Loading...
HomeMy WebLinkAboutBig Independent Cities Excess Pool (BICEP) Financial Stateme (13) CITY OF HUNTINGTON BEAt,.rl MEETING DATE: September 20, 2004 DEPARTMENT ID NUMBER:CK2004-10 Council/Agency Meeting Held: Deferred/Continued to: �4pproved ElConditionally Approved ❑ Ci Denied ler s Sig a re Council Meeting Date: September 20, 2004 Departme D Number: CK2004-10 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND COUNCILMEMBERS o SUBMITTED BY: JOAN L. FLYNN, City Clerk o; PREPARED BY: JOAN L. FLYNN, City Clerk SUBJECT: RECEIVE & FILE BIG INDEPENDENT CITIES EXCESS ROOL (BICEP) FINANCIAL STATEMENTS & INDEPENDENT AjUDI OR'S REPORT -J U N E 30, 2003 AND 2002 Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments) Statement of Issue: The BICEP Joint Powers Agreement between the BICEP member cities requires the Big Independent Cities Excess Pool (BICEP) Financial Statements and Supplementary Information With Independent Auditors Report to be filed as a Public Record with each of the BICEP member cities. The report includes Independent Auditors Report, Balance Sheet, Statements of Operations, Changes in Retained Earnings, Statements of Cash Flows, Notes to Financial Statements, and Claims Development Information from inception to June 30, 2003. Funding Source: Not Applicable. Recommended Action: Motion: Receive and File the Big Independent Cities Excess Pool (BICEP) Financial Statements and Supplementary Information With Independent Auditor's .Report for the years ended June 30, 2003 and 2002. Alternative Action: If Council has questions regarding this report, Council may defer Receiving and Filing to a future meeting. G:\RCA'S\2004rca\CK2004-10 BICEP.doc 8/25/2004 5:21 PM BIG INDEPENDENT CITIES EXCESS POOL STATEMENTS OF OPERATIONS AND CHANGES IN RETAINED EARNINGS Years ended June 30,2003 and 2002 2003 2002 Revenues: Deposit premiums earned $3,188,966 $2,975,593 Expenses: Net increase(decrease)in actuarially determined unpaid losses and loss adjustment expenses (note 3) 3,866,055 1,514,302 Purchased liability insurance and reinsurance 1,687,339 1,239,413 General and administrative expenses 209,440 178,171 5,762,834 2,931,886 Excess of(deficit of)revenue over expenses, before net investment income (2,573,868) 43,707 Net investment income: Investment income 1,440,055 1,351,892 Interest expense 573,937 627,768 866,118 724,124 Excess(deficit)of revenues over expenses (1,707,750) 767,831 Retained earnings,at beginning of year 6,167,933 5,400,102 Retained earnings,at end of year $4,460,183 $6,167.933 The accompanying notes are an integral part of these financial statements. 3 BIG INDEPENDENT CITIES EXCESS POOL STATEMENTS OF CASH FLOWS Years ended June 30,2003 and 2002 2003 2002 Cash flows from operating activities: Excess of revenues(deficit of)over expenses before net investment income $(2,573,868) $ 43,707 Adjustment to reconcile excess (deficiency)of revenues over expenses before net investment income to net cash provided by operations: Write up(write down)of investments to market 463,492 284,509 Increase(decrease)in accounts payable 32,077 (44,052) Increase(decrease)in unpaid losses and loss adjustment expenses 3,487,559 1,494,513 Other asset changes-net -- 15,262 Net cash provided(used)by operating- activities 1,409,260 1393,937 Cash flows from investing activities: Interest received 918,224 894,648 Net change in investment portfolios- Net purchases of long-term investments (1,066,186) (847,573) Net cash provided by(used for investing activities) (147,962) 47,075 Continued on page 5 4 , BIG INDEPENDENT CITIES EXCESS POOL STATEMENT OF CASH FLOWS Years ended June 30,2003 and 2002 (continued) Cash flows from noncapital financing 2003 2002 activities: Interest paid 497,650 549,850 Principal payments 1996 bonds 950,000 900,000 Net cash(used)in noncapital financing activities (1,447,650) 11,449,850) Net increase(decrease)in cash and cash equivalents (186,352) 391,162 Cash and cash equivalents at beginning of year 542,060 150,898 Cash and cash equivalents at end of year The accompanying notes are an integral part of these financial statements. 5 BIG INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS June 30,2003 and 2002 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and-Operations Big Independent Cities Excess Pool (BICEP) was created effective September 23, 1988, by a joint powers agreement among five cities organized and operating under the laws of the State of California. BICEP is organized pursuant to the provisions of the California Government Code for the purpose of providing joint insurance coverage and related risk- management services for member cities. The extension of joint insurance coverage to member cities began October 1, 1988. BICEP's liability program has offered a combination of pooled and commercially purchased public auto and general liability coverages,plus errors and omissions coverage, for losses in excess of the member cities' specified self-insurance retention levels of one million dollars. Individual and aggregate claims in excess of specified levels are covered by excess insurance policies purchased from commercial insurance carriers which, combined with the program's self-funded layers, offer a total of$25 million in coverage limits. Additionally, through its broker, Driver Alliant, it enables its members to purchase worker's compensation insurance as a group. Property insurance was offered until 2002. BICEP is a nonprofit California public agency; thus, it is tax-exempt. It is also considered a "Special District" by the Office of the State Controller, Division of Local Government Fiscal Affairs, for the purpose of filing an Annual Report of Financial Transactions of Special Districts. Basis of Accounting The accounting records of BICEP are maintained on the accrual basis of accounting. Bond Issuance Costs Bond issuance costs are amortized over the life of the bond issue using the straight line method. In 1996 due, in part, to more advantageous interest rates, the 1988 bond issue was retired and new bonds were issued carrying substantially lower interest rates. Cost of issuance expense and the premium paid on retirement are being amortized over the remaining life of the original issue. See note 4 for further explanation, Cash and Cash Equivalents BICEP considers money market funds and all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 6 G INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued) Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): Restricted Cash Restricted cash represents funds held in trust for payment of bond principal and interest, future debt service, and claims payment. Rebatable Arbitrage Earnings Rebatable arbitrage earnings represents the excess of the amount earned on all cash equivalents and investments over the amount which would have been earned if such cash equivalents and investments were invested at a rate equal to the bond yield for activity through January 1, 1995. This excess is subject to change due to bond and investment activity occurring after January 1, 1995. As of the report date there have not been any rebates nor is it anticipated there will be. Deposit Premium Revenue Premiums are recognized as earned over the periods covered by the policies. Under the terms of the Liability Risk Coverage Agreement,between BICEP and its member cities,premium adjustments resulting in additional premium assessments or refunds were to commence in February 1992, covering the experience of BICEP from inception. Premium adjustments are subject to change as the ultimate cost of claims becomes known, investment income and expenses are realized, and BICEP's costs are allocated to each Policy Year. Presentation of premium adjustments has been changed to show the net favorable adjustments as equity, but as noted that amount can change as ultimate outcomes are realized. Unpaid Losses and Loss Adjustment Expenses Estimated unpaid losses and loss adjustment expenses include an amount for losses incurred but not reported. These estimates have been discounted to their present value. Liabilities are based on the estimated ultimate cost of settling the claims, including the effects of inflation and other societal and economic factors. The previously noted claims and ultimate recoveries will be deducted from the gross amount of unpaid losses. Claims which have been incurred but not reported to the claims administrator at June 30, 2003 have been estimated through an independent actuarial analysis based on loss development experience of BICEP and the member cities and available industry loss development data. BIG INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued) Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): BICEP's recognition of losses incurred but not reported is in conformity with Government Accounting Standards Board(GASB 10),Accounting and Financial Reporting for Risk Financing and Related Insurance Issues and the Risk Finance Omnibus (GASB 30) and the American Institute of Certified Public Accountants(AICPA) Statement of position 94-5. At irregular intervals losses have occurred that fell either outside the usual insured layer by the authority or outside the assumed coverages of the excess carrier. In isolated instances BICEP has accepted claims liability along with the insurance carrier and the city of the occurrence. In previous years there was a claim against a city involving due process in a condemnation action, more recently a situation occurred in which one police officer shot and killed another during a drug raid, a third such situation occurred during 2001 and a fourth such incident lead to a disagreement that prompted Pomona's expulsion from the pool in July 2003. See note 7. Use of Estimates Certain assets and liabilities are not subject to precise determination. Specifically, unpaid loss and loss adjustment expense must be estimated. Those losses that have occurred and not been reported can only be estimated by actuarial methods. From year ended June 30, 1995 to year ended June 30, 2000 the $1,000,000 to $2,000,000 loss layer originally carried by BICEP was insured by outside carriers, reducing both the premiums and the risks to the participating cities. Those losses in the $1,000,000 to $2,000,000 layer prior to July 1, 1994 generally have been reported but there is always the possibility of ultimate cost exceeding original estimates. Additionally, as noted previously, there can be the risk of denial of coverage in borderline circumstances. In the years ended after 2001 BICEP shared the $1,000,000 to$2,000,000 layer due to increased costs of outside carriers. Valuation of Investments Investments prior to year ended June 30, 1998 were recorded at cost. Those investment securities are now valued at market as required by Governmental Accounting Standards Board(GASB 31),resulting in restatement of carrying values of investments and changes in previously reported investment income prior to year ended June 30, 1998. The cumulative effects of these adjustments are reflected in retained earnings. See note 5 for further explanation. Note 2 CASH AND INVESTMENTS Under provisions of the California Government Code (Code), BICEP is authorized to invest in: 8 REST FOR CITY COUNCIL ANION MEETING DATE: September 20, 2004 DEPARTMENT ID NUMBER:CK2004-10 Analysis: The BICEP Agreement between cities requires this report to be filed as a public record. In order for the City Council to make a report, audit or any other material a public record in the City Clerk's Office, it must have first been presented to the City Council sitting as a legislative body. The material then becomes a part of the official Council minutes and official files of which the Council and public are aware and able to access as a public record. Environmental Status: Not Applicable Attachment(s): City Clerk's Page Number No. Description _..._...._....__....._.._.._ .............._.. 1. Communication dated July 30, 2004 from Gregory Spiker, ARM, BICEP General Manager, Ken Spiker and Associates, Inc. 2. BICEP Report& Audit and Attachments RCA Author: Flynn/Esparza G:\RCA'S\2004rca\CK2004-10 BICEP.doc 8/25/2004 5:21 PM ATTACHMENT # 1 &h,BIG INDEPENDENT CITIES EXCESS POOL JOINT POWh�t,!ir R I T Y c/o General Manager, Ken Spiker And Associates, Inc. 1100 Sdulfklflower Street, Suite 2100 Los Angeles, California 90015-2115 (213) 748-04tj% (,�o-1%213)�58-6101 Date: July 30, 2004 To: City Clerk, City of Huntington Beach CJ. From: Gregory J. Spiker, ARM, BICEP Board of Directors M Subject: Big Independent Cities Excess Pool (BICEP) Financial > C) Statements and Supplementary Information with Independent Auditor's Report for the years ended June 30, 2003 and 20027; Enclosed please find a copy of the June 30, 2003, Big Independent Cities Excess Pool (BICEP Financial Statements and Supplementary Information with Independent Auditor's Report for the years ended June 30, 2003 and 2002. The BICEP Joint Powers Agreement requires the report to be filed as a public record with your office. Please place the report in the appropriate file in your office. Thank you for your cooperation. Gregory J. Spiker, ARM BICEP General Manager Ken Spiker And Associates, Inc. ATTACHMENT #2 BIG INDEPENDENT CITIES EXCESS POOL Financial Statements and Supplementary Information With Independent Auditor's Report June 30,2003 and 2002 BIG INDEPENDENT CITIES EXCESS POOL Table of Contents Page Financial Statements: Independent Auditor's Report 1 Balance Sheet 2 Statements of Operations and Changes in Retained Earnings 3 Statements of Cash Flows 4 Notes to Financial Statements 6 Supplementary Information Claims Development Information From 1994 to June 30, 2003. Required Supplementary Information 14 EDWARDS, EICHEL & BERANEK CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT The Board of Directors Big Independent Cities Excess Pool We have audited the accompanying balance sheets of the Big Independent Cities Excess Pool (BICEP) at June 30, 2003, and 2002 and the related statements of operations and changes in retained earnings and cash flows for the years then ended. These financial statements are the responsibility of BICEP's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 2003 and 2002 financial statements referred to above present fairly, in all material respects, the financial position of the Big Independent Cities Excess Pool at June 30, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. BICEP has more than 15 years of historical data for use in its estimates of incurred but not reported claims and the corresponding premium adjustments. Although BICEP considers its experience and industry data in determining such amounts, assertions and projections as to future events are necessary and ultimate losses maybe higher or lower than amounts projected. The comparative schedule of Claim Development, on pages 14 and 15 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. p �ol«1q �t�u� a �✓~ Pasadena, California Edwards, Eichel&Beranek May 24,2004 Certified Public Accountants 650 SIERRA MADRE VILLA AVENUE 1 - SUITE#202 PASADENA,CALIFORNIA 91107-2067 626/351-3800 FAx 626/351-3804 WEBSITE www.eebcpas.com BIG INDEPENDENT CITIES EXCESS POOL BALANCE SHEET June 30,2003 and 2002 ASSETS 2003 2002 Cash and cash equivalents,unrestricted $ 35,667 $ 29,855 Restricted cash equivalents 320,040 512,205 Total cash and cash equivalents (Notes 2 and 5) 355,707 542,060 Investments,at market(Note 2) 15,982,703 14,867,023 .Accrued interest receivable 262,341 253,496 Total assets $16,600,751 $15.662� LIABILITIES AND RETAINED EARNINGS Liabilities: Accounts payable $ 52,912 $ 20,835 Unpaid losses and loss adjustment expenses(Note 3) 5,594,866 2,107,308 Bonds payable(Note 4) 6,910,000 7,860,000 Less-unamortized issuance cost 564,496 659,835 6,345,504 7,200,165 Accrued interest payable 147,286 166,338 Total liabilities 12,140,568 9,494,646 Retained earnings 4,460,183 6,167,933 Total liabilities and retained earnings $16.600.751 $15,662,579 The accompanying notes are an integral part of these financial statements. 2 IG INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued) Note 2 CASH AND INVESTMENTS (continued): • A variety of federal and state treasury obligations (including local California agencies) • Obligations or other instruments of or issued by a federal agency or government sponsored enterprise • Bankers' acceptances which are eligible for purchase by the federal reserve system (subject to certain limitations) • Prime quality commercial paper(subject to certain limitations) • Negotiable certificates of deposit issued by nationally or state chartered banks, savings and loan associates and credit unions • Repurchase agreements or reverse repurchase agreements of any securities authorized by the Code Cash and Cash Equivalents,Unrestricted At June 30, 2003, the net carrying amount and deposit balance was $35,667, of which $31,737 was invested in the Local Agency Investment Fund, an investment pool maintained by the State Treasurer. At June 30, 2002, the net carrying amount and deposit balance was $29,855 of which $19,565 was invested in the Local Agency Investment Fund, an investment pool maintained by the State Treasurer. Restricted Cash Equivalents and Investments BICEP invests only in investments that are insured or registered, or for which the securities are held by BICEP or its agent in BICEP's name. Investments held by the Trustee consist of: Cash equivalent-repurchase agreements 2003 2002 and cash $ 320,040 $ 512,205 U.S. Treasury and Federal agency securities 15,982,703 14,867,023 $16,302,743 $15,379M Deposits and investments by governmental agencies are categorized in three classes depending upon the relative level of risk. 9 G INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued) Note 2 CASH AND INVESTMENTS(continued): Category 1 - Cash or investments fully insured or registered or where the securities are held by the unit or its agent in the units name. Category 2 - Uninsured and unregistered instruments held by the broker or advisor's trust department or an agent in the unifs name. Category 3 - Uninsured and unregistered investments held by the broker or dealer or by its trust department or by an agent but not in the unit's name. All of Bicep's cash and investments are in category 1, excepting deposits with the Local Agency Investment Fund(LAIF),which cannot be categorized. Note 3 UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES: The following represents changes in the unpaid losses and loss adjustment expenses for BICEP for the years ended June 30: 2003 2002 Unpaid losses and loss adjustment expenses at beginning of year $2,107,308 $ 612,796 Payments of claims reported (378,498) (19,790) Increase(decrease)in funding levels 3,866,056 1,514,302 Total unpaid losses and loss adjustment expenses at end of year 5 6 2.107.308 Note 4 BONDS PAYABLE, ADVANCE REFUNDING OF 1988 BOND ISSUE AND REDEMPTION OF BONDS OUTSTANDING AS OF MARCH 1,2004: In January 1989, BICEP issued Revenue Bonds Series 1988A for the purpose of acquiring working capital and to finance underwriting expenses. These bonds were outstanding until early 1996 when, as provided in the Bond Purchase Agreement Dated January 29, 1996, revenue bonds in the face amount of$12,550,000 were issued for the advance refunding of the 1988 issue. The 1996 issue carried stated interest rates varying from 5.0 per cent to 6.5 per cent in contrast to the 8.1253 per cent average yield of the remaining outstanding bonds of the refunded issue. 10 BIG INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued)" Note 4 BONDS PAYABLE, ADVANCE REFUNDING OF 1988 BOND ISSUE AND REDEMPTION OF BONDS OUTSTANDING AS OF MARCH 1,2004(continued): Interest on the 1996 bonds was payable semi-annually at rates ranging from 5.0%to 6.15%. Principal maturities range from$625,000 to $1,215,000 and were due annually on March 1, from 1997 through 2009. The bonds maturing after March 1, 2004 were subject to optional early redemption on either March 1, principal and interest payment date, or September 1, interest payment date, at a premium,if any, as follows: March 1, and September 1, 2004 101.0% March 1, and September 1,2005 100.5% March 1, 2006 and thereafter 100.0% On March 1, 2004 the remaining bonds outstanding, principal amount $5,905,000, were redeemed at 101 percent of face value as noted in the preceding schedule. The principal payment of$1,005,000 plus accrued interest of$220,325 was also paid. Remaining deferred balances relating to unamortized costs of both the 1996 issue and the previously refunded original 1988 bond issue amounting $564,496 will be expensed in the year ended June 30,2004. Note 5 ESTIMATED FUTURE PREMIUM ADJUSTMENTS(RETAINED EARNINGS): Until year ended June 20, 2002 BICEP's accounting has consistently charged or credited annually results of operations to the participant cities because as a group they are accountable for the benefits or lack thereof of the pool's operations. GASB 31 became effective for years ended June 30, 1998 with retroactive adjustment of prior years' results preferred. Review of the relationship of cost to market values of investments at July 1, 1996 indicated a minor difference between cost and market value of those investments held by the trustee ($26,568 of market value lower than cost on investments at cost of $15,649,511). Accordingly,no adjustment was made at July 1, 1996. At June 30, 1997 market exceeded cost by$75,565 and at June 30, 1998 market exceeded cost by$172,618. At June 30, 1997 financial statements were restated as follows: 11 BIG INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued) Investments Estimated Future held by trustee Premium Adjustments As originally reported $13,374,164 $581,943 Market value adjustment 75,565 75,565 As restated $13,449,722 �. At June 30, 2003 and June 30,2002 investment securities are valued at market. Note 6 EXCESS INSURANCE: Historically BICEP has reinsured its risks under excess of loss reinsurance agreements for the purpose of limiting its maximum exposure on any one loss or group of losses. BICEP is contingently liable for losses and loss adjustment expenses related to ceded business to the extent that its excess carrier is unable to fulfill its commitments. Management believes that its excess carrier is and will continue to be able to satisfy its obligations under the reinsurance agreement. There have been instances in which BICEP has paid claims in excess of its layer of coverage or on ceded coverages due to special circumstances. For the years beginning in the year ended June 30, 1995, and continuing through June 30, 2000, because of substantial reductions in rates, BICEP placed all of its liability coverages with private insurance carriers. This included the $1 million to $2 million layer, which was previously retained. In years after June 30, 2000 BICEP shared the $1,000,000 to $2,000,000 layer with an excess carrier. BICEP's liabilities for unpaid losses and loss adjustment expenses as of June 30, 2003 and June 30, 2002, have been estimated net of amounts that would be recoverable from the excess insurer. For the years ended June 30, 1995 through June 30, 2000 BICEP had no direct liability having placed all of its coverages with outside carriers, except in those rare instances that there was a reason to go beyond the coverage limitations. In years ended June 30,2002 and'2003, as previously noted,the$1,000,000 to $2,000,000 layer was shared. Note 7 EXPULSION OF POMONA Effective July 1, 2003, by refusing to pay its share of the premiums for the year 2003 — 2004 Pomona was expelled from BICEP. The matter arose over a denial of coverage by the excess carrier on the matter of Kline versus Pomona. The computation of amounts due from Pomona are subject to litigation and the various discussions in progress as of the date of this report. 12 BIG INDEPENDENT CITIES EXCESS POOL NOTES TO FINANCIAL STATEMENTS (continued) Note 8 ADNIISSION OF WEST COVINA AS A PARTICIPANT IN THE POOL The city of West Covina was admitted as a member of the Authority effective July 1, 2003. The process of admission included review of its loss history by the Authority's actuary, analysis of its financial status by BICEP's accountants and acceptance by the four remaining members of the governing board. 13 SUPPLEMENTARY INFORMATION BIG INDEPENDENT CITIES EX 3S POOL CLAIMS DEVELOPMENT INFOK,AATION Cumulative From Inception Through June 30, 2003 Policy Year Ended June 30,2003 1994 1995 1996 1997 1. Net deposit premium $2,513,490 $1,941,159 $1,776,903 $1,916,360 revenue earned and investment income 2. Other costs $1,717,915 $1,715,043 $1,190,895 $1,650,761 3. Estimated incurred claims and expenses, end of policy year $1,035,407 $0 $0 $0 4. Paid claims (cumula- tive)as of: End of policy year — -- --One year later -- -- $56 Two years later $100 -- $11,428 -- Three years later $3,285 $106 $1,214,988 -- Four years later $1,106,257 $3,024 $1,217,445 -- .Five years later $1,067,076 $2,589 $1,221,408 $2,513 Six years later $1,107,802 -- $1,223,769 -- Seven years later -- -- $1,300,581 Eight years later -- -- Nine years later -- Ten years later Eleven years later Twelve years later Thirteen years later Fourteen years later 5. Re-estimated incurred claims and expenses: End of policy year $1,035,407 $0 $0 $0 One year later $767,244 $0 $0 $0 Two years later $809,059 $0 $0 $0 Three years later $1,231,328 $0 $59,562 $0 Four years later $2,195,310 $106 $1,214,989 $2,513 Five years later $2,097,417 $3,024 $1,221,676 -- Six years later $1,139,548 $15,106 $2,445,373 -- Seven years later $1,067,748 $2,412 $2,223,868 Eight years later -- -- Nine years later -- Ten years later Eleven years later Twelve years later Thirteen years later Fourteen years later 6. Increase (decrease)in estimated incurred claims and expenses $301,547 $2,412 $2,223,868 $2,513 from end of policy year 1998 1999 2000 2001 2002 2003 $2,016,625 $2,317,676 $2,137,519 $2,231,046 $2,180,406 $2,984,956 $1,563,652 $1,656,277 $1,661,874 $1,671,750 $1,675,939 $1,722,429 $0 $0 $0 $0 $973,285 $919,969 $4,433 $2,372 -- $1,354 $8,500 -- $4,526 $1,323 $869,216 $5,898 -- $0 $0 $0 $5,000 $300,000 $27,225 $0 $0 $0 $1,354 $393,089 $0 $2,372 $1,323 $918,440 $10,000 $752,198 -- $15,000 $4,617 $5,898 $5,898 $4,617 $1,323 $918,440 ($42,923) ($459,018) 14 BIG INDEPENDENT CITIES EXCESS POOL CLAIMS DEVELOPMENT INFORMATION Ten years' Calculation through June 30,2003 Explanation of the Claims Development table on the preceding page The table on the preceding page illustrates how BICEP's earned revenues and investment income compare to related costs of loss and other expenses assumed by BICEP as of the end of each policy year. The rows of the table are defined as follows: 1. This line shows the total of each fiscal year's earned deposit premiums and investment income,net amounts earned for purchased reinsurance. 2. This line shows each fiscal year's other operating costs including overhead and claims expense not allocable to individual claims. 3. This line shows the estimated incurred losses and allocated loss adjustment expenses as originally reported at the end of the first year in which the event that triggered coverage under the contract occurred (both paid and accrued) net of loss assumed by excess or reinsurers. 4. This line shows the cumulative amounts paid as of the end of successive years for each policy year. 5. This section of rows shows how each policy year's incurred claims and expenses increased or decreased as of the end of successive years. This annual re-estimation results from new information received on known claims, re-evaluation of existing information on known claims, as well as emergence of new claims not previously known. 6. This line compared the latest re-estimated incurred claims and expenses amount to the amount originally established (line 3) and shows whether this latest estimate of claims and expenses costs are greater or less than originally thought. As data for individual policy years mature, the correlation between original estimates and re-estimated accounts is commonly used to evaluate this accuracy of incurred claims and expenses currently recognized in less mature policy years. 15 RCA ROUTING SHEET INITIATING DEPARTMENT: City Clerk's Office SUBJECT: Receive & File Big Independent Cities Excess Pool (BICEP) Financial Statements & Independent Auditor's Reports - June 30, 2003 COUNCIL MEETING DATE: September 7, 2004 ...... .... .... ........ ....._ ..... _ ......... RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City Attorney) Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Not Applicable Financial Impact Statement Unbudget, over $5,000 Not Applicable Bonds If applicable) Not Applicable Staff Report If applicable Not Applicable Commission, Board or Committee Report If applicable) Not Applicable Findings/Conditions for Approval and/or Denial Not Applicable ...... EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RETURNED FORWARDED Administrative Staff Assistant City Administrator Initial City Administrator Initial City Clerk ................. .. ........... ................_...... . ..__ EXPLANATION FOR RETURN OF ITEM. Only)(Below Space For City Clerk's Use RCA Author: Joan Flynn/Esparza RCA ROUTING SHEET INITIATING DEPARTMENT: City Clerk's Office SUBJECT: Receive & File Big Independent Cities Excess Pool (BICEP) Financial Statements & Independent Auditor's Reports - June 30, 2003 and 2002 COUNCIL MEETING DATE: September 20, 2004 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City Attome Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City Attome Not Applicable Certificates of Insurance (Approved by the City Attorney) Not Applicable Financial Impact Statement Unbudget, over$5,000) Not Applicable Bonds (If applicable) Not Applicable Staff Report If applicable) Not Applicable Commission, Board or Committee Report if applicable Not Applicable Findings/Conditions for Approval and/or Denial Not Applicable ........ .... ............... ._ .. . . ............ _ . EXPLANATION FOR MISSING ATTACHMENTS . _. _ __ REVIEWED RETURNED FORWARDED: . Administrative Staff Assistant City Administrator Initial City Administrator Initial City Clerk E PLANATION FOR RETURN OF ITEM. 7 a (Below . . For Only) RCA Author: Joan Flynn/Esparza