1. Risk Analysis ASAP by Actuarial Services and Programs Evaluating Experience of Individual Accounts or Program Groups

2. Purpose of Program Evaluate Actual Experience Loss Ratio Combined Ratio Project Future Experience Indicated Rate Level Change Indicated Loss Cost Particularly useful for monthly or quarterly monitoring of results.

3. Designed for Use by: Senior Underwriting Officer Program Managers Senior Underwriters Large Risk Underwriters Managing General Agents Risk Managers Agents with Large Accounts

4. Risk Analysis ASAP Model Actual Earned Premium Adjustment to Current Rate Level Trend Exposure to Future Period Permissible Loss Ratio Paid Losses Case Loss Reserves Reserves for Unreported Losses Loss Adjustment Expenses Adjustment to Current Benefit/Coverage Level Trend to Future Period Claim Count

5. Built-in User Conveniences Entries on Summary Exhibit transferred to LOB Exhibit for: state, program, experience period, evaluation date, effective date. Can select level of detail to include, and data entry modified accordingly. Deleted entries may be recovered. Tab sequenced through program, with current focus highlighted in yellow. Required steps highlighted and cannot be extinguished until executed.

6. Built-in User Conveniences (cont) Can select to include or exclude: LDF, LAE, Loss Trend, Premium Trend, On-Level Factors (RLAF or BLAF), and can manually over-ride factors. Summary Exhibit displays criteria included in Indication. Creates output file for later retrieval in full detail or e-mailing. Table development screens included with worksheets.

7. Program Flexibility includes: Individual Risk or Group of Risks adjusts length trend, loss development type & effective dates Most Lines of Business & Coverages included but user selects the level of detail to enter Up to 5 Years of Experience (handles partial or truncated years) Handles policy terms of 1, 2, 3, 4, 6, or 12 mos

8. Program Flexibility (cont.) Calendar, Accident, Policy or Report Year Data Loss Development Factors (LDF) vary by Line of Business, Coverage & Limit Paid or Incurred Accident, Policy or Report Year Tort, No-Fault or Add-on No-Fault for Automobile Liability LDFs interpolated between evaluation ages May include LAE as loss factor or in PLR

9. Program Flexibility (cont.) Trend factors by Line of Business & State Defaults to countrywide, if state not found Rate (RLAF) & Benefit (BLAF) On-Level factors by State, Line of Business, Program Up to 10 revisions applying to either applied to new or outstanding business On Calendar, Accident, Policy, Report Year (including partial or truncated years)

10. Graphic: Policy Year vs Calendar Accident Year

11. Premium (or Exposure) Definitions Written Premium (WP) Unearned Premium (UEP) Earned Premium (EP) = WP +UEP at start – UEP at end Current Level EP (CLEP) = EP x Rate Level Adjustment Factors (RLAF) Projected EP = CLEP x Trend Factor

12. When Will RLAFs Be Needed Change in rate level implemented Change in rating modifier on policy (experience, schedule, retro, etc.) Change in increased limits sold (change in Financial Responsibility Limit)

13. Current Level Earned Premium (does not apply to Exposure)

14. Types of Exposure Trend Measured Automobile Physical Damage Age & Symbol Drift Effect of Inflation of Sales Receipts Effect of Inflation on Payroll

15. Premium/Exposure Length Trend

16. Loss Definitions Case Losses = Paid Losses + Case Reserves Ultimate Losses = Case Losses + IBNR Ultimate L&LAE = Ultimate Losses + Loss Adjustment Expenses Ultimate L&LAE on Level = Ulti. L&LAE x Adjustment to Today’s Benefit Level Project L&LAE = Ulti. L&LAE on Level x Trend Factor

17. Loss Emergence Patterns

18. Loss Adjustment Expenses Loss Adjustment Expenses (LAE) = Allocated (ALAE) + Unallocated (ULAE) = Defense & Cost Containment (D&CC) and Adjusting & Other (ao) LAE LAE Factor = Ultimate L&LAE Ultimate Losses

19. Types of Trends on Losses Change in claim frequency Change in average claim cost Change in pure premium

20. Trend from Mid-Point of Experience

21. Length of Loss Trend Period

22. When Will BLAFs Be Needed Common for Workers Compensation to have state revise benefit levels Tort law change, or court interpretation of coverage Change in limits or deductibles sold under program Coverage expansion for program. Change in Financial Responsibility Limit

23. Adjusting to Current Benefit Level

24. Graphic of On-Level Areas

25. Assumptions Included: Premium/Exposure Losses If Group of policies, then evenly spread throughout year, and annual rate revisions. Changes in Rating Mods (experience, schedule, etc) handled as rate changes. Fixed expenses added manually by user. No development applies No Seasonality Age of partial period is adjusted to 12 month period equivalent. Linear interpolation of LDFs valid between evaluation dates.

26. General Observations about: Loss Dev Factors Annual Trends Less mature (age) claims have larger LDF Paid LDF > Incurred LDF Policy Year LDF > Accident Year LDF Increased Limit LDF > Basic Limit LDF Trends increase as limits increase. Excess layer trend >= primary layer trend. Trends compound geometrically.

27. Model Requirements Visual Basic Program for PC use Need Windows platform Size: 12 MB Reads and writes ASCII text files created by program or easily obtained from Excel files and editable as notebook files:.txt,.txb,.txd,.txe

28. Risk Analysis ASAP Risk Analysis ASAP is designed, produced and marketed by: R. Stephen Pulis, ACAS, MAAA Actuarial Services and Programs 1155 Flagmore Drive Katy, TX 77450 (281) 579-2474 ASAP321@aol.com www.ACTUARIAL.BIZ See Price Sheet for costs to purchase or rent.Price Sheet