ABAG PLAN Corp. 17th Annual Board of Directors Meeting May 28, 2003 South San Francisco, CA

AGENDA Business Meeting Year in Review Actuary & Underwriting Report –Actuarial Analysis –Renewal Options –Funding Recommendations Loss Prevention Programs –Risk Assessment –Police Training & Equipment –Sewer Backflow Prevention

AGENDA Financial Summary –Investment Performance Report –Audited Financials Planning Meeting Update Claims Committee Report –Staffing Plan Update –Loss Run & Analysis Administrative Budget

ABAG PLAN Mission Statement The purpose of the PLAN is to benefit the citizens of each Member Entity by establishing a stable, cost-effective self-insurance, risk sharing and risk management program for each Member Entity.

Actuary Report John Alltop, Principal Actuary, Bickmore Risk Services, will present his firm’s report of the PLAN’s outstanding liabilities as of 6/30/03 and funding for FY expected losses.

Renewal Options Dennis Mulqueeney, Vice President, Driver Alliant Risk Services, will present his firm’s activities and results in marketing the PLAN’s excess liability and property coverages for FY 203/04

Funding Options & Recommendations Outstanding Liabilities –Comparison of 6/30/02 & /03 Expected Liabilities and Fund Balances –Retention of funds > 90% CL in SIR Fund Funding for FY –Funding Guidelines & Ratios –Cost of excess insurance at various levels –Choice of SIR

Funding Policy Objectives Sufficient assets to pay expected losses Stability of funding to avoid substantial fluctuations in deposits or assets Support risk management programs to benefit all members

Funding Policy Distribution of Funds* EXPECTED LIABILITIES (50% CL, disc.) $11.2 million RISK MARGIN FUND (50% TO 90% CL) $5.4 million SIR FUND (Above 90% CL) $ 16.8 million Loss Prevention Programs $350,000 * Projected 6/30/03

Funding Comparison FY02 to 03

Funding Policy Benchmarks Maintain Risk Margin Fund at 90% CL Yearly Deposit at least 50% CL – Goal = 70%. Total Fund to SIR ratio at least 2:1 –Goal = 3:1 SIR Fund to SIR ratio at least 1:1 –Goal = $10 Million Revise to 2:1?

Funding Ratio Comparison

FY Liability Program Funding Ratios allow for up to $7 mil retention $3 mil xs $7 mil SIR = $300,000 –Total Funding -2.3% from 02/03 $5 mil xs $5 mil SIR = $416,500 –Total Funding + 0.5% from 02/03 Increase in $5 mil premium = 8.5% Recommendation was cap at $400,000

FY Funding Recommendations $5 xs $5mil Option –Price per “riskier” million is $83,300 vs. $100,000 for $3 mil xs $7 mil option –Compare to $93,514 per mil for “riskier” $7 xs $3 mil layer Increase of 8.5% less than expected –30% average, 19-20% expected –Enough to consider raising retention Increased funding ratios/stability

Liability Program Funding Board Motions Fund FY expected losses with a $5 mil or $7 mil SIR Maintain funds > 90% CL in the SIR Fund.

Property Program Funding See Funding & Comparison FY 2003 v. 04 Insurance Premium Decrease from $ to $0.05 per $100 TIV Change in Total Funding = -4% Continue to fund appraisals with service credits and up to $50,000 of pool funds. Board Motion to Approve Funding

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7. Loss Prevention Programs Risk Assessment Sewer Program Update Police Training & Equipment Defensive Driving Risk Management Training

Risk Assessment BRS Proposal Safety Perception Assessment Loss Analysis & Savings Projections Risk Assessment Site Surveys Risk Assessment Report Safety Video Library & Reference Material Follow Up Consultation & Training

Risk Assessment BRS Proposal Option B (p. 14) $106,000/yr. for 2 years to complete $20,000 for follow up as needed Total Funding Request = $232,000 Recommended as presented with addition of cancellation provision.

7. Loss Prevention Programs Sewer Program - Update –Training Sessions Completed Maintenance, Prevention & Response Verbal Judo –Model Ordinances being implemented –Public Education Brochures Completed –Pop-Up Matching Grant Program > 2,000 –Total Spent $50,000 of $125,000 budget

7. Loss Prevention Programs Sewer Program - FY 2003/04 –Training - first response and code issues –Maintenance Audit - Larry Rugaard –Public Service Announcements –Continue grant program for pop-ups –Complete inserts for remaining members –Claim specialist working with members –No new funds requested

7. Loss Prevention Programs Police Risk Management –POST Funding Cut –South Bay has started mobile training –Escalation of Force training well attended –In-car Camera Matching Grants –Total Funding Recommendation = $103,962

7. Loss Prevention Programs Defensive Driving - $5,000 –State of CA Program well received – Policy part of Risk Assessment Risk Management Education - $10,000 –Up to $500 per member –PARMA, IEA, ARM courses, etc. Board Motion to Approve Programs –Total Funding Request = $350,962

8.A. Investment Performance Presented by Joseph Chan, Finance Director

Investment Policy Objectives Safety of invested funds Liquidity to meet cash flow needs Yield is maximum possible consistent with above principles

Investment Report

Balance Sheet June 30, 2002

Financial Report Board Motion to accept the Investment Report and Audited Financials as of 6/30/02

9. Planning Meeting Progress Previous Goals Identified –Funding Policy - Implemented –Staffing Plan - update in claims report –Evaluate Loss Control Approach - complete –Update Strategic Plan Annually - scheduled –Document Review - begun –Define Committee Roles - begun –Become Accredited? TBD

9. Planning Meeting Progress Eight Goals from October 2002 & progress Implement loss control approach –begin w/ risk assessment Recommended practices/audit –begin w/ risk assessment –List of consultants and lists of model policies Rent a risk manager –examiners & RM available, consultant? Humiliate non-participants –see claim reports

9. Planning Meeting Progress Eight Goals from October 2002 & progress Good standing v. bad standing members –will grade based on risk assessment and losses Current listing of board members and alternates –on site Continue to evaluate the funding variables to update/revise funding policy –discussion & decisions today MOC Revision to include one insuring agreement and one set of exclusions –at next retreat and by 7/1/2004

9. Planning Meeting 2003 Governing Doc Revisions –MOC –Bylaws –Claim Policy Review of Funding Policy Full Day for Board 1/2 Day for Exec Cmte Approval of meeting schedule & topics

10. Claims Committee Report Staffing Plan Update Claim Reports

Staffing Plan Needs of Members –Improved claimant communication –Follow up to ensure hazards remedied –Balance workload & staffing –Keep improving services –Minimize claim costs –Maintain & improve RM programs

Staffing Plan Needs of Staff –Improve examiner support –Improve risk management support –IT contact for RiskMaster –Web site support –Improve legal support –Improve member involvement

Staffing Plan Update Mixed results outsourcing sewer claims –Communication with claimants and members –Costs continue to escalate –Recovery workload and expansion of duties –Dedicated property expertise Need to develop expertise in-house –New Hire = Bruce Carey. Property and Recovery Specialist

Staffing Plan Update More resources devoted to sewer claims –New Hire –More Training –Test case for code defense –Public education and back flow devices Continue addressing needs - improving service and minimizing claim costs

Claim Reports

11. Admin Budget Total Expenses = $1,873,578 –11% Increase from FY02-03 –14% Increase in Personnel, driven by increased overhead, including benefits and new hire Total Funding = $1,800,000 –Difference of $73,578 from reserve –Used $160,000 of reserve in FY Board Motion to Approve Admin Funding

Other Business? Questions? Comments? Announcements? Motion to adjourn

THANK YOU! From the ABAG staff - thanks for your support and assistance. We look forward to working with you in FY