1. MIRA II Reserve Preliminary Report MIRA II vs MIRA I Presented to the BWC-Actuarial Committee July 21, 2008 Presenter: Rex Blateri, MIRA II Project Manager/Business Lead Presented to the BWC-Actuarial Committee July 21, 2008 Presenter: Rex Blateri, MIRA II Project Manager/Business Lead

2. MIRA II Project: Major Events Online Tutorial to External Customers MIRA II Reserve Evaluation MIRA II Web Testing Preparation for MIRA II Training-Phase II MIRA II Reprediction Service MIRA II Reserve Sign Off: Prediction as of Aug 17, 2008 Prepare Staff for Sept 5 Release of Reserves

3. MIRA II vs. MIRA I Statistics Report Data: Original File Reserves calculated as of June 30, 2008 1.7 million claims sent through original prediction process Approximately 328,000 claims with MIRA II or MIRA I reserves greater than zero

4. MIRA II vs. MIRA I Statistics Report Data: Limited File for Statistical Reporting Private and Public Employer Claims with date of injury 2000 thru 2008 Claims with either a MIRA II or MIRA I reserve greater than zero Not including claims with Injury Type 6 (Medical Only) since BWC suppresses reserves on Medical Only claim NOTE: –Reserve amount is the Total Incurred (prediction) – Total Paid (medical and Indemnity) –Claim reserves where both MIRA I and MIRA II is zero (0) are not used in statistical report

5. MIRA II vs. MIRA I Statistics MIRA II Injury Types: Type 1-Death Type 2-PTD Type 5-Temporary Condition Type 6-Medical Only (not included in claim count and averages) Type 9-Permanent Condition

6. MIRA II vs. MIRA I Statistics Lower overall Reserve predictions Improved and quicker stop logic Lower avg reserve prediction More claims with Reserve equal to zero

7. MIRA II vs. MIRA I Statistics MIRA II vs. MIRA I Claim Count by Injury Type Claim Count shift from Permanent Condition to Temporary * Includes claims with reserve equal to zero (0)

8. MIRA II vs. MIRA I Statistics

9. MIRA II vs MIRA I Average Reserve Breakdown by Injury Type NOTE: Calculation uses only claims with reserves greater than zero, does not include zero claim reserves Identified Error in MIRA II Prediction, Indemnity Prediction Too Low Improved Medical Cost Predictions Fewer Claims Reserved as Type 9 * Claim Count and Averages revised on July 17, 2008 after the publishing of the initial report

10. MIRA II-Improved Accuracy Sample PTD Claim Claim Facts – Claimant Current Age – 26 Remaining Life Years – 48 years ICD-9 – Serious Head Injury Paid to date 2008 - $120,187 Paid 2007 - $315,959 Paid 2006 - $282,342 Paid 2005 - $384,097 Total Medical Paid to date - $2,833,915 Both MIRA I and MIRA II use a method to calculate PTD medical where the first 3 yrs of claim life is consider the ‘critical’ care time period and the years > 3 yrs is consider ‘chronic’ care. In MIRA II ‘chronic’ care considers what has been paid in the current year and the prior three years and uses a weighted average of the paid and than calculates for remaining life expectancy years. MIRA I used a flatter baseline amount for calculating ‘chronic’ care amounts. Summary: It is obvious the MIRA I incurred is too low based on the claimant age, injury and what is being paid annually. The claim will be re-predicted on an annual basis and if the medical payments significantly decrease the prediction will trend downward. 3 + Years of Medical Payments

11. MIRA II-Not Always Lower Reserve Example Claim: Permanent Total Disability (PTD)

12. MIRA II vs. MIRA I Statistics

14. Thank You