000 2,082,000 2,216,000 2,338,000 2,461,000 2,631,0001/1-12/31/98 417,000 903,000 1,228,000 1,460,000 1,623,000 1,717,000 1,903,000 2,054,000 2,139,000 2,249,0001/1-12/31/99 467,000 923,000 1,160,000 1,341,000 1,418,000 1,549,000 1,755,000 1,922,000 1,961,000 1,983,0001/1-12/31/00 486,000 1,399,000 2,173,000 2,659,000 3,085,000 3,320,000 3,472,000 3,636,000 3,844,000 3,948,2431/1-12/31/01 412,000 1,204,000 1,733,000 2,147,000 2,475,000 2,889,000 3,165,000 3,302,000 3,549,277 3,803,8721/1-12/31/02 623,000 1,404,000 2,020,000 2,408,000 2,723,000 2,958,000 3,164,000 3,406,375 3,520,736 3,502,8101/1-12/31/03 637,000 1,464,000 2,120,000 2,599,000 3,112,000 3,529,000 3,982,223 4,189,794 4,533,115 4,865,4071/1-12/31/04 609,000 1,394,000 1,970,000 2,350,000 2,873,000 3,187,641 3,534,618 3,655,115 3,728,6101/1-12/31/05 523,000 1,213,000 1,680,000 2,102,000 2,566,307 2,941,098 3,222,227 3,616,0571/1-12/31/06 499,000 1,135,000 1,574,000 2,209,720 2,481,364 2,834,433 3,214,9751/1-12/31/07 407,000 944,000 1,438,058 1,741,696 1,923,921 2,249,8201/1-12/31/08 395,000 945,454 1,315,641 1,505,946 1,801,1161/1-12/31/09 283,083 823,411 1,185,578 1,532,248

B. AGE-TO-AGE FACTORS

Policy 12 to 24 24 to 36 36 to 48 48 to 60 60 to 72 72 to 84 84 to 96 96 to 108 108 to 120 120 toPeriod Months Months Months Months Months Months Months Months Months Ultimate

10/1/92-12/31/92 1.096 1.088 1.027 1.026 1.015 1.1011/1-12/31/93 1.189 1.139 1.052 1.035 0.994 1.024 1.0001/1-12/31/94 1.386 1.183 1.147 1.071 1.052 1.096 1.000 0.8951/1-12/31/95 1.816 1.330 1.171 1.141 1.129 1.069 1.090 0.983 1.0371/1-12/31/96 2.503 1.402 1.183 1.132 1.073 1.056 1.060 1.033 1.0191/1-12/31/97 2.659 1.314 1.231 1.163 1.119 1.064 1.055 1.053 1.0691/1-12/31/98 2.165 1.360 1.189 1.112 1.058 1.108 1.079 1.041 1.0511/1-12/31/99 1.976 1.257 1.156 1.057 1.092 1.133 1.095 1.020 1.0111/1-12/31/00 2.879 1.553 1.224 1.160 1.076 1.046 1.047 1.057 1.0271/1-12/31/01 2.922 1.439 1.239 1.153 1.167 1.096 1.043 1.075 1.0721/1-12/31/02 2.254 1.439 1.192 1.131 1.086 1.070 1.077 1.034 0.9951/1-12/31/03 2.298 1.448 1.226 1.197 1.134 1.128 1.052 1.082 1.0731/1-12/31/04 2.289 1.413 1.193 1.223 1.110 1.109 1.034 1.0201/1-12/31/05 2.319 1.385 1.251 1.221 1.146 1.096 1.1221/1-12/31/06 2.275 1.387 1.404 1.123 1.142 1.1341/1-12/31/07 2.319 1.523 1.211 1.105 1.1691/1-12/31/08 2.394 1.392 1.145 1.1961/1-12/31/09 2.909 1.440 1.292

Average 2.398 1.404 1.216 1.147 1.107 1.082 1.062 1.034 1.029Wtd Avg 2.359 1.410 1.218 1.154 1.112 1.088 1.065 1.039 1.0283 Yr Avg 2.541 1.452 1.216 1.141 1.152 1.113 1.069 1.045 1.0475 Yr Mid Avg 2.344 1.406 1.251 1.180 1.141 1.111 1.057 1.055 1.037NY NCCI 2.548 1.488 1.247 1.151 1.105 1.075 1.056 1.068 1.058 1.353NY Groups 2.460 1.450 1.250 1.130 1.090 1.060 1.050 1.040 1.030 1.150Prior 1.150 1.110 1.090 1.050 1.040 1.030 1.335Selected 1.150 1.120 1.090 1.060 1.040 1.030 1.353

C. PAID LOSS DEVELOPMENT FACTORS

48 to 60 to 72 to 84 to 96 to 108 to 120 toUltimate Ultimate Ultimate Ultimate Ultimate Ultimate Ultimate

2.157 1.876 1.675 1.537 1.450 1.394 1.353

17

Figure 4



HISTORICAL AND EXPECTED DEVELOPMENT OF PAID LOSSES(Losses Including ALAE Limited to Specific Retentions)

* Additional development of 35.3% expected after 120 months.

1/1-12/31/02

1/1-12/31/03

1/1-12/31/041/1-12/31/05

1/1-12/31/06

1/1-12/31/07

1/1-12/31/081/1-12/31/09

1.0

2.0

3.0

4.0

5.0

6.0

12 24 36 48 60 72 84 96 108 120*

$ M

illio

ns

Age of Policy Period in Months

18

Table 4



ESTIMATED ULTIMATE INCURRED LOSSESPAID LOSS DEVELOPMENT

A. LOSSES LIMITED TO SPECIFIC RETENTION

Unlimited Number of LimitedPaid Claims in Paid in Paid

Policy Losses as Specific Excess of Excess of Losses asPeriod of 12/31/12 Retention Retention Retention of 12/31/12

10/1/92-12/31/92 $ 190,898 $ 500,000 0 $ 0 $ 190,8981/1-12/31/93 1,377,939 500,000 0 0 1,377,9391/1-12/31/94 2,515,343 500,000 0 0 2,515,3431/1-12/31/95 2,702,691 500,000 0 0 2,702,6911/1-12/31/96 2,260,736 500,000 0 0 2,260,7361/1-12/31/97 2,652,690 500,000 0 0 2,652,6901/1-12/31/98 2,826,699 300,000 2 57,206 2,769,4931/1-12/31/99 2,164,625 300,000 0 0 2,164,6251/1-12/31/00 3,791,681 300,000 1 163,519 3,628,1621/1-12/31/01 4,209,159 300,000 2 272,000 3,937,1591/1-12/31/02 3,593,284 300,000 1 28,934 3,564,3501/1-12/31/03 4,877,579 300,000 1 12,172 4,865,4071/1-12/31/04 3,728,610 400,000 0 0 3,728,6101/1-12/31/05 3,616,057 400,000 0 0 3,616,0571/1-12/31/06 3,214,975 400,000 0 0 3,214,9751/1-12/31/07 2,249,820 400,000 0 0 2,249,8201/1-12/31/08 1,801,116 400,000 0 0 1,801,1161/1-12/31/09 1,532,248 400,000 0 0 1,532,248

Total $49,306,150 7 $ 533,831 $48,772,319


Limited Age of EstimatedPaid Policy Paid Loss Ultimate

Policy Losses as Period in Development IncurredPeriod of 12/31/12 Months Factor Losses

10/1/92-12/31/92 $ 190,898 247.5 1.000 $ 190,8981/1-12/31/93 1,377,939 240.0 1.000 1,377,9391/1-12/31/94 2,515,343 228.0 1.019 2,563,1351/1-12/31/95 2,702,691 216.0 1.039 2,808,0961/1-12/31/96 2,260,736 204.0 1.062 2,400,9021/1-12/31/97 2,652,690 192.0 1.088 2,886,1271/1-12/31/98 2,769,493 180.0 1.118 3,096,2931/1-12/31/99 2,164,625 168.0 1.151 2,491,4831/1-12/31/00 3,628,162 156.0 1.190 4,317,5131/1-12/31/01 3,937,159 144.0 1.235 4,862,3911/1-12/31/02 3,564,350 132.0 1.289 4,594,4471/1-12/31/03 4,865,407 120.0 1.353 6,582,8961/1-12/31/04 3,728,610 108.0 1.394 5,197,6821/1-12/31/05 3,616,057 96.0 1.450 5,243,2831/1-12/31/06 3,214,975 84.0 1.537 4,941,4171/1-12/31/07 2,249,820 72.0 1.675 3,768,4491/1-12/31/08 1,801,116 60.0 1.876 3,378,8941/1-12/31/09 1,532,248 48.0 2.157 3,305,059

Total $48,772,319 $64,006,904

19

The incurred Bornhuetter-Ferguson method involves two calculation steps. In Section A of

Table 5, unreported losses are estimated by multiplying the expected losses by the expected

percent of unreported losses implied by the incurred loss development factor. Ultimate incurred

losses are estimated in Section B by adding the estimated unreported losses to the incurred losses

as of 12/31/12.

PAID BORNHUETTER-FERGUSON

The paid Bornhuetter-Ferguson method also uses two parameters to estimate ultimate incurred

losses. These parameters are the expected losses and payment pattern. In Section A of Table 6,

outstanding losses are estimated by multiplying the expected losses by the expected ratio of

outstanding losses implied by the paid loss development factor. Ultimate incurred losses are

estimated in Section B by adding paid losses and the estimate of outstanding losses.

SELECTED ESTIMATED ULTIMATE INCURRED LOSSES

The results of the methods are compared in Table 7, and the ultimate incurred losses are selected

for each period. An average is selected for each period unless otherwise noted. The

corresponding incurred method is substituted for the paid method in the average for periods

when the paid method is less than incurred losses. The selection procedure is depicted in Figure

5. The selected estimated ultimate incurred losses are then compared to the aggregate retention.

The aggregate retention is expected to be exceeded in the 1/1-12/31/03 and 1/1-12/31/05 periods.

ESTIMATED REQUIRED RESERVES

The required reserves are estimated in Table 8. The estimated ultimate incurred, incurred, and

paid losses retained by LTCRMG are summarized in Section A. In Section B, the case reserves

20

Table 5



ESTIMATED ULTIMATE INCURRED LOSSESINCURRED BORNHUETTER-FERGUSON

(Losses Including ALAE Limited to Specific Retentions)

A. ESTIMATED UNREPORTED LOSSES

IncurredLoss Expected Estimated

Policy Expected Development Ratio UnreportedPeriod Losses* Factor Unreported Losses

10/1/92-12/31/92 $ 190,898 1.000 0.000 $ 01/1-12/31/93 1,386,460 1.000 0.000 01/1-12/31/94 2,761,369 1.000 0.000 01/1-12/31/95 3,002,961 1.000 0.000 01/1-12/31/96 2,530,814 1.000 0.000 01/1-12/31/97 3,402,702 1.000 0.000 01/1-12/31/98 3,018,054 1.000 0.000 01/1-12/31/99 2,512,014 1.007 0.007 17,5841/1-12/31/00 4,038,311 1.015 0.015 60,5751/1-12/31/01 4,689,363 1.025 0.024 112,545

1/1-12/31/02 4,480,855 1.036 0.035 156,8301/1-12/31/03 6,270,211 1.050 0.048 300,9701/1-12/31/04 5,002,052 1.076 0.071 355,1461/1-12/31/05 6,477,964 1.108 0.097 628,3631/1-12/31/06 4,585,663 1.147 0.128 586,9651/1-12/31/07 3,595,952 1.193 0.162 582,5441/1-12/31/08 3,082,031 1.247 0.198 610,2421/1-12/31/09 3,373,025 1.334 0.250 843,256

Total $64,400,699 $4,255,020


EstimatedIncurred Estimated Ultimate

Policy Losses as Unreported IncurredPeriod of 12/31/12 Losses Losses

10/1/92-12/31/92 $ 190,898 $ 0 $ 190,8981/1-12/31/93 1,377,939 0 1,377,9391/1-12/31/94 2,762,705 0 2,762,7051/1-12/31/95 3,107,732 0 3,107,7321/1-12/31/96 2,546,319 0 2,546,3191/1-12/31/97 3,413,001 0 3,413,0011/1-12/31/98 2,904,642 0 2,904,6421/1-12/31/99 2,477,428 17,584 2,495,0121/1-12/31/00 3,734,762 60,575 3,795,3371/1-12/31/01 4,399,020 112,545 4,511,5651/1-12/31/02 4,101,425 156,830 4,258,2551/1-12/31/03 5,696,751 300,970 5,997,7211/1-12/31/04 4,230,035 355,146 4,585,1811/1-12/31/05 6,002,841 628,363 6,631,2041/1-12/31/06 4,409,639 586,965 4,996,6041/1-12/31/07 3,235,711 582,544 3,818,2551/1-12/31/08 2,756,041 610,242 3,366,2831/1-12/31/09 2,937,480 843,256 3,780,736

Total $60,284,369 $4,255,020 $64,539,389

* From Table 7 of the 5/11/12 actuarial report.

21

Table 6



ESTIMATED ULTIMATE INCURRED LOSSESPAID BORNHUETTER-FERGUSON

(Losses Including ALAE Limited to Specific Retentions)

A. ESTIMATED OUTSTANDING LOSSES

ExpectedPaid Loss Ratio Estimated

Policy Expected Development Amount OutstandingPeriod Losses Factor Outstanding Losses

10/1/92-12/31/92 $ 190,898 1.000 0.000 $ 01/1-12/31/93 1,386,460 1.000 0.000 01/1-12/31/94 2,761,369 1.019 0.019 52,4661/1-12/31/95 3,002,961 1.039 0.038 114,1131/1-12/31/96 2,530,814 1.062 0.058 146,7871/1-12/31/97 3,402,702 1.088 0.081 275,6191/1-12/31/98 3,018,054 1.118 0.106 319,9141/1-12/31/99 2,512,014 1.151 0.131 329,0741/1-12/31/00 4,038,311 1.190 0.160 646,1301/1-12/31/01 4,689,363 1.235 0.190 890,9791/1-12/31/02 4,480,855 1.289 0.224 1,003,7121/1-12/31/03 6,270,211 1.353 0.261 1,636,5251/1-12/31/04 5,002,052 1.394 0.283 1,415,5811/1-12/31/05 6,477,964 1.450 0.310 2,008,1691/1-12/31/06 4,585,663 1.537 0.349 1,600,3961/1-12/31/07 3,595,952 1.675 0.403 1,449,1691/1-12/31/08 3,082,031 1.876 0.467 1,439,3081/1-12/31/09 3,373,025 2.157 0.536 1,807,941

Total $64,400,699 $15,135,883


EstimatedPaid Estimated Ultimate

Policy Losses as Outstanding IncurredPeriod of 12/31/12 Losses Losses

10/1/92-12/31/92 $ 190,898 $ 0 $ 190,8981/1-12/31/93 1,377,939 0 1,377,9391/1-12/31/94 2,515,343 52,466 2,567,8091/1-12/31/95 2,702,691 114,113 2,816,8041/1-12/31/96 2,260,736 146,787 2,407,5231/1-12/31/97 2,652,690 275,619 2,928,3091/1-12/31/98 2,769,493 319,914 3,089,4071/1-12/31/99 2,164,625 329,074 2,493,6991/1-12/31/00 3,628,162 646,130 4,274,2921/1-12/31/01 3,937,159 890,979 4,828,1381/1-12/31/02 3,564,350 1,003,712 4,568,0621/1-12/31/03 4,865,407 1,636,525 6,501,9321/1-12/31/04 3,728,610 1,415,581 5,144,1911/1-12/31/05 3,616,057 2,008,169 5,624,2261/1-12/31/06 3,214,975 1,600,396 4,815,3711/1-12/31/07 2,249,820 1,449,169 3,698,9891/1-12/31/08 1,801,116 1,439,308 3,240,4241/1-12/31/09 1,532,248 1,807,941 3,340,189

Total $48,772,319 $15,135,883 $63,908,202

22

Table 7



SELECTED ESTIMATED ULTIMATE INCURRED LOSSES(Losses Including ALAE Limited to Specific Retentions)

Selected SelectedEstimated Estimated

Incurred Paid Incurred Paid Ultimate UltimatePolicy Loss Loss Bornhuettter- Bornhuettter- Incurred Aggregate Limited toPeriod Development Development Ferguson Ferguson Losses^ Retention Aggregate

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,898 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,939 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,563,135 # 2,762,705 2,567,809 # 2,762,705 2,762,7051/1-12/31/95 3,107,732 2,808,096 # 3,107,732 2,816,804 # 3,107,732 3,107,7321/1-12/31/96 2,546,319 2,400,902 # 2,546,319 2,407,523 # 2,546,319 2,546,3191/1-12/31/97 3,413,001 2,886,127 # 3,413,001 2,928,309 # 3,413,001 3,413,0011/1-12/31/98 2,904,642 3,096,293 2,904,642 3,089,407 2,998,746 2,998,7461/1-12/31/99 2,490,570 2,491,483 2,495,012 2,493,699 2,492,691 2,492,6911/1-12/31/00 3,786,283 4,317,513 3,795,337 4,274,292 4,043,356 $ 4,721,901 4,043,3561/1-12/31/01 4,478,996 4,862,391 4,511,565 4,828,138 4,670,273 5,132,689 4,670,2731/1-12/31/02 4,238,276 4,594,447 4,258,255 4,568,062 4,414,760 5,855,870 4,414,7601/1-12/31/03 5,891,589 6,582,896 5,997,721 6,501,932 6,243,535 6,205,899 6,205,899 *

1/1-12/31/04 4,490,718 5,197,682 4,585,181 5,144,191 4,854,443 5,605,343 4,854,4431/1-12/31/05 6,348,748 5,243,283 # 6,631,204 5,624,226 # 6,489,976 6,260,156 6,260,156 *1/1-12/31/06 5,057,856 4,941,417 4,996,604 4,815,371 4,952,812 6,192,337 4,952,8121/1-12/31/07 3,783,003 3,768,449 3,818,255 3,698,989 3,767,174 6,088,601 3,767,1741/1-12/31/08 3,337,983 3,378,894 3,366,283 3,240,424 3,330,896 5,795,034 3,330,8961/1-12/31/09 3,784,998 3,305,059 3,780,736 3,340,189 3,552,746 4,488,193 3,552,746

Total $63,992,256 $64,006,904 $64,539,389 $63,908,202 $65,210,002 $56,346,023 $64,942,546

^ Selected the average unless otherwise noted.# Since paid method is less than incurred losses, the corresponding incurred

method is substituted in the average.* Limited by the aggregate retention.

23

Figure 5



SELECTED ESTIMATED ULTIMATE INCURRED LOSSES(Losses Including ALAE Limited to Specific Retentions)

0.2

1.4

2.8

3.1

2.5

3.4

3.0

2.5

4.0

4.7

4.4

6.2

4.9

6.5

5.0

3.8

3.33.6

1.0

2.0

3.0

4.0

5.0

6.0

7.0

$ M

illio

ns

Policy Period

Inc Dev Paid Dev Inc B-F Paid B-F Selected

24

Table 8



ESTIMATED REQUIRED RESERVES AS OF 12/31/12(Losses Including ALAE Limited to Specific and Aggregate Retentions)

A. LOSS SUMMARY

EstimatedUltimate Incurred Paid

Policy Incurred Losses as Losses as

Period Losses of 12/31/12 of 12/31/12

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,762,705 2,515,3431/1-12/31/95 3,107,732 3,107,732 2,702,6911/1-12/31/96 2,546,319 2,546,319 2,260,7361/1-12/31/97 3,413,001 3,413,001 2,652,6901/1-12/31/98 2,998,746 2,904,642 2,769,4931/1-12/31/99 2,492,691 2,477,428 2,164,6251/1-12/31/00 4,043,356 3,734,762 3,628,1621/1-12/31/01 4,670,273 4,399,020 3,937,1591/1-12/31/02 4,414,760 4,101,425 3,564,350

1/1-12/31/03 6,205,899 5,696,751 4,865,4071/1-12/31/04 4,854,443 4,230,035 3,728,6101/1-12/31/05 6,260,156 6,002,841 3,616,0571/1-12/31/06 4,952,812 4,409,639 3,214,9751/1-12/31/07 3,767,174 3,235,711 2,249,8201/1-12/31/08 3,330,896 2,756,041 1,801,1161/1-12/31/09 3,552,746 2,937,480 1,532,248

Total $64,942,546 $60,284,369 $48,772,319

B. ESTIMATED REQUIRED RESERVES AS OF 12/31/12

EstimatedCase Estimated Required

Policy Reserves as IBNR as Reserves asPeriod of 12/31/12 of 12/31/12 of 12/31/12

10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 247,362 0 247,3621/1-12/31/95 405,041 0 405,0411/1-12/31/96 285,583 0 285,5831/1-12/31/97 760,311 0 760,3111/1-12/31/98 135,149 94,104 229,2531/1-12/31/99 312,803 15,263 328,0661/1-12/31/00 106,600 308,594 415,1941/1-12/31/01 461,861 271,253 733,1141/1-12/31/02 537,075 313,335 850,4101/1-12/31/03 831,344 509,148 1,340,4921/1-12/31/04 501,425 624,408 1,125,8331/1-12/31/05 2,386,784 257,315 2,644,0991/1-12/31/06 1,194,664 543,173 1,737,8371/1-12/31/07 985,891 531,463 1,517,3541/1-12/31/08 954,925 574,855 1,529,7801/1-12/31/09 1,405,232 615,266 2,020,498

Total $11,512,050 $ 4,658,177 $16,170,227

25

are shown as the difference between the incurred and paid losses. IBNR is estimated as the

difference between the estimated ultimate incurred losses and incurred losses. The total required

reserves as of 12/31/12 are then estimated by adding the case reserves and IBNR or by

subtracting paid losses from the estimated ultimate incurred losses.

ESTIMATED PAYOUT SCHEDULE

Two types of paid to incurred ratios that check the reasonableness of the estimates are calculated

in Table 9. Section A shows paid losses divided by incurred losses as of different ages. This

analysis assists in detecting changes in reserving and settlement practices. If payment and

reserving procedures are consistent between periods, the numbers within each column should be

relatively consistent.

Section B compares paid losses with the estimates of ultimate incurred losses. These ratios serve

two purposes. First, they test the reasonableness of the selected estimated ultimate incurred

losses. If losses are paid at a consistent rate, there is a sufficient volume of losses, and there are

no distorting effects from large claims, the ratios of paid losses to estimated ultimate incurred

losses are expected to be relatively consistent within each column. The second purpose of

Section B is to provide an estimate of the payout schedule to allocate the reserves to the period in

which they are expected to be paid. The selected payout schedule is shown at the bottom of

Section B.

In Table 10, the undiscounted reserves are assigned to the period in which they are expected to

be paid based on the selected schedule.

26

Table 9



PAID TO INCURRED RATIOS(Losses Including ALAE Limited to Specific Retentions)

A. PAID/INCURRED LOSSES


10/1/92-12/31/92 0.780 0.851 0.782 0.799 0.807 0.965 0.9651/1-12/31/93 0.754 0.745 0.770 0.834 0.901 0.918 0.980 0.9801/1-12/31/94 0.711 0.824 0.699 0.703 0.800 0.879 0.909 0.896 0.8961/1-12/31/95 0.409 0.633 0.670 0.636 0.682 0.769 0.860 0.900 0.880 0.9261/1-12/31/96 0.417 0.600 0.565 0.688 0.717 0.793 0.854 0.866 0.896 0.8701/1-12/31/97 0.377 0.557 0.623 0.770 0.803 0.821 0.840 0.842 0.849 0.9181/1-12/31/98 0.421 0.443 0.632 0.758 0.827 0.865 0.840 0.868 0.891 0.9031/1-12/31/99 0.377 0.583 0.803 0.878 0.885 0.901 0.864 0.902 0.910 0.8561/1-12/31/00 0.397 0.737 0.775 0.832 0.879 0.926 0.932 0.928 0.966 0.9661/1-12/31/01 0.400 0.671 0.805 0.801 0.822 0.893 0.931 0.891 0.933 0.8911/1-12/31/02 0.459 0.694 0.794 0.834 0.848 0.902 0.932 0.905 0.926 0.8471/1-12/31/03 0.502 0.687 0.733 0.783 0.842 0.880 0.855 0.848 0.764 0.854

1/1-12/31/04 0.497 0.620 0.792 0.830 0.888 0.903 0.896 0.822 0.8811/1-12/31/05 0.434 0.676 0.796 0.819 0.766 0.773 0.552 0.6021/1-12/31/06 0.520 0.687 0.716 0.783 0.856 0.741 0.7291/1-12/31/07 0.524 0.656 0.726 0.740 0.637 0.6951/1-12/31/08 0.363 0.617 0.766 0.647 0.6541/1-12/31/09 0.434 0.587 0.453 0.522

Average 0.435 0.635 0.719 0.753 0.790 0.830 0.844 0.858 0.903 0.9063 Yr Avg 0.440 0.620 0.648 0.636 0.716 0.736 0.726 0.757 0.857 0.864

B. PAID/ESTIMATED ULTIMATE INCURRED LOSSES

EstimatedPolicy 12 24 36 48 60 72 84 96 108 120 UltimatePeriod Months Months Months Months Months Months Months Months Months Months Losses

10/1/92-12/31/92 0.817 0.896 0.974 1.001 1.027 1.042 1.147 $ 190,8981/1-12/31/93 0.716 0.851 0.969 1.020 1.055 1.049 1.075 1.075 1,377,9391/1-12/31/94 0.391 0.542 0.641 0.736 0.788 0.829 0.909 0.910 0.814 2,762,7051/1-12/31/95 0.194 0.352 0.468 0.548 0.625 0.706 0.755 0.822 0.808 0.838 3,107,7321/1-12/31/96 0.137 0.342 0.480 0.567 0.642 0.689 0.728 0.772 0.798 0.813 2,546,3191/1-12/31/97 0.109 0.290 0.381 0.469 0.545 0.610 0.649 0.685 0.721 0.771 3,413,0011/1-12/31/98 0.139 0.301 0.410 0.487 0.541 0.573 0.635 0.685 0.713 0.750 2,998,7461/1-12/31/99 0.187 0.370 0.465 0.538 0.569 0.621 0.704 0.771 0.787 0.796 2,492,6911/1-12/31/00 0.120 0.346 0.537 0.658 0.763 0.821 0.859 0.899 0.951 0.976 4,043,3561/1-12/31/01 0.088 0.258 0.371 0.460 0.530 0.619 0.678 0.707 0.760 0.814 4,670,2731/1-12/31/02 0.141 0.318 0.458 0.545 0.617 0.670 0.717 0.772 0.797 0.793 4,414,7601/1-12/31/03 0.102 0.234 0.340 0.416 0.498 0.565 0.638 0.671 0.726 0.779 6,243,5351/1-12/31/04 0.125 0.287 0.406 0.484 0.592 0.657 0.728 0.753 0.768 4,854,4431/1-12/31/05 0.081 0.187 0.259 0.324 0.395 0.453 0.496 0.557 6,489,9761/1-12/31/06 0.101 0.229 0.318 0.446 0.501 0.572 0.649 4,952,8121/1-12/31/07 0.108 0.251 0.382 0.462 0.511 0.597 3,767,1741/1-12/31/08 0.119 0.284 0.395 0.452 0.541 3,330,8961/1-12/31/09 0.080 0.232 0.334 0.431 3,552,746

$65,210,002Average 0.122 0.292 0.427 0.533 0.616 0.683 0.741 0.791 0.835 0.8643 Yr Avg 0.102 0.256 0.370 0.448 0.518 0.541 0.624 0.660 0.764 0.795NY Groups 0.133 0.327 0.474 0.592 0.669 0.729 0.773 0.812 0.844 0.870Prior 0.480 0.570 0.660 0.730 0.780 0.830 0.870Selected# 0.490 0.590 0.650 0.710 0.770 0.820 0.850

27

Table 10



ESTIMATED PAYOUT SCHEDULE(Losses Including ALAE Limited to Specific and Aggregate Retentions)

Policy 1/1/13- 1/1/14- 1/1/15- 1/1/16- 1/1/17- 1/1/18- 1/1/19- 1/1/20- 1/1/21- 1/1/22- 1/1/23- 1/1/24- 1/1/25- 1/1/26- 1/1/27- 1/1/28- Period 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 12/31/28 Total

10/1/92-12/31/92 0 01/1-12/31/93 0 0

1/1-12/31/94 247,362 247,3621/1-12/31/95 202,521 202,521 405,0411/1-12/31/96 95,194 95,194 95,194 285,5831/1-12/31/97 190,078 190,078 190,078 190,078 760,3111/1-12/31/98 45,851 45,851 45,851 45,851 45,851 229,2531/1-12/31/99 54,678 54,678 54,678 54,678 54,678 54,678 328,0661/1-12/31/00 59,313 59,313 59,313 59,313 59,313 59,313 59,313 415,1941/1-12/31/01 162,914 81,457 81,457 81,457 81,457 81,457 81,457 81,457 733,1141/1-12/31/02 212,603 141,735 70,868 70,868 70,868 70,868 70,868 70,868 70,868 850,4101/1-12/31/03 275,626 275,626 183,750 91,875 91,875 91,875 91,875 91,875 91,875 54,239 1,340,4921/1-12/31/04 187,639 187,639 187,639 125,093 62,546 62,546 62,546 62,546 62,546 62,546 62,546 1,125,8331/1-12/31/05 624,765 374,859 374,859 374,859 249,906 124,953 124,953 124,953 124,953 124,953 20,086 2,644,0991/1-12/31/06 359,552 299,627 179,776 179,776 179,776 119,851 59,925 59,925 59,925 59,925 59,925 59,925 59,925 1,737,837

1/1-12/31/07 260,118 260,118 216,765 130,059 130,059 130,059 86,706 43,353 43,353 43,353 43,353 43,353 43,353 43,353 1,517,3541/1-12/31/08 223,870 223,870 223,870 186,559 111,935 111,935 111,935 74,623 37,312 37,312 37,312 37,312 37,312 37,312 37,312 1,529,7801/1-12/31/09 396,176 237,706 237,706 237,706 198,088 118,853 118,853 118,853 79,235 39,618 39,618 39,618 39,618 39,618 39,618 39,618 2,020,498

Total 3,598,259 2,730,271 2,201,804 1,828,170 1,336,352 1,026,388 868,432 728,454 570,067 421,946 262,840 180,208 180,208 120,282 76,929 39,618 16,170,227

28

HISTORICAL PROFITABILITY ANALYSIS

When evaluating the estimates contained in this report, it is important to review the underwriting

results of each period to evaluate the program’s direction. Section A of Table 11 and Figure 6

present a comparison of the funds available to pay claims to the estimated ultimate incurred

losses. In the 1/1-12/31/09 period, it is estimated that LTCRMG will show underwriting loss of

$4,471,013.

In Section B, investment income is combined with the underwriting results to estimate net

income by policy period. As shown, the estimated net income after assessments for the 1/1-

12/31/09 period is $1,618,185. The estimated surplus, or cumulative net income after

assessments, is ($8,480,779).

The underwriting results per $100 payroll are shown in Section C and Figure 7. The estimated

underwriting income decreased $2.92 (($4.99) – ($2.07)) from 1/1-12/31/08 to 1/1-12/31/09 due

to a decrease in premium of $0.18 ($2.75 - $2.93), an increase in estimated ultimate incurred

losses of $0.94 ($3.97 – $3.03), and an increase in expenses of $1.80 ($3.77 - $1.97).

Paid, incurred, estimated ultimate incurred, and permissible loss ratios are shown in Table 12 to

further illustrate LTCRMG’s underwriting results. Also shown are combined ratios.

29

Table 11




A. ESTIMATED UNDERWRITING INCOME

Estimated

Funds Ultimate Estimated

Policy Audited Operating Available Incurred Underwriting

Period Premium* Expenses*^ for Claims Losses Income

10/1/92-12/31/92 $ 401,306 $ 123,035 $ 278,271 $ 190,898 $ 87,373

1/1-12/31/93 1,909,243 637,289 1,271,954 1,377,939 ( 105,985)

1/1-12/31/94 2,721,968 905,544 1,816,424 2,762,705 ( 946,281)

1/1-12/31/95 3,866,532 1,064,420 2,802,112 3,107,732 ( 305,620)

1/1-12/31/96 2,646,035 1,113,663 1,532,372 2,546,319 ( 1,013,947)

1/1-12/31/97 3,537,019 1,473,872 2,063,147 3,413,001 ( 1,349,854)

1/1-12/31/98 3,630,091 1,602,503 2,027,588 2,998,746 ( 971,158)

1/1-12/31/99 3,777,347 2,005,943 1,771,404 2,492,691 ( 721,287)

1/1-12/31/00 4,382,495 1,226,771 3,155,724 4,043,356 ( 887,632)

1/1-12/31/01 4,752,053 1,335,285 3,416,768 4,670,273 ( 1,253,505)

1/1-12/31/02 4,040,173 1,275,358 2,764,815 4,414,760 ( 1,649,945)

1/1-12/31/03 4,135,390 2,022,883 2,112,507 6,205,899 ( 4,093,392)

1/1-12/31/04 5,228,465 3,246,052 1,982,413 4,854,443 ( 2,872,030)

1/1-12/31/05 4,859,714 2,911,964 1,947,750 6,260,156 ( 4,312,406)

1/1-12/31/06 5,520,987 2,321,672 3,199,315 4,952,812 ( 1,753,497)

1/1-12/31/07 5,208,035 515,485 # 4,692,550 3,767,174 925,376

1/1-12/31/08 3,214,718 2,160,803 1,053,915 3,330,896 ( 2,276,981)

1/1-12/31/09 2,456,780 3,375,047 # ( 918,267) 3,552,746 ( 4,471,013)

Total $66,288,351 $29,317,589 $36,970,762 $64,942,546 ($27,971,784)

B. ESTIMATED FUND BALANCE

Investment Estimated Retrospective Estimated

Estimated and Other Net Income Rate Charge Net Income

Policy Underwriting Income Including Before (Credit) and After

Period Income Unrealized CGs* Assessments Assessents Assessments

10/1/92-12/31/92 $ 87,373 $ 6,909 $ 94,282 $ 95,235 $ 189,517

1/1-12/31/93 ( 105,985) 29,040 ( 76,945) 205,451 128,506

1/1-12/31/94 ( 946,281) 130,042 ( 816,239) 210,664 ( 605,575)

1/1-12/31/95 ( 305,620) 220,600 ( 85,020) ( 426,071) ( 511,091)

1/1-12/31/96 ( 1,013,947) 486,608 ( 527,339) ( 31,739) ( 559,078)

1/1-12/31/97 ( 1,349,854) 719,969 ( 629,885) 830,314 200,429

1/1-12/31/98 ( 971,158) 685,410 ( 285,748) 1,411,998 1,126,250

1/1-12/31/99 ( 721,287) 791,911 70,624 850,505 921,129

1/1-12/31/00 ( 887,632) 182,845 ( 704,787) ( 2,419,489) ( 3,124,276)

1/1-12/31/01 ( 1,253,505) 95,663 ( 1,157,842) ( 2,359,287) ( 3,517,129)

1/1-12/31/02 ( 1,649,945) ( 296,483) ( 1,946,428) 1,729,264 ( 217,164)

1/1-12/31/03 ( 4,093,392) 796,498 ( 3,296,894) 526,140 ( 2,770,754)

1/1-12/31/04 ( 2,872,030) 494,618 ( 2,377,412) 2,562,143 184,731

1/1-12/31/05 ( 4,312,406) 271,720 ( 4,040,686) 3,548,454 ( 492,232)

1/1-12/31/06 ( 1,753,497) 574,518 ( 1,178,979) 255,134 ( 923,845)

1/1-12/31/07 925,376 632,060 1,557,436 ( 1,645,821) ( 88,385)

1/1-12/31/08 ( 2,276,981) ( 265,924) ( 2,542,905) 2,502,908 ( 39,997)

1/1-12/31/09 ( 4,471,013) 495,866 ( 3,975,147) 5,593,332 1,618,185

Total ($27,971,784) $6,051,870 ($21,919,914) $13,439,135 ($8,480,779)

* From the 12/31/09 audited financial statements.

^ Includes reinsurance premiums and taxes.

# Includes assessment accounting changes.

30

Table 11 (Continued)




C. ESTIMATED UNDERWRITING INCOME PER $100 PAYROLL

Estimated

Funds Ultimate Estimated

Policy Audited Operating Available Incurred Underwriting

Period Premium Expenses for Claims Losses Income

10/1/92-12/31/92 $4.86 $1.49 $3.37 $2.31 $1.06

1/1-12/31/93 4.96 1.66 3.30 3.58 ( 0.28)

1/1-12/31/94 5.42 1.80 3.62 5.51 ( 1.89)

1/1-12/31/95 5.86 1.61 4.25 4.71 ( 0.46)

1/1-12/31/96 3.82 1.61 2.21 3.68 ( 1.47)

1/1-12/31/97 4.71 1.96 2.75 4.54 ( 1.79)

1/1-12/31/98 4.29 1.89 2.40 3.54 ( 1.14)

1/1-12/31/99 4.14 2.20 1.94 2.73 ( 0.79)

1/1-12/31/00 4.12 1.15 2.97 3.80 ( 0.83)

1/1-12/31/01 4.11 1.16 2.95 4.04 ( 1.09)

1/1-12/31/02 3.06 0.97 2.09 3.35 ( 1.26)

1/1-12/31/03 2.96 1.45 1.51 4.44 ( 2.93)

1/1-12/31/04 4.22 2.62 1.60 3.91 ( 2.31)

1/1-12/31/05 3.84 2.30 1.54 4.95 ( 3.41)

1/1-12/31/06 4.45 1.87 2.58 3.99 ( 1.41)

1/1-12/31/07 4.27 0.42 3.85 3.09 0.76

1/1-12/31/08 2.93 1.97 0.96 3.03 ( 2.07)

1/1-12/31/09 2.75 3.77 ( 1.02) 3.97 ( 4.99)

D. PAYROLL

Policy Audited

Period Payroll (100)

10/1/92-12/31/92 $ 82,491

1/1-12/31/93 384,998

1/1-12/31/94 501,797

1/1-12/31/95 660,003

1/1-12/31/96 692,337

1/1-12/31/97 751,062

1/1-12/31/98 846,717

1/1-12/31/99 912,311

1/1-12/31/00 1,063,491

1/1-12/31/01 1,156,011

1/1-12/31/02 1,318,890

1/1-12/31/03 1,397,725

1/1-12/31/04 1,240,049

1/1-12/31/05 1,265,487

1/1-12/31/06 1,240,949

1/1-12/31/07 1,220,161

1/1-12/31/08 1,097,655

1/1-12/31/09 894,852

31

Figure 6



HISTORICAL PROFITABILITY ANALYSIS(Excluding Investment Income)

0.3

2.0

3.7

4.2

3.7

4.94.6 4.5

5.3

6.05.7

8.2 8.1

9.2

7.3

4.3

5.5

6.9

0.4

1.9

2.7

3.9

2.6

3.5 3.63.8

4.4

4.8

4.0 4.1

5.2

4.9

5.55.2

3.2

2.5

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

$ M

illio

ns

Policy Period

Estimated Ultimate Losses Operating Expenses Premium

32

Figure 7



HISTORICAL PROFITABILITY ANALYSIS(Excluding Investment Income)

3.80

5.24

7.31

6.32

5.29

6.50

5.43

4.93 4.955.20

4.32

5.89

6.53

7.25

5.86

3.51

5.00

7.74

4.86 4.96

5.42

5.86

3.82

4.71

4.294.14 4.12 4.11

3.06 2.96

4.22

3.84

4.454.27

2.932.75

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

$ p

er

$100

Pay

roll

Policy Period

Estimated Ultimate Losses Operating Expenses Premium

33

Table 12



LOSS RATIOS


Permissible Combined

Incurred Estimated Loss Ratio Ratio

Paid Loss Loss Ratio Ultimate (Funds [(Losses+

Policy Ratio as as of Incurred Available/ Expenses)/

Period of 12/31/12 of 12/31/12 Loss Ratio Premium) Premium]

10/1/92-12/31/92 0.476 0.476 0.476 0.693 0.782

1/1-12/31/93 0.722 0.722 0.722 0.666 1.056

1/1-12/31/94 0.924 1.015 1.015 0.667 1.348

1/1-12/31/95 0.699 0.804 0.804 0.725 1.079

1/1-12/31/96 0.854 0.962 0.962 0.579 1.383

1/1-12/31/97 0.750 0.965 0.965 0.583 1.382

1/1-12/31/98 0.763 0.800 0.826 0.559 1.268

1/1-12/31/99 0.573 0.656 0.660 0.469 1.191

1/1-12/31/00 0.828 0.852 0.923 0.720 1.203

1/1-12/31/01 0.829 0.926 0.983 0.719 1.264

1/1-12/31/02 0.882 1.015 1.093 0.684 1.408

1/1-12/31/03 1.177 1.378 1.501 0.511 1.990

1/1-12/31/04 0.713 0.809 0.928 0.379 1.549

1/1-12/31/05 0.744 1.235 1.288 0.401 1.887

1/1-12/31/06 0.582 0.799 0.897 0.579 1.318

1/1-12/31/07 0.432 0.621 0.723 0.901 0.822

1/1-12/31/08 0.560 0.857 1.036 0.328 1.708

1/1-12/31/09 0.624 1.196 1.446 ( 0.374) 2.820

Total 0.980 0.558 1.422

34

QUALIFICATIONS AND LIMITATIONS

The estimates contained in this report depend upon the following:

The actuarial assumptions, quantitative analysis, and professional judgment expressed in this report.

The reliability of loss experience to serve as an indicator of future losses.

The completeness and accuracy of data provided by NCAComp.

The completeness and accuracy of the discussion of LTCRMG’s excess insurance expressed in this report.

While estimates are shown for each year, the actual losses incurred for a particular year may be

lower or higher than the amounts shown. However, the amount shown for the total of all years is

expected to be reasonable.

The information used in this report should be reviewed for its consistency and accuracy with the

internal records of LTCRMG. Material changes in any of the assumptions or information upon

which the findings are based will require a re-evaluation of the results of this report and a

possible revision of those findings.

The quantitative methodologies and actuarial factors used in this report are specifically

developed for the losses and time periods described above and may not be appropriate for any

other losses or periods. As LTCRMG’s loss experience matures and new business is written, it is

35

important to update this analysis at least annually. Such a report should review changes in the

prior periods’ losses as well as any new information that might become available.

This report is intended for the use of LTCRMG and its auditors, service providers, and

regulators. If the report is released to any third party, it should be released in its entirety. Please

advise BYNAC if this report is distributed to any other third party.

36

CONSULTATION

The professional opinion given in this report is based on the judgment and experience of

BYNAC. An analysis by another actuary may not arrive at the same conclusion. In the event

that another actuary is consulted regarding the findings of this report, both actuaries should make

themselves available for supplemental advice and consultation.

37


APPENDIX A

INCURRED LOSSES $250,000 AND GREATER

38

Appendix A




Paid Lossand ALAE

Policy Accident Incurred Loss and ALAE as of as ofPeriod Date Status 12/31/10 7/31/11 9/30/11 10/31/11 12/31/11 12/31/12 12/31/12

1/1-12/31/94 1/17/94 Open < 250,620 250,620 258,489 258,489 258,418 158,547

1/1-12/31/95 7/7/95 Open < < < < < 323,140 171,674

1/1-12/31/96 11/10/96 Open < 393,914 393,914 395,589 327,722 328,121 164,977

1/1-12/31/97 2/25/97 Open < 260,422 260,422 260,422 260,422 262,771 148,5233/25/97 Open < 409,002 409,002 409,002 409,002 409,001 134,5064/4/97 Open 277,103 552,273 552,273 552,273 552,273 555,879 220,046

277,103 1,221,697 1,221,697 1,221,697 1,221,697 1,227,651 503,075

1/1-12/31/98 2/6/98 N/A < 335,012 335,013 335,013 336,263 < <

7/18/98 Open 300,000 * 978,997 983,938 983,938 983,938 985,185 310,369

8/17/98 Closed 300,000 * 436,315 436,315 436,315 436,315 346,837 346,837

600,000 1,750,324 1,755,266 1,755,266 1,756,516 1,332,022 657,206

1/1-12/31/99 1/5/99 Open < 423,300 423,300 423,300 425,935 425,935 168,515

10/10/99 Open 300,000 * 300,000 645,153 645,153 645,153 645,153 255,349

300,000 723,300 1,068,453 1,068,453 1,071,088 1,071,088 423,864

1/1-12/31/00 1/24/00 Open 301,689 371,494 427,519 614,702 619,820 802,758 463,519

1/1-12/31/01 3/7/01 Open 317,139 573,512 626,269 625,990 626,888 643,192 394,773

4/4/01 Open 345,532 1,845,398 1,957,816 1,957,330 1,957,331 1,964,658 477,2278/2/01 # Open 300,000 300,000 300,000 300,000 300,000 300,000 300,000

9/8/01 Open 300,000 * 532,020 538,885 538,885 538,885 545,315 180,369

11/14/01 Open 290,320 466,927 585,944 585,944 585,944 589,163 170,680

11/17/01 Open < 278,834 278,834 278,834 278,834 280,529 125,524

1,552,991 3,996,691 4,287,748 4,286,983 4,287,882 4,322,857 1,648,573

1/1-12/31/02 7/27/02 Open < < < < < 279,822 66,974

10/9/02 N/A 284,822 < < < < < <

10/10/02 Open 300,442 877,250 883,250 883,250 883,250 682,303 328,934

11/8/02 N/A < 353,221 353,221 353,221 353,221 < <

585,264 1,230,471 1,236,471 1,236,471 1,236,471 962,125 395,908

< Less than $250,000.

# Claim is 100% 15-8 as of November 2012.

* Loss is capped at $300,000 by prior TPA.

39

Appendix A (Continued)




Paid Loss

and ALAE

Policy Accident Incurred Loss and ALAE as of as of

Period Date Status 12/31/10 7/31/11 9/30/11 10/31/11 12/31/11 12/31/12 12/31/12

1/1-12/31/03 1/15/03 Open < 254,555 254,555 254,555 254,555 257,785 107,508

3/2/03 N/A < 399,466 399,466 399,466 399,466 < <

3/13/03 Open < 502,939 502,939 502,939 502,939 502,939 163,826

4/9/03 Open 300,000 * 300,000 * 303,062 1,070,828 2,792,608 2,792,455 312,172

5/16/03 Open < < < 340,116 309,247 309,247 110,041

6/5/03 Open < 300,000 * 632,647 632,647 632,647 636,647 187,578

9/11/03 N/A 263,099 263,099 534,350 534,350 534,350 < <

10/26/03 Open < 1,398,305 1,398,305 1,398,305 1,400,321 1,404,328 175,300

12/18/03 Open 300,000 * 768,945 771,945 771,945 771,945 775,317 256,686

12/29/03 # Open < < < < < 300,000 280,326

863,099 4,187,309 4,797,269 5,905,151 7,598,078 6,978,718 1,593,437

1/1-12/31/04 3/29/04 N/A < 582,874 582,874 582,874 582,874 < <

8/13/04 Open 316,374 1,268,691 1,268,691 1,268,691 1,268,691 1,009,730 222,263

12/18/04 Open < < < 401,008 677,033 676,933 164,608

316,374 1,851,565 1,851,565 2,252,573 2,528,598 1,686,663 386,871

1/1-12/31/05 1/19/05 Open < < < 354,066 427,040 430,730 70,5513/14/05 Open < 539,777 539,777 539,777 595,541 598,127 149,8223/24/05 N/A < < 359,269 < < < <5/11/05 Open < < < < < 350,055 84,0155/14/05 N/A < 572,590 592,944 592,944 592,944 < <5/29/05 Open < < < < < 754,808 122,7956/12/05 Open < < 378,087 378,087 382,287 382,287 38,0197/28/05 Open < 723,862 723,862 723,862 723,862 850,926 216,3549/13/05 Open 267,854 500,533 480,415 480,415 480,415 480,415 114,82110/1/05 Open 290,719 400,000 1,306,893 1,306,893 1,306,893 1,311,224 344,301

12/19/05 Open < 529,217 529,217 529,217 529,217 422,484 90,627

558,573 3,265,979 4,910,464 4,905,261 5,038,199 5,581,056 1,231,306

1/1-12/31/06 2/24/06 Open < < < < < 373,534 157,032

7/18/06 Open < < < < < 303,356 200,230

7/28/06 Open < 343,330 343,330 343,330 343,330 372,517 208,155

8/10/06 Open < < < < < 390,727 142,085

9/5/06 Open < 329,124 329,124 329,124 329,124 381,253 77,529

12/4/06 Open < < < < < 252,319 238,432

672,454 672,454 672,454 672,454 2,073,706 1,023,463

1/1-12/31/07 1/19/07 Open < < < 383,918 426,656 439,339 92,123

6/15/07 Open < < < < < 322,165 133,868

7/29/07 N/A 285,881 285,881 285,881 < < < <

8/27/07 N/A < < 258,616 258,616 258,616 < <

9/2/07 Open < < < < 294,023 294,023 108,184

285,881 285,881 544,497 642,534 979,295 1,055,527 334,175

1/1-12/31/08 2/12/08 Open < < 544,564 544,564 544,564 527,367 196,639

7/4/08 Open < < < 258,465 278,881 278,881 162,148

10/3/08 Open < < < < < 357,444 67,169

10/13/08 Open < < < < 269,317 277,699 103,055

544,564 803,029 1,092,762 1,441,391 529,011

1/1-12/31/09 2/19/09 Open < < 258,709 288,521 338,059 338,059 219,053

4/7/09 Open < < < < 326,821 431,721 74,942

12/21/09 Open < < < < 522,548 374,888 55,131

258,709 288,521 1,187,428 1,144,668 349,126

# Claim is 100% 15-8.

< Less than $250,000.

* Loss is capped at $300,000 by prior TPA.

40


APPENDIX B

SUPPORT EXHIBITS

41

Appendix B, Exhibit I



ESTIMATED ULTIMATE CLAIM COUNT AND AVERAGE SEVERITY(Unlimited Losses Including ALAE)

(Including Claims Closed without Payment)

A. ESTIMATED ULTIMATE CLAIMS

Age of IndustryReported Policy Claim Count Estimated

Policy Claims as of Period in Development UltimatePeriod of 12/31/12 Months Factor Claims

10/1/92-12/31/92 17 247.5 1.000 171/1-12/31/93 39 240.0 1.000 391/1-12/31/94 54 228.0 1.000 541/1-12/31/95 61 216.0 1.000 611/1-12/31/96 69 204.0 1.000 691/1-12/31/97 80 192.0 1.000 801/1-12/31/98 105 180.0 1.000 1051/1-12/31/99 141 168.0 1.000 1411/1-12/31/00 418 156.0 1.000 4181/1-12/31/01 467 144.0 1.000 467

1/1-12/31/02 563 132.0 1.000 5631/1-12/31/03 529 120.0 1.000 5291/1-12/31/04 491 108.0 1.000 4911/1-12/31/05 401 96.0 1.000 4011/1-12/31/06 401 84.0 1.001 4011/1-12/31/07 292 72.0 1.002 2931/1-12/31/08 203 60.0 1.003 2041/1-12/31/09 158 48.0 1.004 159

Total 4,489 4,492

B. ESTIMATED ULTIMATE AVERAGE SEVERITY

Estimated EstimatedUltimate Estimated Ultimate

Policy Incurred Ultimate AveragePeriod Losses Claims Severity

10/1/92-12/31/92 $ 190,898 17 $ 11,2291/1-12/31/93 1,377,939 39 35,3321/1-12/31/94 2,762,705 54 51,1611/1-12/31/95 3,107,732 61 50,9461/1-12/31/96 2,546,319 69 36,9031/1-12/31/97 3,468,880 80 43,3611/1-12/31/98 3,754,484 105 35,7571/1-12/31/99 2,966,681 141 21,0401/1-12/31/00 4,587,656 418 10,9751/1-12/31/01 7,369,366 467 15,7801/1-12/31/02 4,826,270 563 8,5721/1-12/31/03 11,307,993 529 21,3761/1-12/31/04 5,871,989 491 11,9591/1-12/31/05 8,704,945 401 21,7081/1-12/31/06 4,952,812 401 12,3511/1-12/31/07 3,812,974 293 13,0141/1-12/31/08 3,484,829 204 17,0821/1-12/31/09 3,591,111 159 22,586

Total $78,685,583 4,492

42

Appendix B, Exhibit II



CLAIM COUNT SUMMARY(Including Claims Closed without Payment)

Estimated Ultimate Reported Closed Open IBNR

Policy Claim Claims as Claims as Claims as Claims asPeriod Count of 12/31/12 of 12/31/12 of 12/31/12 of 12/31/12

10/1/92-12/31/92 17 17 17 0 01/1-12/31/93 39 39 36 3 01/1-12/31/94 54 54 48 6 01/1-12/31/95 61 61 54 7 01/1-12/31/96 69 69 61 8 01/1-12/31/97 80 80 71 9 01/1-12/31/98 105 105 99 6 01/1-12/31/99 141 141 132 9 01/1-12/31/00 418 418 405 13 01/1-12/31/01 467 467 451 16 0

1/1-12/31/02 563 563 545 18 01/1-12/31/03 529 529 510 19 01/1-12/31/04 491 491 475 16 01/1-12/31/05 401 401 375 26 01/1-12/31/06 401 401 381 20 01/1-12/31/07 293 292 280 12 11/1-12/31/08 204 203 194 9 11/1-12/31/09 159 158 144 14 1

Total 4,492 4,489 4,278 211 3

43


APPENDIX C

ESTIMATED UNLIMITED AND ALAE RESERVES

44

Appendix C, Exhibit I



SELECTED ESTIMATED ULTIMATE INCURRED LOSSES(Unlimited Losses Including ALAE)

Limited SelectedEstimated Limited Unlimited EstimatedUltimate Incurred Incurred Ultimate

Policy Incurred Losses as Losses as IncurredPeriod Losses of 12/31/12 of 12/31/12 Losses*

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,762,705 2,762,705 2,762,7051/1-12/31/95 3,107,732 3,107,732 3,107,732 3,107,7321/1-12/31/96 2,546,319 2,546,319 2,546,319 2,546,3191/1-12/31/97 3,413,001 3,413,001 3,468,880 3,468,8801/1-12/31/98 2,998,746 2,904,642 3,636,664 3,754,4841/1-12/31/99 2,492,691 2,477,428 2,948,516 2,966,6811/1-12/31/00 4,043,356 3,734,762 4,237,520 4,587,6561/1-12/31/01 4,670,273 4,399,020 6,941,348 7,369,3661/1-12/31/02 4,414,760 4,101,425 4,483,728 4,826,2701/1-12/31/03 6,243,535 5,696,751 10,317,684 11,307,9931/1-12/31/04 4,854,443 4,230,035 5,116,698 5,871,9891/1-12/31/05 6,489,976 6,002,841 8,051,555 8,704,9451/1-12/31/06 4,952,812 4,409,639 4,409,639 4,952,8121/1-12/31/07 3,767,174 3,235,711 3,275,050 3,812,9741/1-12/31/08 3,330,896 2,756,041 2,883,408 3,484,8291/1-12/31/09 3,552,746 2,937,480 2,969,201 3,591,111

Total $ 65,210,002 $ 60,284,369 $ 72,725,484 $ 78,685,583

* Estimated to equal the limited estimated ultimate incurred losses dividedby the limited incurred losses multiplied by the unlimited incurred losses.

45

Appendix C, Exhibit II



ESTIMATED REQUIRED RESERVES AS OF 12/31/12(Unlimited Losses Including ALAE)

A. LOSS SUMMARY


Policy Incurred Losses as Losses asPeriod Losses of 12/31/12 of 12/31/12

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,762,705 2,515,3431/1-12/31/95 3,107,732 3,107,732 2,702,6911/1-12/31/96 2,546,319 2,546,319 2,260,7361/1-12/31/97 3,468,880 3,468,880 2,652,6901/1-12/31/98 3,754,484 3,636,664 2,826,6991/1-12/31/99 2,966,681 2,948,516 2,164,6251/1-12/31/00 4,587,656 4,237,520 3,791,6811/1-12/31/01 7,369,366 6,941,348 4,209,1591/1-12/31/02 4,826,270 4,483,728 3,593,2841/1-12/31/03 11,307,993 10,317,684 4,877,5791/1-12/31/04 5,871,989 5,116,698 3,728,6101/1-12/31/05 8,704,945 8,051,555 3,616,0571/1-12/31/06 4,952,812 4,409,639 3,214,9751/1-12/31/07 3,812,974 3,275,050 2,249,8201/1-12/31/08 3,484,829 2,883,408 1,801,1161/1-12/31/09 3,591,111 2,969,201 1,532,248

Total $ 78,685,583 $ 72,725,484 $49,306,150

B. ESTIMATED REQUIRED RESERVES AS OF 12/31/12


Policy Reserves as IBNR as of Reserves asPeriod of 12/31/12 of 12/31/12 of 12/31/12

10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 247,362 0 247,3621/1-12/31/95 405,041 0 405,0411/1-12/31/96 285,583 0 285,5831/1-12/31/97 816,190 0 816,1901/1-12/31/98 809,965 117,820 927,7851/1-12/31/99 783,891 18,165 802,0561/1-12/31/00 445,839 350,136 795,9751/1-12/31/01 2,732,189 428,018 3,160,2071/1-12/31/02 890,444 342,542 1,232,9861/1-12/31/03 5,440,105 990,309 6,430,4141/1-12/31/04 1,388,088 755,291 2,143,3791/1-12/31/05 4,435,498 653,390 5,088,8881/1-12/31/06 1,194,664 543,173 1,737,8371/1-12/31/07 1,025,230 537,924 1,563,1541/1-12/31/08 1,082,292 601,421 1,683,7131/1-12/31/09 1,436,953 621,910 2,058,863

Total $23,419,334 $5,960,099 $29,379,433

46

Appendix C, Exhibit III



ESTIMATED RECOVERABLE REQUIRED RESERVES AS OF 12/31/12

A. LOSS SUMMARY



10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 0 0 01/1-12/31/95 0 0 01/1-12/31/96 0 0 01/1-12/31/97 55,879 55,879 01/1-12/31/98 755,738 732,022 57,2061/1-12/31/99 473,990 471,088 01/1-12/31/00 544,300 502,758 163,5191/1-12/31/01 2,699,093 2,542,328 272,0001/1-12/31/02 411,510 382,303 28,9341/1-12/31/03 5,102,094 4,620,933 12,1721/1-12/31/04 1,017,546 886,663 01/1-12/31/05 2,444,789 2,048,714 01/1-12/31/06 0 0 01/1-12/31/07 45,800 39,339 01/1-12/31/08 153,933 127,367 01/1-12/31/09 38,365 31,721 0

Total $ 13,743,037 $ 12,441,115 $ 533,831

B. ESTIMATED RECOVERABLE REQUIRED RESERVES AS OF 12/31/12



10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 0 0 01/1-12/31/95 0 0 01/1-12/31/96 0 0 01/1-12/31/97 55,879 0 55,8791/1-12/31/98 674,816 23,716 698,5321/1-12/31/99 471,088 2,902 473,9901/1-12/31/00 339,239 41,542 380,7811/1-12/31/01 2,270,328 156,765 2,427,0931/1-12/31/02 353,369 29,207 382,5761/1-12/31/03 4,608,761 481,161 5,089,9221/1-12/31/04 886,663 130,883 1,017,5461/1-12/31/05 2,048,714 396,075 2,444,7891/1-12/31/06 0 0 01/1-12/31/07 39,339 6,461 45,8001/1-12/31/08 127,367 26,566 153,9331/1-12/31/09 31,721 6,644 38,365

Total $11,907,284 $1,301,922 $13,209,206

47

Appendix C, Exhibit IV



ESTIMATED MEDICAL, INDEMNITY, AND ALAE RESERVES(Losses Including ALAE Limited to Specific and Aggregate Retentions)

LimitedEstimated Estimated Estimated EstimatedRequired Medical Indemnity ALAE

Policy Reserves as Reserves# Reserves# Reserves#Period of 12/31/12 40% 54% 6%

10/1/92-12/31/92 $ 0 $ 0 $ 0 $ 01/1-12/31/93 0 0 0 01/1-12/31/94 247,362 98,945 133,575 14,8421/1-12/31/95 405,041 162,016 218,722 24,3021/1-12/31/96 285,583 114,233 154,215 17,1351/1-12/31/97 760,311 304,124 410,568 45,6191/1-12/31/98 229,253 91,701 123,797 13,7551/1-12/31/99 328,066 131,226 177,156 19,6841/1-12/31/00 415,194 166,078 224,205 24,9121/1-12/31/01 733,114 293,246 395,882 43,9871/1-12/31/02 850,410 340,164 459,221 51,0251/1-12/31/03 1,340,492 536,197 723,866 80,4301/1-12/31/04 1,125,833 450,333 607,950 67,5501/1-12/31/05 2,644,099 1,057,640 1,427,813 158,6461/1-12/31/06 1,737,837 695,135 938,432 104,2701/1-12/31/07 1,517,354 606,942 819,371 91,0411/1-12/31/08 1,529,780 611,912 826,081 91,7871/1-12/31/09 2,020,498 808,199 1,091,069 121,230

Total $16,170,227 $6,468,091 $ 8,731,923 $ 970,215

# Selected judgmentally.

48


APPENDIX D

ESTIMATED REQUIRED RESERVES AS OF 12/31/12 - HIGH

49

Appendix D, Exhibit I



SELECTED ESTIMATED ULTIMATE INCURRED LOSSES - HIGH(Losses Including ALAE Limited to Specific Retentions)

Selected SelectedEstimated Estimated

Incurred Incurred Paid Ultimate UltimatePolicy Loss Paid Loss Bornhuettter- Bornhuettter- Incurred Aggregate Limited toPeriod Development Development Ferguson Ferguson Losses* Retention Aggregate

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,898 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,939 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,563,135 2,762,705 2,567,809 2,762,705 2,762,7051/1-12/31/95 3,107,732 2,808,096 3,107,732 2,816,804 3,107,732 3,107,7321/1-12/31/96 2,546,319 2,400,902 2,546,319 2,407,523 2,559,051 2,559,0511/1-12/31/97 3,413,001 2,886,127 3,413,001 2,928,309 3,447,131 3,447,1311/1-12/31/98 2,904,642 3,096,293 2,904,642 3,089,407 3,043,727 3,043,7271/1-12/31/99 2,490,570 2,491,483 2,495,012 2,493,699 2,542,545 2,542,5451/1-12/31/00 3,786,283 4,317,513 3,795,337 4,274,292 4,144,440 $ 4,721,901 4,144,4401/1-12/31/01 4,478,996 4,862,391 4,511,565 4,828,138 4,810,381 5,132,689 4,810,3811/1-12/31/02 4,238,276 4,594,447 4,258,255 4,568,062 4,569,277 5,855,870 4,569,2771/1-12/31/03 5,891,589 6,582,896 5,997,721 6,501,932 6,493,276 6,205,899 6,205,899 ^1/1-12/31/04 4,490,718 5,197,682 4,585,181 5,144,191 5,072,893 5,605,343 5,072,8931/1-12/31/05 6,348,748 5,243,283 6,631,204 5,624,226 6,814,475 6,260,156 6,260,156 ^1/1-12/31/06 5,057,856 4,941,417 4,996,604 4,815,371 5,225,217 6,192,337 5,225,2171/1-12/31/07 3,783,003 3,768,449 3,818,255 3,698,989 3,993,204 6,088,601 3,993,2041/1-12/31/08 3,337,983 3,378,894 3,366,283 3,240,424 3,547,404 5,795,034 3,547,4041/1-12/31/09 3,784,998 3,305,059 3,780,736 3,340,189 3,801,438 4,488,193 3,801,438

Total $63,992,256 $64,006,904 $64,539,389 $63,908,202 $67,503,733 $56,346,023 $66,662,037

* Selected ranges of 0.5% through 7.0% increasing 0.5%each year for 1/1-12/31/96 through 1/1-12/31/09, respectively.

^ Limited by the aggregate retention.

50

Appendix D, Exhibit II



ESTIMATED REQUIRED RESERVES AS OF 12/31/12 - HIGH(Losses Including ALAE Limited to Specific and Aggregate Retentions)

A. LOSS SUMMARY



10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,762,705 2,515,3431/1-12/31/95 3,107,732 3,107,732 2,702,6911/1-12/31/96 2,559,051 2,546,319 2,260,7361/1-12/31/97 3,447,131 3,413,001 2,652,6901/1-12/31/98 3,043,727 2,904,642 2,769,4931/1-12/31/99 2,542,545 2,477,428 2,164,6251/1-12/31/00 4,144,440 3,734,762 3,628,1621/1-12/31/01 4,810,381 4,399,020 3,937,1591/1-12/31/02 4,569,277 4,101,425 3,564,3501/1-12/31/03 6,205,899 5,696,751 4,865,4071/1-12/31/04 5,072,893 4,230,035 3,728,6101/1-12/31/05 6,260,156 6,002,841 3,616,0571/1-12/31/06 5,225,217 4,409,639 3,214,9751/1-12/31/07 3,993,204 3,235,711 2,249,8201/1-12/31/08 3,547,404 2,756,041 1,801,1161/1-12/31/09 3,801,438 2,937,480 1,532,248

Total $66,662,037 $60,284,369 $48,772,319

B. ESTIMATED REQUIRED RESERVES AS OF 12/31/12 - HIGH


Policy Reserves as IBNR as Reserves asPeriod of 12/31/12 of 12/31/12 of 12/31/12

10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 247,362 0 247,3621/1-12/31/95 405,041 0 405,0411/1-12/31/96 285,583 12,732 298,3151/1-12/31/97 760,311 34,130 794,4411/1-12/31/98 135,149 139,085 274,2341/1-12/31/99 312,803 65,117 377,9201/1-12/31/00 106,600 409,678 516,2781/1-12/31/01 461,861 411,361 873,2221/1-12/31/02 537,075 467,852 1,004,9271/1-12/31/03 831,344 509,148 1,340,4921/1-12/31/04 501,425 842,858 1,344,2831/1-12/31/05 2,386,784 257,315 2,644,0991/1-12/31/06 1,194,664 815,578 2,010,2421/1-12/31/07 985,891 757,493 1,743,3841/1-12/31/08 954,925 791,363 1,746,2881/1-12/31/09 1,405,232 863,958 2,269,190

Total $11,512,050 $ 6,377,668 $17,889,718

51

Appendix D, Exhibit III



SELECTED ESTIMATED ULTIMATE INCURRED LOSSES - HIGH(Unlimited Losses Including ALAE)

Limited SelectedEstimated Limited Unlimited EstimatedUltimate Incurred Incurred Ultimate

Policy Incurred Losses as Losses as IncurredPeriod Losses of 12/31/12 of 12/31/12 Losses*

10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,762,705 2,762,705 2,762,7051/1-12/31/95 3,107,732 3,107,732 3,107,732 3,107,7321/1-12/31/96 2,559,051 2,546,319 2,546,319 2,559,0511/1-12/31/97 3,447,131 3,413,001 3,468,880 3,503,5691/1-12/31/98 3,043,727 2,904,642 3,636,664 3,810,8011/1-12/31/99 2,542,545 2,477,428 2,948,516 3,026,0151/1-12/31/00 4,144,440 3,734,762 4,237,520 4,702,3471/1-12/31/01 4,810,381 4,399,020 6,941,348 7,590,4471/1-12/31/02 4,569,277 4,101,425 4,483,728 4,995,1901/1-12/31/03 6,493,276 5,696,751 10,317,684 11,760,3121/1-12/31/04 5,072,893 4,230,035 5,116,698 6,136,2291/1-12/31/05 6,814,475 6,002,841 8,051,555 9,140,1931/1-12/31/06 5,225,217 4,409,639 4,409,639 5,225,2171/1-12/31/07 3,993,204 3,235,711 3,275,050 4,041,7521/1-12/31/08 3,547,404 2,756,041 2,883,408 3,711,3431/1-12/31/09 3,801,438 2,937,480 2,969,201 3,842,489

Total $ 67,503,733 $ 60,284,369 $ 72,725,484 $ 81,484,229

* Estimated to equal the limited estimated ultimate incurred losses dividedby the limited incurred losses multiplied by the unlimited incurred losses.

52

Appendix D, Exhibit IV



ESTIMATED REQUIRED RESERVES AS OF 12/31/12 - HIGH(Unlimited Losses Including ALAE)

A. LOSS SUMMARY



10/1/92-12/31/92 $ 190,898 $ 190,898 $ 190,8981/1-12/31/93 1,377,939 1,377,939 1,377,9391/1-12/31/94 2,762,705 2,762,705 2,515,3431/1-12/31/95 3,107,732 3,107,732 2,702,6911/1-12/31/96 2,559,051 2,546,319 2,260,7361/1-12/31/97 3,503,569 3,468,880 2,652,6901/1-12/31/98 3,810,801 3,636,664 2,826,6991/1-12/31/99 3,026,015 2,948,516 2,164,6251/1-12/31/00 4,702,347 4,237,520 3,791,6811/1-12/31/01 7,590,447 6,941,348 4,209,1591/1-12/31/02 4,995,190 4,483,728 3,593,2841/1-12/31/03 11,760,312 10,317,684 4,877,5791/1-12/31/04 6,136,229 5,116,698 3,728,6101/1-12/31/05 9,140,193 8,051,555 3,616,0571/1-12/31/06 5,225,217 4,409,639 3,214,9751/1-12/31/07 4,041,752 3,275,050 2,249,8201/1-12/31/08 3,711,343 2,883,408 1,801,1161/1-12/31/09 3,842,489 2,969,201 1,532,248

Total $ 81,484,229 $ 72,725,484 $49,306,150

B. ESTIMATED REQUIRED RESERVES AS OF 12/31/12 - HIGH



10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 247,362 0 247,3621/1-12/31/95 405,041 0 405,0411/1-12/31/96 285,583 12,732 298,3151/1-12/31/97 816,190 34,689 850,8791/1-12/31/98 809,965 174,137 984,1021/1-12/31/99 783,891 77,499 861,3901/1-12/31/00 445,839 464,827 910,6661/1-12/31/01 2,732,189 649,099 3,381,2881/1-12/31/02 890,444 511,462 1,401,9061/1-12/31/03 5,440,105 1,442,628 6,882,7331/1-12/31/04 1,388,088 1,019,531 2,407,6191/1-12/31/05 4,435,498 1,088,638 5,524,1361/1-12/31/06 1,194,664 815,578 2,010,2421/1-12/31/07 1,025,230 766,702 1,791,9321/1-12/31/08 1,082,292 827,935 1,910,2271/1-12/31/09 1,436,953 873,288 2,310,241

Total $23,419,334 $8,758,745 $32,178,079

53

Appendix D, Exhibit V



ESTIMATED RECOVERABLE REQUIRED RESERVES AS OF 12/31/12 - HIGH

A. LOSS SUMMARY



10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 0 0 01/1-12/31/95 0 0 01/1-12/31/96 0 0 01/1-12/31/97 56,438 55,879 01/1-12/31/98 767,074 732,022 57,2061/1-12/31/99 483,470 471,088 01/1-12/31/00 557,907 502,758 163,5191/1-12/31/01 2,780,066 2,542,328 272,0001/1-12/31/02 425,913 382,303 28,9341/1-12/31/03 5,554,413 4,620,933 12,1721/1-12/31/04 1,063,336 886,663 01/1-12/31/05 2,880,037 2,048,714 01/1-12/31/06 0 0 01/1-12/31/07 48,548 39,339 01/1-12/31/08 163,939 127,367 01/1-12/31/09 41,051 31,721 0

Total $ 14,822,192 $ 12,441,115 $ 533,831

B. ESTIMATED RECOVERABLE REQUIRED RESERVES AS OF 12/31/12 - HIGH



10/1/92-12/31/92 $ 0 $ 0 $ 01/1-12/31/93 0 0 01/1-12/31/94 0 0 01/1-12/31/95 0 0 01/1-12/31/96 0 0 01/1-12/31/97 55,879 559 56,4381/1-12/31/98 674,816 35,052 709,8681/1-12/31/99 471,088 12,382 483,4701/1-12/31/00 339,239 55,149 394,3881/1-12/31/01 2,270,328 237,738 2,508,0661/1-12/31/02 353,369 43,610 396,9791/1-12/31/03 4,608,761 933,480 5,542,2411/1-12/31/04 886,663 176,673 1,063,3361/1-12/31/05 2,048,714 831,323 2,880,0371/1-12/31/06 0 0 01/1-12/31/07 39,339 9,209 48,5481/1-12/31/08 127,367 36,572 163,9391/1-12/31/09 31,721 9,330 41,051

Total $11,907,284 $2,381,077 $14,288,361

54

Appendix D, Exhibit VI



ESTIMATED MEDICAL, INDEMNITY, AND ALAE RESERVES - HIGH(Losses Including ALAE Limited to Specific and Aggregate Retentions)

LimitedEstimated Estimated Estimated EstimatedRequired Medical Indemnity ALAE

Policy Reserves as Reserves# Reserves# Reserves#Period of 12/31/12 40% 54% 6%

10/1/92-12/31/92 $ 0 $ 0 $ 0 $ 01/1-12/31/93 0 0 0 01/1-12/31/94 247,362 98,945 133,575 14,8421/1-12/31/95 405,041 162,016 218,722 24,3021/1-12/31/96 298,315 119,326 161,090 17,8991/1-12/31/97 794,441 317,776 428,998 47,6661/1-12/31/98 274,234 109,694 148,086 16,4541/1-12/31/99 377,920 151,168 204,077 22,6751/1-12/31/00 516,278 206,511 278,790 30,9771/1-12/31/01 873,222 349,289 471,540 52,3931/1-12/31/02 1,004,927 401,971 542,661 60,2961/1-12/31/03 1,340,492 536,197 723,866 80,4301/1-12/31/04 1,344,283 537,713 725,913 80,6571/1-12/31/05 2,644,099 1,057,640 1,427,813 158,6461/1-12/31/06 2,010,242 804,097 1,085,531 120,6151/1-12/31/07 1,743,384 697,354 941,427 104,6031/1-12/31/08 1,746,288 698,515 942,996 104,7771/1-12/31/09 2,269,190 907,676 1,225,363 136,151

Total $17,889,718 $7,155,888 $ 9,660,448 $1,073,383

# Selected judgmentally.

55


APPENDIX E

COMPARISON TO PRIOR REPORTS

56

Appendix E



COMPARISON OF ESTIMATED ULTIMATE INCURRED LOSSES TO PRIOR REPORTS


A. ESTIMATED ULTIMATE INCURRED LOSSES BASED ON LOSSES VALUED AS OF

Policy

Period 12/31/98^ 12/31/99^ 12/31/00^ 12/31/01^ 12/31/02* 12/31/03* 12/31/04* 12/31/05* 12/31/06* 12/31/07* 12/31/08* 12/31/09* 12/31/10 12/31/11 12/31/12

10/1/92-12/31/92 278,714 282,000 231,996 237,000 219,000 191,000 191,000 191,000 191,000 191,000 191,000 190,898 190,898 190,898 190,898

1/1-12/31/93 1,937,564 1,887,000 1,793,054 1,621,500 1,600,000 1,565,000 1,440,000 1,452,000 1,392,000 1,400,000 1,393,000 1,398,500 1,386,209 1,386,460 1,377,939

1/1-12/31/94 3,297,323 3,121,000 2,917,637 2,838,000 2,825,000 2,575,000 2,538,000 2,475,000 2,450,000 2,500,000 2,515,000 2,540,000 2,737,942 2,761,369 2,762,705

1/1-12/31/95 3,254,426 3,281,500 3,070,909 2,828,000 2,900,000 2,900,000 2,836,000 2,950,000 2,900,000 2,850,000 2,850,000 2,915,000 2,995,718 3,002,961 3,107,732

1/1-12/31/96 3,167,464 2,745,500 2,513,796 2,268,000 2,300,000 2,350,000 2,356,000 2,450,000 2,425,000 2,425,000 2,375,000 2,340,000 2,607,004 2,530,814 2,546,319

1/1-12/31/97 3,397,870 3,113,000 2,663,903 2,481,000 2,600,000 2,700,000 2,835,000 2,975,000 2,900,000 2,800,000 2,800,000 2,800,000 3,390,931 3,402,702 3,413,001

1/1-12/31/98 3,043,303 3,697,000 2,751,871 2,268,000 2,300,000 2,200,000 2,280,000 2,450,000 2,475,000 2,525,000 2,550,000 2,680,000 3,095,007 3,018,054 2,998,746

1/1-12/31/99 3,624,000 2,877,698 2,008,000 1,900,000 1,900,000 1,915,000 2,100,000 2,200,000 2,200,000 2,350,000 2,335,000 2,486,475 2,512,014 2,492,691

1/1-12/31/00 3,185,774 3,033,500 3,400,000 3,750,000 3,987,000 3,900,000 3,950,000 4,000,000 4,050,000 4,125,000 3,826,051 4,038,311 4,043,356

1/1-12/31/01 2,681,000 2,800,000 2,800,000 3,300,000 3,400,000 3,650,000 3,600,000 3,750,000 3,850,000 4,646,621 4,689,363 4,670,273

1/1-12/31/02 3,500,000 3,200,000 3,400,000 3,500,000 3,700,000 3,650,000 3,600,000 3,825,000 4,229,304 4,480,855 4,414,760

1/1-12/31/03 3,400,000 3,500,000 4,000,000 4,000,000 4,200,000 4,350,000 4,750,000 6,189,965 6,270,211 6,205,899

1/1-12/31/04 4,000,000 4,500,000 4,400,000 4,475,000 3,800,000 3,800,000 4,729,587 5,002,052 4,854,443

1/1-12/31/05 3,800,000 3,500,000 3,400,000 3,400,000 3,650,000 5,811,951 6,477,964 6,260,156

1/1-12/31/06 3,700,000 3,600,000 3,600,000 3,750,000 4,459,812 4,585,663 4,952,812

1/1-12/31/07 3,700,000 3,500,000 3,150,000 3,396,152 3,595,952 3,767,174

1/1-12/31/08 3,400,000 2,900,000 3,164,688 3,082,031 3,330,896

1/1-12/31/09 2,500,000 2,999,444 3,373,025 3,552,746

Total 18,376,664 21,751,000 22,006,638 22,264,000 26,344,000 29,531,000 34,578,000 40,143,000 43,833,000 47,516,000 50,474,000 53,499,398 62,343,759 64,400,699 64,942,546

B. CHANGE IN ESTIMATED ULTIMATE INCURRED LOSSES

12/31/98^ 12/31/99^ 12/31/00^ 12/31/01^ 12/31/02* 12/31/03* 12/31/04* 12/31/05* 12/31/06* 12/31/07* 12/31/08* 12/31/09* 12/31/10 12/31/11 12/31/98

Policy to to to to to to to to to to to to to to to

Period 12/31/99^ 12/31/00^ 12/31/01^ 12/31/02* 12/31/03* 12/31/04* 12/31/05* 12/31/06* 12/31/07* 12/31/08* 12/31/09* 12/31/10 12/31/11 12/31/12 12/31/12

10/1/92-12/31/92 3,286 ( 50,004) 5,004 ( 18,000) ( 28,000) 0 0 0 0 0 ( 102) 0 0 0 ( 87,816)

1/1-12/31/93 ( 50,564) ( 93,946) ( 171,554) ( 21,500) ( 35,000) ( 125,000) 12,000 ( 60,000) 8,000 ( 7,000) 5,500 ( 12,291) 251 ( 8,521) ( 559,625)

1/1-12/31/94 ( 176,323) ( 203,363) ( 79,637) ( 13,000) ( 250,000) ( 37,000) ( 63,000) ( 25,000) 50,000 15,000 25,000 197,942 23,427 1,336 ( 534,618)

1/1-12/31/95 27,074 ( 210,591) ( 242,909) 72,000 0 ( 64,000) 114,000 ( 50,000) ( 50,000) 0 65,000 80,718 7,243 104,771 ( 146,694)

1/1-12/31/96 ( 421,964) ( 231,704) ( 245,796) 32,000 50,000 6,000 94,000 ( 25,000) 0 ( 50,000) ( 35,000) 267,004 ( 76,190) 15,505 ( 621,145)

1/1-12/31/97 ( 284,870) ( 449,097) ( 182,903) 119,000 100,000 135,000 140,000 ( 75,000) ( 100,000) 0 0 590,931 11,771 10,299 15,131

1/1-12/31/98 653,697 ( 945,129) ( 483,871) 32,000 ( 100,000) 80,000 170,000 25,000 50,000 25,000 130,000 415,007 ( 76,953) ( 19,308) ( 44,557)

1/1-12/31/99 ( 746,302) ( 869,698) ( 108,000) 0 15,000 185,000 100,000 0 150,000 ( 15,000) 151,475 25,539 ( 19,323) (1,131,309)

1/1-12/31/00 ( 152,274) 366,500 350,000 237,000 ( 87,000) 50,000 50,000 50,000 75,000 ( 298,949) 212,260 5,045 857,582

1/1-12/31/01 119,000 0 500,000 100,000 250,000 ( 50,000) 150,000 100,000 796,621 42,742 ( 19,090) 1,989,273

1/1-12/31/02 ( 300,000) 200,000 100,000 200,000 ( 50,000) ( 50,000) 225,000 404,304 251,551 ( 66,095) 914,760

1/1-12/31/03 100,000 500,000 0 200,000 150,000 400,000 1,439,965 80,246 ( 64,312) 2,805,899

1/1-12/31/04 500,000 ( 100,000) 75,000 ( 675,000) 0 929,587 272,465 ( 147,609) 854,443

1/1-12/31/05 ( 300,000) ( 100,000) 0 250,000 2,161,951 666,013 ( 217,808) 2,460,156

1/1-12/31/06 ( 100,000) 0 150,000 709,812 125,851 367,149 1,252,812

1/1-12/31/07 ( 200,000) ( 350,000) 246,152 199,800 171,222 67,174

1/1-12/31/08 ( 500,000) 264,688 ( 82,657) 248,865 ( 69,104)

1/1-12/31/09 499,444 373,581 179,721 1,052,746

Total ( 249,664) (2,930,136) (2,423,638) 580,000 ( 213,000) 1,047,000 1,765,000 ( 10,000) ( 17,000) ( 442,000) 525,398 8,844,361 2,056,940 541,847 9,075,108

^ Ernst & Young actuarial report. Average of low and high estimates.

* Madison Consulting Group actuarial report.

Elizabeth Long, ACAS, FCA, MAAA 9 Forrest Blend …...9 Forrest Blend Drive . Titusville, NJ 08560 ....

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