HomeMy WebLinkAboutFinance Committee - October 18, 2018CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA - Final
100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D
Thursday, October 18, 2018 - 3:00 PM
Finance Committee Members:
Will O'Neill, Chair / Mayor Pro Tem
Diane Dixon, Council Member
Scott Peotter, Council Member
William Collopy, Committee Member
Joe Stapleton, Committee Member
Larry Tucker, Committee Member
VACANT, Committee Member
Staff Members:
Grace K. Leung, City Manager
Carol Jacobs, Assistant City Manager
Dan Matusiewicz, Finance Director / Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that
the Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that
the public be allowed to comment on agenda items before the Committee and items not on the agenda but are within
the subject matter jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount
of time, generally three (3) minutes per person.
The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an
attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, we will
attempt to accommodate you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least
forty-eight (48) hours prior to the meeting to inform us of your particular needs and to determine if accommodation is
feasible at (949) 644-3123 or dmatusiewicz@newportbeachca.gov.
NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT
Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance
Department 24 hours prior to the scheduled meeting.
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be
within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments
to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for
the record. The Finance Committee has the discretion to extend or shorten the speakers’ time
limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all
speakers. As a courtesy, please turn cell phones off or set them in the silent mode.
IV.CONSENT CALENDAR
MINUTES OF SEPTEMBER 6, 2018A.
Recommended Action:
Approve and file.
DRAFT MINUTES 090618
October 18, 2018
Page 2
Finance Committee Meeting
V.CURRENT BUSINESS
STATUS OF INSURANCE RESERVE (GENERAL LIABILITY AND WORKERS’
COMPENSATION) FUND
A.
Summary:
The Insurance Reserve Fund was established to account for costs associated with
the general lability and workers’ compensation programs. The City employs an
actuary to estimate the liabilities and recommend a range of funding options
associated with each program. The actuary will provide a high-level review of the
actuarial valuations and key trends. Staff has identified preliminary
recommendations that should be considered in the proposed 2019-2020 Budget.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
ATTACHMENT B
FUNDING STATUS OF KEY RESERVESB.
Summary:
Prudent financial management requires that some portion of available funds be
reserved for future use. Council Reserve Policy F-2 establishes reserve
requirements and funding policies associated with key reserves. Staff has prepared
a summary of the funding status of the City’s key reserves for the Committee’s
review.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
ATTACHMENT B
FISCAL SUSTAINABILITY PLAN REVIEWC.
Summary:
The Finance Committee periodically reviews the Fiscal Sustainability Plan to align
its ongoing work with the Plan and to consider any changes deemed necessary.
Many of the elements contained in the plan are incorporated in Council policies that
are reviewed by the Finance Committee on an ongoing basis.
Recommended Action:
Review the Fiscal Sustainability Plan, suggest and recommend changes as needed
for submittal to the City Council for final approval.
STAFF REPORT
ATTACHMENT A
October 18, 2018
Page 3
Finance Committee Meeting
FISCAL YEAR 2017-2018 YEAR END SURPLUSD.
Summary:
The Finance Department has prepared a preliminary 2017-2018 fiscal year-end
General Fund surplus estimate.
Recommended Action:
Receive and file.
STAFF REPORT
BUDGET AMENDMENTS (QUARTER ENDED SEPTEMBER 30, 2018)E.
Summary:
The purpose of this memorandum is to report on the budget amendments for the first
quarter of Fiscal Year 2018-2019. All budget amendments are in compliance with
City Council Policy F-3, Budget Adoption and Administration.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
WORK PLAN REVIEWF.
Summary:
Staff has provided the Committee agenda topics scheduled for the remainder of the
calendar year.
Recommended Action:
Receive and file.
ATTACHMENT A
VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS
WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR
REPORT (NON-DISCUSSION ITEM)
VII.ADJOURNMENT
Finance Committee Meeting Minutes September 6, 2018
Page 1 of 7
CITY OF NEWPORT BEACH FINANCE COMMITTEE
SEPTEMBER 6, 2018 MEETING MINUTES I. CALL MEETING TO ORDER
The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Mayor Pro Tem/Chair Will O’Neill, Council Member Diane Dixon, Council
Member Scott Peotter, Committee Member William Collopy, and Committee Member Larry Tucker
ABSENT: Committee Member Joe Stapleton (excused) and Committee Member
(VACANT POSITION)
STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Dan Matusiewicz, Deputy Director/Finance Steve Montano, Administrative
Specialist to the Finance Director Marlene Burns, and Public Works Administrative Analyst Raymond Reyes
OTHER ENTITIES: Jayson Schmitt (Chandler Asset Management)
MEMBERS OF THE
PUBLIC: Jim Mosher and Jennifer McDonald
III. PUBLIC COMMENTS
Chair O’Neill opened public comments.
Jim Mosher acknowledged various employee transitions in the City, including the new City Manager, and suggested review of the appropriate maximum dollar amount for administrative
authorization for contracts and services, consideration of performance-based budgeting, and review of pension costs utilizing the case scenario of the former City Manager and current City
Manager.
Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments.
IV. CONSENT CALENDAR
A. MINUTES OF JUNE 28, 2018
Recommended Action: Approve and file.
MOTION: Committee Member Tucker moved, and Committee Member Collopy seconded, to
approve the minutes, as amended. The motion carried with 3 ayes – 0 noes, 2 abstentions (O’Neill and Peotter), and 1 absence (Stapleton).
Finance Committee Meeting Minutes September 6, 2018
Page 2 of 7
V. CURRENT BUSINESS A. ANNUAL REVIEW OF INVESTMENT POLICY
Summary: Review Investment Policy Recommended Action: Receive and file.
Chair O’Neill introduced the item and noted there were no recommended changes to the policy
at this time.
Chair O’Neill opened public comments.
Jim Mosher noted the Committee would be reviewing the Investment Performance in Item 5B; however, any policy changes should be made during this item, and that appeared
counterintuitive. He noted there were no recommended changes at this time, although he mentioned the historic change from multiple advisors to one advisor. In his opinion, there
seemed to be lack of motivation to change back to multiple advisors. He noted the policy was adopted via the City Council Consent Calendar and he expressed concern the practice does
not allow for appropriate City Council vetting and public discussion.
The item was unanimously received and filed by the Committee.
There was no further action taken on this item.
B. INVESTMENT PERFORMANCE REVIEW Summary:
Staff and/or the investment advisor will describe the performance of the City’s investment portfolio.
Recommended Action: Discuss and provide direction regarding policy recommendations as appropriate. If applicable, direct staff to propose changes to City Council for consideration at a future date.
Committee Member Collopy inquired as to the proper protocol for staff presentations on agenda items. He noted the staff presentations may stimulate questions or further discussion by the
Committee.
Chair O’Neill acknowledged the point and stated he would encourage presentations for items with additional information, or information that had not yet been reviewed or received by the
Committee. He will call for questions or input from the Committee and the public on “receive and file” items; however, if there is an absence of new information to present, a staff presentation will not be required.
Committee Member Tucker inquired as to the duration of the portfolio, as is it is his understanding it was leaning more toward the three-year range.
Finance Director Matusiewicz responded, at the advice of the City’s investment advisor, the City is still using a one-to-three year strategy; however, staff prefers to move to a one-to-five
year strategy at an appropriate time but especially when the yield curve steepens. Discussion ensued regarding the appropriate yield thresholds that would trigger review of the City’s investments.
Jayson Schmitt, representing Chandler Asset Management, responded relative to the upcoming Federal Reserve meeting and proposed changes to rates. In the next six months, it
is likely that the Federal Reserve will consider increasing interest rates and noted the average
Finance Committee Meeting Minutes September 6, 2018
Page 3 of 7
maturity of the portfolio is 1.8 years. Based upon the upcoming meeting, the City will be in a
better position in approximately six months to address the yield curve.
Committee Member Collopy inquired as to the steepness of the yield curve over the next two- to-three years. Mr. Schmitt noted the impacts of inflation and Federal Reserve decreases to its
balance funds sheets.
Committee Member Collopy inquired as to the trigger for the City to change its investment policy from one-to-five years versus five-to-ten years. He recommends allowing staff to pursue
a five-to-ten year plan.
Chair O’Neill noted discussions by the City Council related to General Liability and Workers’ Compensation that will be required prior to any review of investment performance. Discussion
ensued regarding asset liability management and risk mitigation strategy. Committee Member Tucker expressed concern with extending the timeframe out five-to-ten years.
Chair O’Neill noted he shared the same concern; therefore, preferring a shorter-term
investment policy.
The item was unanimously received and filed by the Committee. There was no further action taken on this item.
C. RESERVE POLICY
Summary: Further discussion and consideration of reserve policy pursuant to findings in Draft Report:
GFOA Risk Based Analysis of General Fund Reserve Requirements. Recommended Action:
Discuss and provide staff direction to revise the reserve policy as appropriate and bring changes to Council for consideration at a future date.
Chair O’Neill thanked the Committee, consultant, and staff for their efforts related to this item.
Finance Director Matusiewicz provided a brief overview of the item as related to various
exposures, such as, revenue volatility and recession but noted only the short-term impact of the pension expense volatility was considered. GFOA stated that this is a policy choice;
however, there is a two-year lag between valuation and when rates will commence. This matter is a budgetary concern. There may be a potential for very large numbers, in particular the
assets currently with CalPERS, and analysis shows various loss scenarios in monetary figures. Once the City becomes fully-funded, there will be more volatility in the investment return.
Committee Collopy reviewed the losses presented in the documents provided. He noted the
significant gain to be realized in 2018; however, he noted it was still undetermined what the loss would be in 2019. He inquired how the Committee would be informed and what potential
actions they could take once advised of losses.
Committee Member Tucker noted the impacts of pensions are more ambiguous and the City continues to have exposure to other types of risk.
Committee Member Collopy stated he previously considered the City’s reserve policies as too
conservative; however, given the recent study and analysis, he is in favor of keeping the money in the current reserve structure.
Committee Member Tucker inquired whether the funds, if transferred from reserves, would be
spent toward specific projects.
Finance Committee Meeting Minutes September 6, 2018
Page 4 of 7
Finance Director Matusiewicz confirmed that staff would advise the Committee as soon as
possible regarding potential losses. If a loss was incurred in 2018 the impact would be estimated, and built into the recommendation for contributions during the 2019-2020 budget
year.
Council Member Peotter inquired whether the Committee would be reviewing the General Fund Operating Budget and other funds. Finance Director Matusiewicz confirmed the Committee
would be presented with deeper information on the various funds and specific project funding for sea walls, as an example, and other projects. He spoke regarding the short-term and long-
term investments related to asset liability management and capital projects.
Discussion ensued related to the various Master Plans, the Facilities Financial Plan, and the City’s general long-term capital project finance strategy.
Chair O’Neill expressed support to modify the reserve policy to reflect the City’s current practice
over the past several years.
Finance Director Matusiewicz stated that interfund transfers are excluded from operating fund expenditures. Interfund transfers tend to be exceptions. Due to the new Master Plans and
pension discretionary payments, the City would prefer to continue funding these items to stay the course. Those payments should be included in the cap, to provide a soft landing during
leaner years, so that the City can continue payments and weather-out the storm.
Committee Member Collopy stated he is opposed to changing the contribution reserve formula to be based off of revenue, because it generates a bigger number. He is confident in the current
amount of reserves, and prefers to stay the course at 25%. He requested discussions and analysis related to risk situations and leans against the reserves in the upcoming years.
Discussion ensued regarding data related to earnings losses and upcoming payment
schedules. Finance Director Matusiewicz suggested the target payment to CalPERS should be between $32 to $35 million, and with that large commitment, the City needs to be aware of
potential risk exposures. He suggested using the reserve to stay the course.
Chair O’Neill stated the City Council policy is a directive to the City Manager, and it is the responsibility of the City Manager to explain the rationale of why a request for waiver of any
Council policy is suggested at any particular time. He suggested to either keep the current policy as-is or modify the existing policy to reflect the City’s actions over the past several years,
as this seems to be the understood best practice at this time. He wants to avoid requests for waivers each year.
Council Member Dixon prefers the existing plan of 25%. However, if there is a plan to reach
$32 to $35 million pension payment, she inquired as to whether the reserves can be increased to ensure the pension payment going forward. Discussion ensued regarding projected
revenues, use of budget surplus, building them into the reserves, and whether discretionary payments should be sent directly to CalPERS.
Chair O’Neill opened public comments.
Jim Mosher commented there is a capital improvement project mechanism in the City Charter
for making firm and permanent commitments towards a particular project. He expressed indifference on the reserve policy, although he did comment the distributed handout has an
assumption of a 7% average investment return, with +/- of 12%. He inquired as to how likely the percentage of the investment portfolio return would be, in that range.
Finance Director Matusiewicz responded the likelihood is two standard deviations from the
mean expected return.
Finance Committee Meeting Minutes September 6, 2018
Page 5 of 7
Chair O’Neill expressed support for a motion to modify the City Council policy to maintain the reserves at 25% of the total operating budget, with the exception of discretionary payments
toward the City’s unfunded pension liability, until the net pension costs fall below 8% of the general fund revenues.
Discussion ensued regarding whether the statement, “until the net pension costs fall below
8%...” should be included in the reserve policy and various matters related to the discretionary payments towards the unfunded pension liability. Finance Director Matusiewicz stated the
language was included in an effort to get to a point where the unfunded pension liability was paid off.
FINAL MOTION: Chair O’Neill moved, and Council Member Dixon seconded, to modify the
current City Council reserve policy to maintain the reserves at 25% of the total operating budget, with the exception of discretionary payments toward the City’s unfunded pension
liability. The motion carried with 4 ayes – 1 no (Peotter), and 1 absence (Stapleton).
D. REVIEW OF FINANCE COMMITTEE PURPOSE AND RESPONSIBILITIES Summary:
Review City Council Resolution 2017-58 (Finance Committee Purpose and Responsibilities), suggest and recommend changes as needed for submission to the City Council for final
approval. Recommended Action:
Discuss and recommend changes as appropriate.
Chair O’Neill noted Committee Member Tucker’s contribution to this item.
Committee Member Tucker noted his desire to reflect the actual actions and activities of the Finance Committee.
Chair O’Neill opened public comments.
Jim Mosher, in reference to Page 3 of 5 of the document distributed with this item, stated if the
Finance Committee’s goals are to encourage public participation, he suggested scheduling future meetings later in the evening and not in conflict with any other scheduled City public
meeting. In reference to the handout from Commission Member Tucker, he inquired as to the plan and desire of the Finance Committee to place on their annual agenda a discussion related
to maximizing City revenues and minimizing costs.
Council Member Dixon supports the changes proposed by Commission Member Tucker and notes the Finance Committee’s regular review of operations, financial policies, and various
other items through analysis and deep-dives into revenues and expenditures.
Committee Member Tucker noted the non-discretionary nature of most sources of City revenues. He does not see this as an annual activity for the Finance Commission; however, it
could be conducted on an as-needed basis.
FINAL MOTION: Committee Member Tucker moved, and Council Member Dixon seconded, to modify the purposes and responsibilities section of the Finance Committee document, as
proposed in the document distributed by Committee Member Tucker. The motion carried with 5 ayes – 0 noes, and 1 absence (Stapleton).
Finance Committee Meeting Minutes September 6, 2018
Page 6 of 7
E. BUDGET AMENDMENTS (QUARTER ENDED JUNE 30, 2018) Summary: Receive and file a staff report on the budget amendments for the prior quarter.
Recommended Action: Receive and file.
Chair O’Neill introduced the matter and noted this is a review and file item.
Council Member Peotter inquired as to the purpose of the April 13, 2018, transfer for Capital
Improvements.
Budget Manager Giangrande responded the transfer was to close-out completed Public Works projects in the 2018 fiscal year and includes information through March 2018. All balances
remaining are returned to the original fund to allow for reappropriation, if necessary.
Chair O’Neill opened public comments. Noting there were no members of the public who elected to speak, Chair O’Neill closed public comments.
There was no further action taken on this item.
F. REVIEW OF FINANCE COMMITTEE WORKPLAN
Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the
calendar year. Recommended Action:
Discuss and comment as necessary.
Chair O’Neill introduced this matter.
Discussion ensued regarding the Workplan structure and items currently listed on the document.
Chair O’Neill noted that the October meeting will include a detailed discussion on City Council
Policy F-14 and Workers’ Compensation/General Liability Actuarial Valuation Update, and Fiscal Sustainability.
Commission Member Tucker requested a standing item regarding pensions, not to necessarily
be discussed at every meeting, but to ensure that there is a placeholder on the Agenda if the matter arises. Chair O’Neill would work with the City Attorney regarding the required noticing
for such items.
In response to an inquiry from Council Member Dixon, Finance Director Matusiewicz confirmed the City can consult with Mr. John Bartel of Bartel and Associates on an hourly basis, as
needed. Chair Dixon wants to ensure the continuity of his knowledge on various items.
Council Member Peotter suggested the inclusion of a status or resolution column on the Workplan to inform as to the action taken on any particular matter. He would like to add “Section
115 Trusts” as an additional Workplan item. Discussion ensued regarding Section 115 Trusts. Chair O’Neill noted his suggested item on discretionary pension contributions would include a
Section 115 Trust component, and is scheduled for the November meeting.
In response to an inquiry from Council Member Dixon, Finance Director Matusiewicz stated, that, generally, information related to any year-end surplus funds will be provided once they
are more polished and reviewed by the City Manager.
Finance Committee Meeting Minutes September 6, 2018
Page 7 of 7
Committee Member Collopy stated there are reserves that are built into various budget line
items and would like to have a staff presentation centered around these types of funds.
Chair O’Neill expressed support for a future study session related to Reserve Policy F-2 and non-general fund reserves. Chair Dixon confirmed they have not been analyzed, and only
general information was provided.
There was no further action taken on this item.
VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM)
Council Member Peotter inquired as to the on-going Finance Committee meeting schedule and would prefer regularity for planning purposes. Discussion ensued regarding various meeting date
options and potentially starting the meetings later in the evening.
Brief discussion ensued regarding the October 18, 2018, meeting; however, no changes to the time of the meeting were made.
VII. ADJOURNMENT
The Finance Committee adjourned at 4:35 p.m. to the next regular meeting of the Finance
Committee.
Filed with these minutes are copies of all materials distributed at the meeting.
The agenda for the Regular Meeting was posted on August 31, 2018, at 3:55 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic
Center Drive.
Attest:
___________________________________ _____________________
Will O’Neill, Chair Date Finance Committee
October 18, 2018, Finance Committee Agenda Comments
These comments on an item on the Newport Beach City Council Finance Committee agenda are
submitted by: Jim Mosher ( jimmosher@yahoo.com ), 2210 Private Road, Newport Beach 92660
(949-548-6229)
Item IV.A. MINUTES OF SEPTEMBER 6, 2018
Changes to the draft minutes passages shown in italics are suggested in strikeout underline format.
Page 1, Item 1: “The meeting was called to order at 3:00 p.m. in the Crystal Cove Newport
Coast Conference Room, Bay 2D 2E, 100 Civic Center Drive, Newport Beach, California
92660.”
Page 4, paragraph 6, last sentence: “He requested discussions and analysis related to risk
situations and leans liens against the reserves in the upcoming years.” [?]
Page 4, paragraph 4 from end: “Commission Committee Member Tucker requested a
standing item regarding pensions,…”
Page 6, Item F, paragraph 2: “Discussion ensued regarding the Workplan Work Plan structure
and items currently listed on the document.”
Item No. 4A1
Draft Minutes of September 6, 2018
Correspondence
October 18, 2018
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5A
October 18, 2018
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Dan Matusiewicz, Finance Director
949-644-3123 or danm@newportbeachca.gov
SUBJECT: STATUS OF INSURANCE RESERVE (GENERAL LIABILITY AND
WORKERS’ COMPENSATION) FUND
ABSTRACT:
Numerous claims and suits have been filed against the City in the normal course of
business. The Insurance Reserve Fund was established to account for costs associated
with the general lability and workers’ compensation programs and the City employs an
actuary to estimate the liabilities associated with each. The General Liability funding
status is 41% below the target funding level and Workers’ Compensation is 14% below
the target funding level at the end of Fiscal Year 2017-2018. The City Council approved
a $4.2 million transfer from the General Fund into the General Liability Program for Fiscal
Year 2018-2019, bringing the program to an 89% funded ratio in the current fiscal year.
Staff will also propose a one-time inter-fund transfer of $3.0 million from the General Fund
to the Workers’ Compensation Program to close the funding gap of this reserve. After a
more thorough evaluation of other funding requirements, the City Manager may
recommend these actions as part the Fiscal Year 2019-2020 Proposed Budget.
RECOMMENDATION:
No action of the committee is required at this time. While evaluating budget priorities for
Fiscal Year 2019-2020, staff will consider recommending an internal service rate
adjustment to set-aside an additional $0.9 million per year for the Workers’ Compensation
Program consistent with the latest actuarial valuation. Staff will also propose a one-time
inter-fund transfer of $3.0 million from the General Fund to the Workers’ Compensation
Program to close the funding gap of this reserve. After a more thorough evaluation of
other funding requirements, the City Manager may recommend these actions as part the
Fiscal Year 2019-2020 Proposed Budget.
Status of the Insurance Reserve (General Liability and Workers’ Compensation) Fund
October 18, 2018
Page 2
DISCUSSION:
The City is exposed to various risks of loss related to torts, theft of, damage to, and
destruction of assets, errors and omissions, injuries to employees, and natural disasters.
Numerous claims and suits have been filed against the City in the normal course of
business. The Insurance Reserve Fund was established to account for costs associated
with the general lability and workers’ compensation programs and the City employs an
actuary to estimate the liabilities associated with each.
The Insurance Reserve Fund is accounted for as an internal service fund where assets
are set aside for risk management, administration, claim settlements and benefit
distribution. Claims liabilities are reported when it is probable that a loss has occurred
and the amount of the loss can be reasonably estimated. The estimated liability under
such claims is based upon an actuarial valuation of claim activity and supplemented by
information received from the City Attorney, contracted attorneys and the Risk Manager,
is estimated and recorded as accrued claims and judgements payable. Liabilities and
related expenses include claims administration, legal defense, insurance premiums,
settlements, other risk management activities and an estimate of “incurred-but-not
reported” (IBNR) claims. Liabilities are calculated considering recent claim settlement
trends including frequency and magnitude of payouts and are discounted to consider the
time value of money.
The Insurance Reserve Fund is funded by the operating budget of each department. Each
department is charged a rate, or premium, equal to its proportionate share of the total
cost required to fund the programs at their respective target funding levels. The premium
accounts for the number of part-time or full-time employees and is calculated using trends
in actual experience after considering unexpected and unusual claims. Setting aside
resources in these funds lessens the burden placed on the budget when liabilities become
payable.
The City relies on the actuarial valuations to estimate the expected long-term liability.
Deviation from the expected liability could be significant; therefore, the actuary also
estimates a range of funding levels from “marginally acceptable” to “high” depending on
the City Council’s tolerance for funding risk and desired “confidence level” that funding
will be sufficient to settle incurred losses. Actuaries generally consider funding to the 70%
confidence level to be marginally acceptable and funding to the 90% confidence level to
be conservative. Previous Council’s have selected the 75% confidence level as the
desired funding target, which is considered “low” by industry standards. Another way to
think of a 75% level of confidence is that there is a 75% chance there will be sufficient
resources to pay the full amount of incurred claims without future contributions. The
Status of the Insurance Reserve (General Liability and Workers’ Compensation) Fund
October 18, 2018
Page 3
following table outlines the estimated Fiscal Year 2018 Funding Status of each program
in the Insurance ISF.
The table above indicates that the General Liability funding status is 41% below the target
funding level and Workers’ Compensation is 14% below the target funding level at the
end of Fiscal Year 2017-2018. The City Council approved a $4.2 million transfer from the
General Fund into the General Liability Fund for Fiscal Year 2018-2019, bringing the fund
to an 89% funded ratio in the current fiscal year.
To lessen the impact of short-term annual rate change fluctuation, City management may
implement one-time fund transfers (rather than department rate increases) when funding
shortfalls appear to be due to unusually sharp and non-recurring factors. Excess reserves
in other areas may be transferred to the internal service fund in these instances but such
transfers should not exceed the funding necessary to reach a 75% confidence level. After
considering other funding requirements, the City Manager may recommend that Council
appropriate an additional $0.9 million per year and authorize a one-time transfer of $3.0
million to the Workers’ Compensation fund as part of the Fiscal Year 2019-2020 proposed
budget.
Due to the timing of the annual audit and other factors, the actuary may not be aware of
all cases and the most current case development(s). Auditors will require an update from
the City Attorney through the last date of audit fieldwork, usually sometime in late
November or early December. Staff may make further adjustments to the actuarial
estimates when necessary. Examples of such adjustments include:
1. An old settlement that provided lifetime payment (a self-funded annuity).
2. Recent legal development that is in the process of negotiations and settlement.
3. Ordinary routine claim that had significant favorable or unfavorable development.
Status of the Insurance Reserve (General Liability and Workers’ Compensation) Fund
October 18, 2018
Page 4
Prepared by: Submitted by:
/s/ Steve Montano
/s/ Dan Matusiewicz
Steve Montano Dan Matusiewicz
Deputy Finance Director Finance Director
Attachments:
A. General Liability Fiscal Year 2018-2019 Valuation
B. Workers’ Compensation Fiscal Year 2018-2019 Valuation
ATTACHMENT A
GENERAL LIABILITY FISCAL YEAR 2018-2019 VALUATION
Actuarial Review of the Self-Insured
/LDELOLW\ Program
Outstanding Liabilities as of June 30, 201-XQH and June 30, 20
Forecast for Program Years 201-1 and 201 -
Presented to
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Exhibit GL - 1
Page 1
City of Newport Beach - General Liability
Funding Guidelines for Outstanding Liabilities at
June 30, 2018
(A) Estimated Ultimate Losses
Incurred through 6/30/18: $36,160,000
(From Appendix GL - G)
(B) Estimated Paid Losses
through 6/30/18:30,307,000
(From Appendix GL - G)
(C) Estimated Liability for Claims
Outstanding at 6/30/18:$5,853,000
(From Appendix GL - G)
(D) Estimated Liability for Outstanding
Claims Administration Fees at 6/30/18:164,000
(From Appendix GL - F)
(E) Total Outstanding Liability for
Claims at 6/30/18:$6,017,000
((C) + (D))
(F) Reserve Discount Factor (Based on a Discount Rate of 3.0%.): 0.948
(Appendix GL - I, Page 1, (G))
(G) Discounted Outstanding Liability for
Claims at 6/30/18:$5,707,000
((E) x (F))
Marginally
Acceptable Recommended Conservative
Confidence Level of Adequacy: 70% 75% 80% 85% 90%
(H) Confidence Level Factor: 1.115 1.165 1.225 1.299 1.397
(From Appendix GL - J)
(I) Margin for Adverse Experience: 656,000 942,000 1,284,000 1,706,000 2,266,000
((G) x [(H) - 1])
(J) Total Required Assets
at 6/30/18: $6,363,000 $6,649,000 $6,991,000 $7,413,000 $7,973,000
((G) + (I))
(K) Estimated Total Assets
at 6/30/18: 7,944,000 7,944,000 7,944,000 7,944,000 7,944,000
(From Appendix GL - L)
(L) Indicated Funding Redundancy/
(Deficiency): $1,581,000 $1,295,000 $953,000 $531,000 ($29,000)
((K) - (J))
-30-
DRAFT
Exhibit GL - 1
Page 2
City of Newport Beach - General Liability
Funding Guidelines for Outstanding Liabilities at
June 30, 2019
(A) Estimated Ultimate Losses
Incurred through 6/30/19: $38,473,000
(From Appendix GL - G)
(B) Estimated Paid Losses
through 6/30/19:32,798,000
(From Appendix GL - G)
(C) Estimated Liability for Claims
Outstanding at 6/30/19:$5,675,000
(From Appendix GL - G)
(D) Estimated Liability for Outstanding
Claims Administration Fees at 6/30/19:200,000
(From Appendix GL - F)
(E) Total Outstanding Liability for
Claims at 6/30/19:$5,875,000
((C) + (D))
(F) Reserve Discount Factor (Based on a Discount Rate of 3.0%.): 0.947
(Appendix GL - I, Page 1, (H))
(G) Discounted Outstanding Liability for
Claims at 6/30/19:$5,566,000
((E) x (F))
Marginally
Acceptable Recommended Conservative
Confidence Level of Adequacy: 70% 75% 80% 85% 90%
(H) Confidence Level Factor: 1.115 1.165 1.225 1.299 1.397
(From Appendix GL - J)
(I) Margin for Adverse Experience: 640,000 918,000 1,252,000 1,664,000 2,210,000
((G) x [(H) - 1])
(J) Total Required Assets
at 6/30/19: $6,206,000 $6,484,000 $6,818,000 $7,230,000 $7,776,000
((G) + (I))
(K) Estimated Total Assets
at 6/30/19: 8,540,000 8,540,000 8,540,000 8,540,000 8,540,000
(From Appendix GL - L)
(L) Indicated Funding Redundancy/
(Deficiency): $2,334,000 $2,056,000 $1,722,000 $1,310,000 $764,000
((K) - (J))
-31-
DRAFT
Exhibit GL - 1
Page 3
City of Newport Beach - General Liability
Funding Guidelines for Outstanding Liabilities at
June 30, 2020
(A) Estimated Ultimate Losses
Incurred through 6/30/20: $40,887,000
(From Appendix GL - G)
(B) Estimated Paid Losses
through 6/30/20:35,164,000
(From Appendix GL - G)
(C) Estimated Liability for Claims
Outstanding at 6/30/20:$5,723,000
(From Appendix GL - G)
(D) Estimated Liability for Outstanding
Claims Administration Fees at 6/30/20:223,000
(From Appendix GL - F)
(E) Total Outstanding Liability for
Claims at 6/30/20:$5,946,000
((C) + (D))
(F) Reserve Discount Factor (Based on a Discount Rate of 3.0%.): 0.947
(Appendix GL - I, Page 1, (H))
(G) Discounted Outstanding Liability for
Claims at 6/30/20:$5,633,000
((E) x (F))
Marginally
Acceptable Recommended Conservative
Confidence Level of Adequacy: 70% 75% 80% 85% 90%
(H) Confidence Level Factor: 1.115 1.165 1.225 1.299 1.397
(From Appendix GL - J)
(I) Margin for Adverse Experience: 648,000 929,000 1,267,000 1,684,000 2,236,000
((G) x [(H) - 1])
(J) Total Required Assets
at 6/30/20: $6,281,000 $6,562,000 $6,900,000 $7,317,000 $7,869,000
((G) + (I))
(K) Estimated Total Assets
at 6/30/20: 4,641,000 4,641,000 4,641,000 4,641,000 4,641,000
(From Appendix GL - L, Page 2)
(L) Indicated Funding Redundancy/
(Deficiency): ($1,640,000) ($1,921,000) ($2,259,000) ($2,676,000) ($3,228,000)
((K) - (J))
-32-
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Exhibit GL - 2
Page 1E
City of Newport Beach - General Liability
Funding Options for Program Year 2018-2019 (SIR = $500,000)
Dollar Payroll
Amount Rate
(A) Estimated Ultimate Losses Incurred in
Accident Year 2018-2019:$2,313,000 $2.479
(From Appendix GL - G)
(B)Estimated Claims Administration Fees
Incurred in Accident Year 2018-2019: 225,000 0.241
(From Exhibit GL - 5, Page 1, (L))
(C) Total Claims Costs
Incurred in Accident Year 2018-2019: $2,538,000 $2.720
((A) + (B))
(D) Loss Discount Factor (Based on a Discount Rate of 3.0%.): 0.931
(Appendix GL - I, Page 2, (G))
(E) Discounted Total Claims Costs
Incurred in Accident Year 2018-2019: $2,364,000 $2.533
((C) x (D))
Marginally
Acceptable Recommended Conservative
70% 75% 80% 85% 90%
(F) Confidence Level Factor:
(From Appendix GL - J) 1.175 1.260 1.359 1.484 1.651
(G) Margin for Adverse Experience: 414,000 615,000 849,000 1,144,000 1,539,000
((E) x [(F) - 1])
(H) Recommended Funding in 2018-2019
for Claims Costs and Other Expenses: $2,778,000 $2,979,000 $3,213,000 $3,508,000 $3,903,000
((E) + (G))
(I) Budgeted Non Claims Related Expenses: 7,142,000 7,142,000 7,142,000 7,142,000 7,142,000
(Provided by the City)
(J) Recommended Funding in 2018-2019
for Claims Costs, Other Expenses,
and Non Claims Related Expenses: $9,920,000 $10,121,000 $10,355,000 $10,650,000 $11,045,000
((H) + (I))
(K) Rate per $100 of Payroll: $10.631 $10.847 $11.097 $11.414 $11.837
((J) / $933,104)
Payroll rates are per hundred dollars of 2018-2019 payroll of $93,310,400.
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Exhibit GL - 2
Page 2E
City of Newport Beach - General Liability
Funding Options for Program Year 2019-2020 (SIR = $500,000)
Dollar Payroll
Amount Rate
(A) Estimated Ultimate Losses Incurred in
Accident Year 2019-2020:$2,414,000 $2.500
(From Appendix GL - G)
(B)Estimated Claims Administration Fees
Incurred in Accident Year 2019-2020: 240,000 0.249
(From Exhibit GL - 5, Page 1, (L))
(C) Total Claims Costs
Incurred in Accident Year 2019-2020: $2,654,000 $2.748
((A) + (B))
(D) Loss Discount Factor (Based on a Discount Rate of 3.0%.): 0.931
(Appendix GL - I, Page 2, (G))
(E) Discounted Total Claims Costs
Incurred in Accident Year 2019-2020: $2,472,000 $2.560
((C) x (D))
Marginally
Acceptable Recommended Conservative
70% 75% 80% 85% 90%
(F) Confidence Level Factor:
(From Appendix GL - J) 1.175 1.260 1.359 1.484 1.651
(G) Margin for Adverse Experience: 433,000 643,000 887,000 1,196,000 1,609,000
((E) x [(F) - 1])
(H) Recommended Funding in 2019-2020
for Claims Costs and Other Expenses: $2,905,000 $3,115,000 $3,359,000 $3,668,000 $4,081,000
((E) + (G))
(I) Budgeted Non Claims Related Expenses: 7,356,000 7,356,000 7,356,000 7,356,000 7,356,000
(Provided by the City)
(J) Recommended Funding in 2019-2020
for Claims Costs, Other Expenses,
and Non Claims Related Expenses: $10,261,000 $10,471,000 $10,715,000 $11,024,000 $11,437,000
((H) + (I))
(K) Rate per $100 of Payroll: $10.625 $10.842 $11.095 $11.415 $11.842
((J) / $965,762)
Payroll rates are per hundred dollars of 2019-2020 payroll of $96,576,200.
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Exhibit GL - 3
City of Newport Beach - General Liability
IBNR as of 6/30/19 at Expected Claims Level
Estimated
Percent of
IBNR
Estimated Reported Estimated
IBNR Between Estimated IBNR
Accident Estimated Reported as of 7/1/18 and IBNR as of
Year Ultimate as of 6/30/18 6/30/18 6/30/19 Reported 6/30/19
(A) (B) (C) (D) (E) (F)
Prior $6,994,007 $6,994,007 $0 100.0% $0 $0
1998-1999 770,067 770,067 0 100.0% 0 0
1999-2000 613,638 613,638 0 100.0% 0 0
2000-2001 646,463 646,463 0 100.0% 0 0
2001-2002 1,596,703 1,596,703 0 100.0% 0 0
2002-2003 1,097,716 1,097,716 0 100.0% 0 0
2003-2004 951,067 951,067 0 100.0% 0 0
2004-2005 883,647 883,647 0 100.0% 0 0
2005-2006 305,582 305,582 0 100.0% 0 0
2006-2007 1,789,857 1,789,857 0 100.0% 0 0
2007-2008 500,336 500,336 0 100.0% 0 0
2008-2009 1,069,988 1,069,988 0 100.0% 0 0
2009-2010 1,758,000 1,757,242 758 100.0% 758 0
2010-2011 2,487,271 2,487,271 0 100.0% 0 0
2011-2012 1,987,712 1,987,712 0 59.9% 0 0
2012-2013 1,934,000 1,919,645 14,355 58.0% 8,000 6,355
2013-2014 1,730,000 1,689,444 40,556 53.2% 22,000 18,556
2014-2015 1,893,000 1,836,006 56,994 49.7% 28,000 28,994
2015-2016 2,403,000 2,084,283 318,717 64.5% 206,000 112,717
2016-2017 2,308,000 1,643,351 664,649 53.6% 356,000 308,649
2017-2018 2,440,000 1,192,518 1,247,482 46.1% 575,000 672,482
2018-2019 2,313,000 43.4% 1,004,000 1,309,000
Totals $38,473,054 $33,816,543 $2,343,511 $2,199,758 $2,456,753
Notes:
(A) From Exhibit GL - 4, Page 1.
(B) Provided by the City. These losses exclude amounts
incurred above the City's SIR for each year.
(C) (A) - (B).
(D) Percentage of incurred but not reported (IBNR) expected to be
reported between 7/1/18 and 6/30/19. The percentage is based
on the development pattern selected in Appendix GL - A.
(E) ((A) - (B)) x (D).
(F) (A) - (B) - (E).
This exhibit shows the calculation of the amount of incurred but not reported losses we expect as of
6/30/19. This amount is dependent on both the strength of the case reserves and the average
frequency and severity of the losses incurred.
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DRAFT
Exhibit GL - 4
Page 1
City of Newport Beach - General Liability
Estimated Ultimate Program Losses
Exposure Exposure
Reported Paid Method Method Selected
Loss Loss Based on Based on Frequency- Estimate of
Accident Development Development Reported Paid Severity Ultimate
Year Method Method Losses Losses Method Losses
(A) (B) (C) (D) (E) (F)
Prior $6,994,007 $6,994,007 $6,994,007 $6,994,007 $5,750,932 $6,994,007
1998-1999 770,067 770,067 770,067 770,067 543,279 770,067
1999-2000 613,638 613,638 613,638 613,638 913,082 613,638
2000-2001 646,463 646,463 646,463 646,463 562,388 646,463
2001-2002 1,596,703 1,596,703 1,596,703 1,596,703 1,334,487 1,596,703
2002-2003 1,097,716 1,097,716 1,097,716 1,097,716 1,414,794 1,097,716
2003-2004 951,067 951,067 951,067 951,067 1,141,340 951,067
2004-2005 883,647 883,647 883,647 883,647 1,212,442 883,647
2005-2006 305,582 305,582 305,582 305,582 499,328 305,582
2006-2007 1,789,857 1,789,857 1,789,857 1,789,857 1,189,062 1,789,857
2007-2008 500,336 500,336 500,336 500,336 844,466 500,336
2008-2009 1,069,988 1,069,988 1,069,988 1,069,988 1,149,789 1,069,988
2009-2010 1,757,242 1,542,003 1,757,242 1,542,003 1,757,627 1,758,000
2010-2011 2,492,246 2,519,606 2,490,829 2,510,396 1,779,422 2,487,271
2011-2012 1,997,651 2,061,257 1,994,258 2,034,841 1,309,252 1,987,712
2012-2013 1,942,681 1,851,999 1,943,366 1,860,056 1,975,968 1,934,000
2013-2014 1,733,370 1,638,609 1,736,881 1,666,076 1,795,032 1,730,000
2014-2015 1,933,314 1,570,545 1,935,909 1,657,038 1,755,624 1,893,000
2015-2016 2,428,190 2,633,676 2,380,535 2,425,455 1,820,113 2,403,000
2016-2017 2,364,782 2,787,399 2,290,745 2,325,241 2,304,161 2,308,000
2017-2018 2,749,947 1,315,282 2,407,114 2,060,148 1,858,600 2,440,000
Totals $36,160,054
Projected Losses for the Year 2018-2019 (G) $2,313,000
Projected Losses for the Year 2019-2020 (H) $2,414,000
Projected Losses for the Year 2020-2021 (I) $2,522,000
Notes:
(A) From Appendix GL - A, Page 1, Column (G).
(B) From Appendix GL - B, Page 1, Column (G).
(C) From Appendix GL - C, Page 1, Column (G).
(D) From Appendix GL - C, Page 2, Column (G).
(E) From Appendix GL - D, Page 1, Column (C).
(F) Selected averages of (A), (B), (C), (D), and (E).
(G) From Exhibit GL - 5, Page 1, Line (K).
(H) From Exhibit GL - 5, Page 1, Line (K).
(I) From Exhibit GL - 5, Page 1, Line (K).
This exhibit summarizes the results of the actuarial methods we have applied to estimate ultimate
losses for each year. It is important to apply a number of estimation methods because each one relies
on specific assumptions about the claims process that tend to hold generally true, but that may be
violated in specific situations. Thus, the more estimation methods that can be applied, the better.
-42-
DRAFT
Exhibit GL - 4
Page 2
City of Newport Beach - General Liability
Estimated Ultimate Limited Losses Capped at $100,000 per Claim
Exposure Exposure
Reported Paid Method Method Selected
Loss Loss Based on Based on Frequency- Ultimate
Accident Development Development Reported Paid Severity Limited
Year Method Method Losses Losses Method Losses
(A) (B) (C) (D) (E) (F)
Prior $4,506,367 $4,506,367 $4,506,367 $4,506,367 $4,506,832 $4,506,367
1998-1999 370,067 370,067 370,067 370,067 370,064 370,067
1999-2000 613,638 613,638 613,638 613,638 613,672 613,638
2000-2001 371,963 371,963 371,963 371,963 371,936 371,963
2001-2002 869,819 869,819 869,819 869,819 869,889 869,819
2002-2003 908,045 908,045 908,045 908,045 908,040 908,045
2003-2004 720,636 720,636 720,636 720,636 720,564 720,636
2004-2005 753,995 753,995 753,995 753,995 753,984 753,995
2005-2006 305,582 305,582 305,582 305,582 305,606 305,582
2006-2007 716,294 716,294 716,294 716,294 716,310 716,294
2007-2008 500,336 500,336 500,336 500,336 500,290 500,336
2008-2009 669,988 669,988 669,988 669,988 670,015 669,988
2009-2010 1,008,806 980,313 1,008,806 980,313 1,008,962 1,009,000
2010-2011 1,005,316 1,006,321 1,005,316 1,006,321 1,005,304 1,005,316
2011-2012 728,191 730,376 728,191 730,375 728,180 728,191
2012-2013 1,080,521 1,088,085 1,080,521 1,088,090 1,080,960 1,081,000
2013-2014 877,597 888,128 877,597 889,868 967,173 879,000
2014-2015 848,967 854,177 848,967 863,867 930,852 854,000
2015-2016 1,055,393 1,110,079 1,055,834 1,106,114 949,969 1,082,000
2016-2017 1,113,796 1,315,123 1,113,217 1,189,146 1,184,021 1,183,000
2017-2018 1,033,079 738,361 1,046,578 1,021,265 940,600 1,034,000
Totals $20,162,237
Projected Losses for the Year 2018-2019 (G) $1,152,000
Projected Losses for the Year 2019-2020 (H) $1,184,000
Projected Losses for the Year 2020-2021 (I) $1,218,000
Notes:
(A) From Appendix GL - A, Page 1, Column (D).
(B) From Appendix GL - B, Page 1, Column (D).
(C) Based on results in Appendix GL - C, Page 1.
(D) Based on results in Appendix GL - C, Page 2.
(E) Based on results in Appendix GL - D, Page 1.
(F) Selected averages of (A), (B), (C), (D), and (E).
(G) From Exhibit GL - 5, Page 1, Line (K) / Line (G).
(H) From Exhibit GL - 5, Page 1, Line (K) / Line (G).
(I) From Exhibit GL - 5, Page 1, Line (K) / Line (G).
This exhibit summarizes the results of the actuarial methods we have applied to estimate limited losses
for each year. These results are used to select a limited loss rate for future years.
-43-
DRAFT
Exhibit GL - 5
Page 1
City of Newport Beach - General Liability
Selection of Projected Limited Loss Rate
and Projection of Program Losses and ULAE
Ultimate Trended Trended
Accident Limited Trend Limited Composite Limited
Year Losses Factor Losses Exposures Loss Rate
(A) (B) (C) (D) (E)
Prior 4,506,367 1.232 5,551,844 705,833 7.866
1998-1999 370,067 1.219 451,112 684,653 0.659
1999-2000 613,638 1.208 741,275 703,795 1.053
2000-2001 371,963 1.196 444,868 778,168 0.572
2001-2002 869,819 1.184 1,029,866 805,232 1.279
2002-2003 908,045 1.173 1,065,137 846,633 1.258
2003-2004 720,636 1.161 836,658 866,935 0.965
2004-2005 753,995 1.150 867,094 881,402 0.984
2005-2006 305,582 1.138 347,752 908,125 0.383
2006-2007 716,294 1.126 806,547 922,925 0.874
2007-2008 500,336 1.116 558,375 954,264 0.585
2008-2009 669,988 1.105 740,337 994,333 0.745
2009-2010 1,009,000 1.094 1,103,846 997,806 1.106
2010-2011 1,005,316 1.083 1,088,757 1,021,164 1.066
2011-2012 728,191 1.073 781,349 925,177 0.845
2012-2013 1,081,000 1.062 1,148,022 932,888 1.231
2013-2014 879,000 1.051 923,829 934,728 0.988
2014-2015 854,000 1.041 889,014 958,766 0.927
2015-2016 1,082,000 1.030 1,114,460 974,899 1.143
2016-2017 1,183,000 1.019 1,205,477 966,137 1.248
2017-2018 1,034,000 1.010 1,044,340 953,323 1.095
Totals $20,162,237 $22,739,959 18,717,186 $1.215
12/13-16/17 5,079,000 5,280,802 4,767,418 1.108
(F) Selected Limited Rate: $1.200
Prior: $1.250
Program Year: 2018-2019 2019-2020 2020-2021
(G) Factor to SIR: 2.008 2.038 2.070
(H) Trend Factor: 1.000 1.010 1.020
(I) Program Rate: $2.410 $2.470 $2.534
(J) Composite Exposures: 959,905 977,387 995,400
(K) Projected Program Losses:2,313,000 2,414,000 2,522,000
(L) Projected ULAE: 225,000 240,000 257,000
(M) Projected Loss and ULAE:$2,538,000 $2,654,000 $2,779,000
Notes appear on the next page.
-44-
DRAFT
Exhibit GL - 5
Page 2
City of Newport Beach - General Liability
Selection of Projected Limited Loss Rate
and Projection of Program Losses and ULAE
Notes:
(A) From Exhibit GL - 4, Page 2, Column (F).
For purposes of projecting future losses, losses
are capped at $100,000 per occurrence.
(B) From Appendix GL - E, Page 1, Column (B).
(C) (A) x (B).
(D) From Appendix GL - N, Page 2, Column (G).
(E) (C) / (D).
(F) Selected based on (E).
(G) Based on a Burr distribution, a mathematical model
of claim sizes.
(H) From Appendix GL - E.
(I) (F) x (G) x (H).
(J) From Appendix GL - N, Page 2, Column (G).
(K) (I) x (J).
(L) Based on an estimated claim closing pattern and the City's
historical claims administration expenses.
(M) (K) + (L).
This exhibit shows the calculation of future loss costs based on the past loss
rates. The projections will be accurate only to the extent that what has
happened in the past is representative of what will happen in the future.
-45-
DRAFT
Appendix GL - A
Page 1
City of Newport Beach - General Liability
Reported Loss Development
Limited Reported Program Reported
Reported Loss Ultimate Reported Loss Ultimate
Accident Losses as Development Limited Losses Development Program
Year of 6/30/18 Factor Losses of 6/30/18 Factor Losses
(A) (B) (C) (D) (E) (F) (G)
Prior $4,506,367 1.000 $4,506,367 $6,994,007 1.000 $6,994,007
1998-1999 370,067 1.000 370,067 770,067 1.000 770,067
1999-2000 613,638 1.000 613,638 613,638 1.000 613,638
2000-2001 371,963 1.000 371,963 646,463 1.000 646,463
2001-2002 869,819 1.000 869,819 1,596,703 1.000 1,596,703
2002-2003 908,045 1.000 908,045 1,097,716 1.000 1,097,716
2003-2004 720,636 1.000 720,636 951,067 1.000 951,067
2004-2005 753,995 1.000 753,995 883,647 1.000 883,647
2005-2006 305,582 1.000 305,582 305,582 1.000 305,582
2006-2007 716,294 1.000 716,294 1,789,857 1.000 1,789,857
2007-2008 500,336 1.000 500,336 500,336 1.000 500,336
2008-2009 669,988 1.000 669,988 1,069,988 1.000 1,069,988
2009-2010 1,008,806 1.000 1,008,806 1,757,242 1.000 1,757,242
2010-2011 1,005,316 1.000 1,005,316 2,487,271 1.002 2,492,246
2011-2012 728,191 1.000 728,191 1,987,712 1.005 1,997,651
2012-2013 1,080,521 1.000 1,080,521 1,919,645 1.012 1,942,681
2013-2014 877,597 1.000 877,597 1,689,444 1.026 1,733,370
2014-2015 848,967 1.000 848,967 1,836,006 1.053 1,933,314
2015-2016 1,044,944 1.010 1,055,393 2,084,283 1.165 2,428,190
2016-2017 1,076,131 1.035 1,113,796 1,643,351 1.439 2,364,782
2017-2018 767,518 1.346 1,033,079 1,192,518 2.306 2,749,947
Totals $19,744,721 $20,058,396 $33,816,543 $36,618,494
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City. These losses exclude
amounts over $100,000 per occurrence.
(C) From Appendix GL - A, Page 2.
(D) (B) x (C). These estimated losses exclude
amounts over $100,000 per occurrence.
(E) Losses capped at the City's SIR. Amounts are provided by the City.
(F) Derived from factors on Appendix GL - A, Page 4.
(G) (E) x (F).
This method tends to understate ultimate losses for the most recent several years
because the large losses for those years generally have not yet emerged at the time
of our review.
This exhibit shows the calculation of estimated ultimate losses for each year based
on paid losses and case reserves as reported by the claims administrator. These
losses tend to "develop" or change from period to period as more information
becomes available about the cases. This development tends to follow quantifiable
patterns over time.
-46-
DRAFT
Appendix GL - A
Page 2
City of Newport Beach - General Liability
Reported Loss Development
Limited Losses Reported as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 36,934 372,489 659,151 769,794 760,315 766,546 766,546 766,551 766,551 666,551
1998-1999 77,490 319,637 480,320 451,320 378,622 370,067 370,067 370,067 370,067 370,067
1999-2000 500,755 917,120 871,886 618,403 616,638 615,138 613,638 613,638 613,638 613,638
2000-2001 549,018 743,273 524,488 399,370 398,235 373,667 373,667 373,667 371,963 371,963
2001-2002 855,924 1,217,991 993,138 948,029 869,834 869,834 869,834 869,834 869,819 869,819
2002-2003 918,457 1,114,227 971,088 908,060 908,060 908,060 908,060 908,045 908,045 908,045
2003-2004 954,039 1,120,149 924,529 946,554 871,223 745,516 720,636 720,636 720,636 720,636
2004-2005 898,617 1,047,180 879,636 839,617 760,204 756,722 753,995 753,995 753,995 753,995
2005-2006 482,911 732,052 500,204 508,658 423,830 382,663 382,663 382,663 305,582 305,582
2006-2007 1,016,022 709,686 646,156 691,082 722,942 716,294 716,294 716,294 716,294 716,294
2007-2008 436,294 544,230 613,152 516,257 500,336 500,336 500,336 500,336 500,336 500,336
2008-2009 475,031 779,800 679,821 669,988 669,988 669,988 669,988 669,988 669,988 669,988
2009-2010 685,009 704,382 1,041,443 1,072,157 993,806 983,806 983,806 983,806 1,008,806
2010-2011 1,107,371 1,062,998 927,587 1,027,601 1,002,587 1,027,587 1,005,316 1,005,316
2011-2012 840,279 1,058,708 753,609 728,191 728,191 728,191 728,191
2012-2013 972,581 1,230,886 999,521 1,099,321 1,080,521 1,080,521
2013-2014 976,550 962,335 931,348 877,597 877,597
2014-2015 453,846 875,941 908,284 848,967
2015-2016 861,287 1,174,700 1,044,944
2016-2017 1,057,345 1,076,131
2017-2018 767,518
Reported Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 10.085 1.770 1.168 0.988 1.008 1.000 1.000 1.000 0.870 1.000
1998-1999 4.125 1.503 0.940 0.839 0.977 1.000 1.000 1.000 1.000 1.000
1999-2000 1.831 0.951 0.709 0.997 0.998 0.998 1.000 1.000 1.000 1.000
2000-2001 1.354 0.706 0.761 0.997 0.938 1.000 1.000 0.995 1.000 1.000
2001-2002 1.423 0.815 0.955 0.918 1.000 1.000 1.000 1.000 1.000 1.000
2002-2003 1.213 0.872 0.935 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2003-2004 1.174 0.825 1.024 0.920 0.856 0.967 1.000 1.000 1.000 1.000
2004-2005 1.165 0.840 0.955 0.905 0.995 0.996 1.000 1.000 1.000 1.000
2005-2006 1.516 0.683 1.017 0.833 0.903 1.000 1.000 0.799 1.000 1.000
2006-2007 0.698 0.910 1.070 1.046 0.991 1.000 1.000 1.000 1.000 1.000
2007-2008 1.247 1.127 0.842 0.969 1.000 1.000 1.000 1.000 1.000 1.000
2008-2009 1.642 0.872 0.986 1.000 1.000 1.000 1.000 1.000 1.000
2009-2010 1.028 1.479 1.029 0.927 0.990 1.000 1.000 1.025
2010-2011 0.960 0.873 1.108 0.976 1.025 0.978 1.000
2011-2012 1.260 0.712 0.966 1.000 1.000 1.000
2012-2013 1.266 0.812 1.100 0.983 1.000
2013-2014 0.985 0.968 0.942 1.000
2014-2015 1.930 1.037 0.935
2015-2016 1.364 0.890
2016-2017 1.018
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 1.864 0.981 0.969 0.959 0.980 0.996 1.000 0.986 0.989 1.000
Dollar-Weighted
Averages
3-yr 1.318 0.957 0.995 0.993 1.009 0.992 1.000 1.012 1.000 1.000
4-yr 1.221 0.915 0.989 0.988 1.004 0.993 1.000 1.009 1.000 1.000
Comparative
Factors 1.575 1.050 0.965 0.965 0.990 1.000 1.000 1.000 1.000 1.000
Prior 1.300 1.035 1.015 0.985 0.995 1.000 1.000 1.000 1.000 1.000
Selected 1.300 1.025 1.010 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Cumulated 1.346 1.035 1.010 1.000 1.000 1.000 1.000 1.000 1.000 1.000
-47-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix GL - A
Page 3
City of Newport Beach - General Liability
Reported Loss Development
Limited Losses Reported as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
666,551 666,551 666,546 666,546 666,546 666,546 666,546 666,546 666,546 666,546 666,546
370,067 370,067 370,067 370,067 370,067 370,067 370,067 370,067 370,067 370,067
613,638 613,638 613,638 613,638 613,638 613,638 613,638 613,638 613,638
371,963 371,963 371,963 371,963 371,963 371,963 371,963 371,963
869,819 869,819 869,819 869,819 869,819 869,819 869,819
908,045 908,045 908,045 908,045 908,045 908,045
720,636 720,636 720,636 720,636 720,636
753,995 753,995 753,995 753,995
305,582 305,582 305,582
716,294 716,294
500,336
Reported Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000
1.000 1.000 1.000
1.000 1.000
1.000
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
-48-
DRAFT
Appendix GL - A
Page 4
City of Newport Beach - General Liability
Reported between $100,000 and $500,000 Loss Development
Losses Reported as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 75,000 415,112 716,716 716,716 716,716 716,716 716,716 716,716366,205
1998-1999 2,000 11,500 402,000 400,000 400,000 400,000 400,000 400,000 400,000
1999-2000 2,000 2,000 2,000
2000-2001 50,000 366,561 329,561 284,092 274,500 274,500 274,500 274,500 274,500 274,500
2001-2002 579,415 729,974 731,413 726,884 726,884 726,884 726,884 726,884 726,884
2002-2003 67,500 242,699 488,971 535,675 549,574 554,574 189,671 189,671 189,671 189,671
2003-2004 21,659 332,659 531,659 536,849 279,334 230,431 230,431 230,431 230,431 230,431
2004-2005 5,000 203,852 181,352 129,652 129,652 129,652 129,652 129,652 129,652
2005-2006 400,000 406,000 400,000 400,000
2006-2007 310,000 233,456 512,824 514,354 819,354 1,073,564 1,073,564 1,073,563 1,073,563 1,073,564
2007-2008
2008-2009 750 85,712 400,000 400,000 400,000 400,000 400,000 400,000
2009-2010 20,000 100,000 526,275 437,895 468,437 478,450 478,450 478,450 748,437
2010-2011 325,000 470,325 772,410 1,384,635 1,586,013 1,518,846 1,481,954 1,481,954
2011-2012 605,820 1,105,820 1,385,000 1,255,808 1,053,833 1,259,521 1,259,521
2012-2013 550,000 550,000 540,852 705,681 789,276 839,124
2013-2014 552,743 671,316 891,031 811,847 811,847
2014-2015 260,000 320,159 790,093 987,039
2015-2016 93,823 558,886 1,039,339
2016-2017 235,121 567,220
2017-2018 425,000
Reported Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 5.535 1.727 1.000 1.000 1.000 1.000 1.000 0.511 1.000
1998-1999 5.750 34.957 0.995 1.000 1.000 1.000 1.000 1.000 1.000
1999-2000 1.000 1.000
2000-2001 7.331 0.899 0.862 0.966 1.000 1.000 1.000 1.000 1.000 1.000
2001-2002 1.260 1.002 0.994 1.000 1.000 1.000 1.000 1.000 1.000
2002-2003 3.596 2.015 1.096 1.026 1.009 0.342 1.000 1.000 1.000 1.000
2003-2004 15.359 1.598 1.010 0.520 0.825 1.000 1.000 1.000 1.000 1.000
2004-2005 0.890 0.715 1.000 1.000 1.000 1.000 1.000 1.000
2005-2006 1.015 0.985 1.000
2006-2007 0.753 2.197 1.003 1.593 1.310 1.000 1.000 1.000 1.000 1.000
2007-2008
2008-2009 4.667 1.000 1.000 1.000 1.000 1.000
2009-2010 5.000 5.263 0.832 1.070 1.021 1.000 1.000 1.564
2010-2011 1.447 1.642 1.793 1.145 0.958 0.976 1.000
2011-2012 1.825 1.252 0.907 0.839 1.195 1.000
2012-2013 1.000 0.983 1.305 1.118 1.063
2013-2014 1.215 1.327 0.911 1.000
2014-2015 1.231 2.468 1.249
2015-2016 5.957 1.860
2016-2017 2.412
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 3.510 2.252 3.370 1.261 1.029 0.943 1.000 1.056 0.946 1.000
Dollar-Weighted
Averages
3-yr 2.456 1.755 1.127 0.957 1.055 0.989 1.000
4-yr 1.855 1.553 1.043 1.020 1.051 0.990
Comparative
Factors 3.450 1.400 1.225 1.060 1.030 1.020 1.005 1.003 1.001 1.000
Prior 3.500 1.750 1.250 1.060 1.030 1.015 1.007 1.004 1.000 1.000
Selected 3.500 1.750 1.250 1.060 1.030 1.015 1.007 1.004 1.000 1.000
Cumulated 8.575 2.450 1.400 1.120 1.057 1.026 1.011 1.004 1.000 1.000
-49-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix GL - A
Page 5
City of Newport Beach - General Liability
Reported between $100,000 and $500,000 Loss Development
Losses Reported as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205
400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000
274,500 274,500 274,500 274,500 274,500 274,500 274,500 274,500
726,884 726,884 726,884 726,884 726,884 726,884 726,884
189,671 189,671 189,671 189,671 189,671 189,671
230,431 230,431 230,431 230,431 230,431
129,652 129,652 129,652 129,652
1,073,563 1,073,563
Reported Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000
1.000 1.000 1.000
1.000
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000
1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
-50-
DRAFT
Appendix GL - B
Page 1
City of Newport Beach - General Liability
Paid Loss Development
Limited Program
Paid Paid Loss Ultimate Paid Paid Loss Ultimate
Accident Losses as Development Limited Losses Development Program
Year of 6/30/18 Factor Losses of 6/30/18 Factor Losses
(A) (B) (C) (D) (E) (F) (G)
Prior $4,506,367 1.000 $4,506,367 $6,994,007 1.000 $6,994,007
1998-1999 370,067 1.000 370,067 770,067 1.000 770,067
1999-2000 613,638 1.000 613,638 613,638 1.000 613,638
2000-2001 371,963 1.000 371,963 646,463 1.000 646,463
2001-2002 869,819 1.000 869,819 1,596,703 1.000 1,596,703
2002-2003 908,045 1.000 908,045 1,097,716 1.000 1,097,716
2003-2004 720,636 1.000 720,636 951,067 1.000 951,067
2004-2005 753,995 1.000 753,995 883,647 1.000 883,647
2005-2006 305,582 1.000 305,582 305,582 1.000 305,582
2006-2007 716,294 1.000 716,294 1,789,857 1.000 1,789,857
2007-2008 500,336 1.000 500,336 500,336 1.000 500,336
2008-2009 669,988 1.000 669,988 1,069,988 1.000 1,069,988
2009-2010 980,313 1.000 980,313 1,542,003 1.000 1,542,003
2010-2011 1,005,316 1.001 1,006,321 2,487,271 1.013 2,519,606
2011-2012 728,191 1.003 730,376 1,987,712 1.037 2,061,257
2012-2013 1,080,521 1.007 1,088,085 1,727,611 1.072 1,851,999
2013-2014 877,597 1.012 888,128 1,463,044 1.120 1,638,609
2014-2015 811,955 1.052 854,177 1,253,428 1.253 1,570,545
2015-2016 898,122 1.236 1,110,079 1,636,840 1.609 2,633,676
2016-2017 575,043 2.287 1,315,123 852,155 3.271 2,787,399
2017-2018 137,395 5.374 738,361 137,395 9.573 1,315,282
Totals $18,401,183 $20,017,693 $30,306,530 $35,139,447
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City. These losses exclude
amounts over $100,000 per occurrence.
(C) From Appendix GL - B, Page 2.
(D) (B) x (C). These estimated losses exclude
amounts over $100,000 per occurrence.
(E) Losses capped at the City's SIR. Amounts are provided by the City.
(F) Derived from factors on Appendix GL - B, Page 4.
(G) (E) x (F).
This method tends to understate ultimate losses for the most recent several years
because the large losses for those years generally have not yet emerged at the time
of our review.
This exhibit shows the calculation of estimated ultimate losses for each year based
on paid losses as reported by the claims administrator. These losses tend to
"develop" or change from period to period as more information becomes available
about the cases. This development tends to follow quantifiable patterns over time.
-51-
DRAFT
Appendix GL - B
Page 2
City of Newport Beach - General Liability
Paid Loss Development
Limited Losses Paid as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 36,784 372,237 648,788 759,677 759,841 766,364 766,546 766,546 766,546 666,546
1998-1999 75,051 208,510 236,973 248,910 369,448 370,067 370,067 370,067 370,067 370,067
1999-2000 212,144 430,909 569,603 613,576 613,638 613,638 613,638 613,638 613,638 613,638
2000-2001 106,036 220,865 357,219 373,667 373,667 373,667 373,667 371,963 371,963 371,963
2001-2002 145,483 536,370 857,259 869,520 869,834 869,834 869,819 869,819 869,819 869,819
2002-2003 137,018 498,443 794,252 849,933 908,060 908,045 908,045 908,045 908,045 908,045
2003-2004 189,305 508,064 675,522 694,537 720,238 720,539 720,636 720,636 720,636 720,636
2004-2005 108,487 386,646 608,676 746,154 753,270 753,270 753,995 753,995 753,995 753,995
2005-2006 127,750 195,501 269,369 289,338 305,582 305,582 305,582 305,582 305,582 305,582
2006-2007 106,004 350,898 495,609 635,391 716,164 716,294 716,294 716,294 716,294 716,294
2007-2008 150,771 238,832 451,655 500,336 500,336 500,336 500,336 500,336 500,336 500,336
2008-2009 122,135 253,083 511,166 668,701 669,988 669,988 669,988 669,988 669,988 669,988
2009-2010 63,003 239,700 596,877 889,199 955,542 956,396 959,491 964,734 980,313
2010-2011 113,190 361,280 818,485 979,718 1,002,587 1,005,316 1,005,316 1,005,316
2011-2012 110,947 275,198 628,090 728,191 728,191 728,191 728,191
2012-2013 160,575 468,173 883,533 1,076,776 1,080,521 1,080,521
2013-2014 185,547 377,426 781,670 877,597 877,597
2014-2015 157,426 407,772 685,460 811,955
2015-2016 281,872 634,454 898,122
2016-2017 279,069 575,043
2017-2018 137,395
Paid Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 10.120 1.743 1.171 1.000 1.009 1.000 1.000 1.000 0.870 1.000
1998-1999 2.778 1.137 1.050 1.484 1.002 1.000 1.000 1.000 1.000 1.000
1999-2000 2.031 1.322 1.077 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2000-2001 2.083 1.617 1.046 1.000 1.000 1.000 0.995 1.000 1.000 1.000
2001-2002 3.687 1.598 1.014 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2002-2003 3.638 1.593 1.070 1.068 1.000 1.000 1.000 1.000 1.000 1.000
2003-2004 2.684 1.330 1.028 1.037 1.000 1.000 1.000 1.000 1.000 1.000
2004-2005 3.564 1.574 1.226 1.010 1.000 1.001 1.000 1.000 1.000 1.000
2005-2006 1.530 1.378 1.074 1.056 1.000 1.000 1.000 1.000 1.000 1.000
2006-2007 3.310 1.412 1.282 1.127 1.000 1.000 1.000 1.000 1.000 1.000
2007-2008 1.584 1.891 1.108 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2008-2009 2.072 2.020 1.308 1.002 1.000 1.000 1.000 1.000 1.000
2009-2010 3.805 2.490 1.490 1.075 1.001 1.003 1.005 1.016
2010-2011 3.192 2.266 1.197 1.023 1.003 1.000 1.000
2011-2012 2.480 2.282 1.159 1.000 1.000 1.000
2012-2013 2.916 1.887 1.219 1.003 1.000
2013-2014 2.034 2.071 1.123 1.000
2014-2015 2.590 1.681 1.185
2015-2016 2.251 1.416
2016-2017 2.061
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 3.021 1.721 1.157 1.052 1.001 1.000 1.000 1.001 0.989 1.000
Dollar-Weighted
Averages
3-yr 2.251 1.666 1.177 1.001 1.001 1.001 1.002 1.007 1.000 1.000
4-yr 2.207 1.721 1.173 1.007 1.001 1.001 1.002 1.005 1.000 1.000
Comparative
Factors 3.100 1.800 1.250 1.070 1.045 1.020 1.010 1.009 1.008 1.007
Prior 2.400 1.900 1.175 1.050 1.010 1.005 1.003 1.001 1.000 1.000
Selected 2.350 1.850 1.175 1.040 1.005 1.004 1.002 1.001 1.000 1.000
Cumulated 5.374 2.287 1.236 1.052 1.012 1.007 1.003 1.001 1.000 1.000
-52-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix GL - B
Page 3
City of Newport Beach - General Liability
Paid Loss Development
Limited Losses Paid as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
666,546 666,546 666,546 666,546 666,546 666,546 666,546 666,546 666,546 666,546 666,546
370,067 370,067 370,067 370,067 370,067 370,067 370,067 370,067 370,067 370,067
613,638 613,638 613,638 613,638 613,638 613,638 613,638 613,638 613,638
371,963 371,963 371,963 371,963 371,963 371,963 371,963 371,963
869,819 869,819 869,819 869,819 869,819 869,819 869,819
908,045 908,045 908,045 908,045 908,045 908,045
720,636 720,636 720,636 720,636 720,636
753,995 753,995 753,995 753,995
305,582 305,582 305,582
716,294 716,294
500,336
Paid Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000
1.000 1.000 1.000
1.000 1.000
1.000
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.006 1.005 1.004 1.003 1.002 1.001 1.001 1.001 1.001 1.001 1.001
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
-53-
DRAFT
Appendix GL - B
Page 4
City of Newport Beach - General Liability
Paid between $100,000 and $500,000 Loss Development
Losses Paid as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 75,000 75,000 366,716 366,716 716,716 716,716 716,716 716,716 366,205
1998-1999 400,000 400,000 400,000 400,000 400,000 400,000
1999-2000
2000-2001 22,519 274,079 274,500 274,500 274,500 274,500 274,500 274,500
2001-2002 626,162 726,739 726,884 726,884 726,884 726,884 726,884 726,884
2002-2003 11,149 37,298 71,595 140,980 185,892 189,671 189,671 189,671 189,671
2003-2004 1,659 45,558 193,328 227,604 229,334 230,431 230,431 230,431 230,431 230,431
2004-2005 3,852 129,339 129,652 129,652 129,652 129,652 129,652 129,652
2005-2006
2006-2007 8,327 347,804 514,354 682,925 926,963 948,571 1,073,564 1,073,564 1,073,564
2007-2008
2008-2009 322,987 400,000 400,000 400,000 400,000 400,000
2009-2010 347,007 356,676 478,450 478,450 478,450 561,691
2010-2011 470,369 706,567 1,469,378 1,481,074 1,481,955 1,481,955
2011-2012 548,391 964,557 1,053,833 1,053,582 1,259,520
2012-2013 180,852 373,988 638,226 647,090
2013-2014 83,573 320,278 564,019 585,447
2014-2015 231,885 265,093 299,551 441,473
2015-2016 11,323 294,342 738,718
2016-2017 2,741 277,112
2017-2018
Paid Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 1.000 4.890 1.000 1.954 1.000 1.000 1.000 0.511 1.000
1998-1999 1.000 1.000 1.000 1.000 1.000 1.000
1999-2000
2000-2001 12.171 1.002 1.000 1.000 1.000 1.000 1.000 1.000
2001-2002 1.161 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2002-2003 3.345 1.920 1.969 1.319 1.020 1.000 1.000 1.000 1.000
2003-2004 27.461 4.244 1.177 1.008 1.005 1.000 1.000 1.000 1.000 1.000
2004-2005 33.581 1.002 1.000 1.000 1.000 1.000 1.000 1.000
2005-2006
2006-2007 41.766 1.479 1.328 1.357 1.023 1.132 1.000 1.000 1.000
2007-2008
2008-2009 1.238 1.000 1.000 1.000 1.000
2009-2010 1.028 1.341 1.000 1.000 1.174
2010-2011 1.502 2.080 1.008 1.001 1.000
2011-2012 1.759 1.093 1.000 1.195
2012-2013 2.068 1.707 1.014
2013-2014 3.832 1.761 1.038
2014-2015 1.143 1.130 1.474
2015-2016 25.995 2.510
2016-2017 101.099
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 38.925 8.261 5.412 1.271 1.172 1.020 1.012 1.017 0.946 1.000
Dollar-Weighted
Averages
3-yr 3.401 2.113 1.723 1.197 1.006 1.069 1.000
4-yr 1.738 1.436 1.040 1.061
Comparative
Factors 8.100 2.500 1.500 1.250 1.100 1.080 1.050 1.035 1.025 1.010
Prior 8.000 2.500 1.500 1.250 1.100 1.075 1.050 1.030 1.000 1.000
Selected 8.000 2.500 1.500 1.250 1.100 1.075 1.050 1.030 1.000 1.000
Cumulated 47.984 5.998 2.399 1.599 1.279 1.163 1.082 1.030 1.000 1.000
-54-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix GL - B
Page 5
City of Newport Beach - General Liability
Paid between $100,000 and $500,000 Loss Development
Losses Paid as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205 366,205
400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000
274,500 274,500 274,500 274,500 274,500 274,500 274,500 274,500
726,884 726,884 726,884 726,884 726,884 726,884 726,884
189,671 189,671 189,671 189,671 189,671 189,671
230,431 230,431 230,431 230,431 230,431
129,652 129,652 129,652 129,652
1,073,564 1,073,564
Paid Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000
1.000 1.000 1.000
1.000
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000
1.000 1.000
1.008 1.007 1.006 1.005 1.004 1.003 1.003 1.002 1.001 1.001 1.001
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
-55-
DRAFT
Appendix GL - C
Page 1
City of Newport Beach - General Liability
Exposure and Development Method
Based on Reported Losses
Percentage Incurred
Reported Loss of Losses but not Ultimate
Accident Composite Losses as Development Yet to Be Program Reported Program
Year Exposures of 6/30/18 Factor Reported Rate (IBNR) Losses
(A) (B) (C) (D) (E) (F) (G)
Prior 705,833 6,994,007 1.000 0.000 8.146 0 6,994,007
1998-1999 684,653 770,067 1.000 0.000 0.794 0 770,067
1999-2000 703,795 613,638 1.000 0.000 1.298 0 613,638
2000-2001 778,168 646,463 1.000 0.000 0.723 0 646,463
2001-2002 805,232 1,596,703 1.000 0.000 1.657 0 1,596,703
2002-2003 846,633 1,097,716 1.000 0.000 1.672 0 1,097,716
2003-2004 866,935 951,067 1.000 0.000 1.316 0 951,067
2004-2005 881,402 883,647 1.000 0.000 1.375 0 883,647
2005-2006 908,125 305,582 1.000 0.000 0.549 0 305,582
2006-2007 922,925 1,789,857 1.000 0.000 1.288 0 1,789,857
2007-2008 954,264 500,336 1.000 0.000 0.885 0 500,336
2008-2009 994,333 1,069,988 1.000 0.000 1.157 0 1,069,988
2009-2010 997,806 1,757,242 1.000 0.000 1.761 0 1,757,242
2010-2011 1,021,164 2,487,271 1.002 0.002 1.742 3,558 2,490,829
2011-2012 925,177 1,987,712 1.005 0.005 1.415 6,546 1,994,258
2012-2013 932,888 1,919,645 1.012 0.012 2.119 23,721 1,943,366
2013-2014 934,728 1,689,444 1.026 0.025 2.030 47,437 1,736,881
2014-2015 958,766 1,836,006 1.053 0.050 2.084 99,903 1,935,909
2015-2016 974,899 2,084,283 1.165 0.142 2.140 296,252 2,380,535
2016-2017 966,137 1,643,351 1.439 0.305 2.197 647,394 2,290,745
2017-2018 953,323 1,192,518 2.306 0.566 2.251 1,214,596 2,407,114
Totals 18,717,186 $33,816,543 $2,339,407 $36,155,950
Notes:
(A) From Appendix GL - N, Page 2, Column (G).
(B) Provided by the City. These losses exclude
amounts incurred above the City's SIR for each year.
(C) From Appendix GL - A, Page 1, Column (F).
(D) 1 - 1/(C).
(E) From Appendix GL - C, Page 3, Column (H).
(F) (A) x (D) x (E).
(G) (B) + (F).
This exhibit shows the calculation of ultimate losses based on the assumption that there is an underlying relationship
between losses and exposure that changes in regular ways over time. The method relies on the premise that
the losses that are currently unreported will cost what this relationship would suggest.
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DRAFT
Appendix GL - C
Page 2
City of Newport Beach - General Liability
Exposure and Development Method
Based on Paid Losses
Percentage
Paid Loss of Losses Incurred Ultimate
Accident Composite Losses as Development Yet to Be Program but not Program
Year Exposures of 6/30/18 Factor Paid Rate Paid Losses
(A) (B) (C) (D) (E) (F) (G)
Prior 705,833 6,994,007 1.000 0.000 8.146 0 6,994,007
1998-1999 684,653 770,067 1.000 0.000 0.794 0 770,067
1999-2000 703,795 613,638 1.000 0.000 1.298 0 613,638
2000-2001 778,168 646,463 1.000 0.000 0.723 0 646,463
2001-2002 805,232 1,596,703 1.000 0.000 1.657 0 1,596,703
2002-2003 846,633 1,097,716 1.000 0.000 1.672 0 1,097,716
2003-2004 866,935 951,067 1.000 0.000 1.316 0 951,067
2004-2005 881,402 883,647 1.000 0.000 1.375 0 883,647
2005-2006 908,125 305,582 1.000 0.000 0.549 0 305,582
2006-2007 922,925 1,789,857 1.000 0.000 1.288 0 1,789,857
2007-2008 954,264 500,336 1.000 0.000 0.885 0 500,336
2008-2009 994,333 1,069,988 1.000 0.000 1.157 0 1,069,988
2009-2010 997,806 1,542,003 1.000 0.000 1.761 0 1,542,003
2010-2011 1,021,164 2,487,271 1.013 0.013 1.742 23,125 2,510,396
2011-2012 925,177 1,987,712 1.037 0.036 1.415 47,129 2,034,841
2012-2013 932,888 1,727,611 1.072 0.067 2.119 132,445 1,860,056
2013-2014 934,728 1,463,044 1.120 0.107 2.030 203,032 1,666,076
2014-2015 958,766 1,253,428 1.253 0.202 2.084 403,610 1,657,038
2015-2016 974,899 1,636,840 1.609 0.378 2.140 788,615 2,425,455
2016-2017 966,137 852,155 3.271 0.694 2.197 1,473,086 2,325,241
2017-2018 953,323 137,395 9.573 0.896 2.251 1,922,753 2,060,148
Totals 18,717,186 $30,306,530 $4,993,795 $35,300,325
Notes:
(A) From Appendix GL - N, Page 2, Column (G).
(B) Provided by the City. These losses exclude
amounts paid above the City's SIR for each year.
(C) From Appendix GL - B, Page 1, Column (F).
(D) 1 - 1/(C).
(E) From Appendix GL - C, Page 3, Column (H).
(F) (A) x (D) x (E).
(G) (B) + (F).
This exhibit shows the calculation of ultimate losses based on the assumption that there is an underlying relationship
between losses and exposure that changes in regular ways over time. The method relies on the premise that
the losses that are currently unpaid will cost what this relationship would suggest.
-57-
DRAFT
Appendix GL - C
Page 3
City of Newport Beach - General Liability
Exposure and Development Method
Ultimate Trended Trended
Accident Composite Limited Trend Limited Limited Limited Factor to Program
Year Exposures Losses Factor Losses Loss Rate Loss Rate SIR Loss Rate
(A) (B) (C) (D) (E) (F) (G) (H)
Prior 705,833 4,506,367 1.232 5,551,844 7.866 6.384 1.276 8.146
1998-1999 684,653 370,067 1.219 451,112 0.659 0.541 1.468 0.794
1999-2000 703,795 613,638 1.208 741,275 1.053 0.872 1.488 1.298
2000-2001 778,168 371,963 1.196 444,868 0.572 0.478 1.512 0.723
2001-2002 805,232 869,819 1.184 1,029,866 1.279 1.080 1.534 1.657
2002-2003 846,633 908,045 1.173 1,065,137 1.258 1.073 1.558 1.672
2003-2004 866,935 720,636 1.161 836,658 0.965 0.831 1.584 1.316
2004-2005 881,402 753,995 1.150 867,094 0.984 0.855 1.608 1.375
2005-2006 908,125 305,582 1.138 347,752 0.383 0.336 1.634 0.549
2006-2007 922,925 716,294 1.126 806,547 0.874 0.776 1.660 1.288
2007-2008 954,264 500,336 1.116 558,375 0.585 0.524 1.688 0.885
2008-2009 994,333 669,988 1.105 740,337 0.745 0.674 1.716 1.157
2009-2010 997,806 1,009,000 1.094 1,103,846 1.106 1.011 1.742 1.761
2010-2011 1,021,164 1,005,316 1.083 1,088,757 1.066 0.984 1.770 1.742
2011-2012 925,177 728,191 1.073 781,349 0.845 0.787 1.798 1.415
2012-2013 932,888 1,081,000 1.062 1,148,022 1.231 1.159 1.828 2.119
2013-2014 934,728 878,000 1.051 922,778 0.987 1.094 1.856 2.030
2014-2015 958,766 852,000 1.041 886,932 0.925 1.105 1.886 2.084
2015-2016 974,899 1,083,000 1.030 1,115,490 1.144 1.117 1.916 2.140
2016-2017 966,137 1,214,000 1.019 1,237,066 1.280 1.129 1.946 2.197
2017-2018 953,323 1,033,000 1.010 1,043,330 1.094 1.139 1.976 2.251
Total/Avg 18,717,186 $20,190,237 $22,768,435 $1.216
12/13-16/17 4,767,418 5,108,000 5,310,288 1.114
13/14-17/18 4,787,853 5,060,000 5,205,596 1.087
Selected Limited Rate: $1.150
Prior: $1.200
Notes:
(A) From Appendix GL - N, Page 2, Column (G).
(B) Selected average of results from Appendices G and G.
(C) From Appendix GL - E, Page 1, Column (B).
(D) (B) x (C).
(E) (D) / (A).
(F) Selected Limited Rate / (C). For 2012-2013 and prior (B) / (A).
(G) Based on a Burr distribution, a mathematical model
of claim sizes.
(H) (F) x (G).
This exhibit shows the calculation of the underlying historical relationship between losses and exposure that is
needed to apply the estimation methods shown on pages 1 and 2 of this Appendix.
-58-
DRAFT
Appendix GL - D
Page 1
City of Newport Beach - General Liability
Frequency and Severity Method
Ultimate Adjusted Ultimate
Accident Program Ultimate Program
Year Severity Claims Losses
(A) (B) (C)
Prior $4,507 1,276 $5,750,932
1998-1999 5,379 101 543,279
1999-2000 5,779 158 913,082
2000-2001 4,766 118 562,388
2001-2002 8,393 159 1,334,487
2002-2003 10,034 141 1,414,794
2003-2004 7,660 149 1,141,340
2004-2005 7,873 154 1,212,442
2005-2006 6,016 83 499,328
2006-2007 9,437 126 1,189,062
2007-2008 8,617 98 844,466
2008-2009 11,163 103 1,149,789
2009-2010 13,417 131 1,757,627
2010-2011 16,787 106 1,779,422
2011-2012 14,231 92 1,309,252
2012-2013 20,583 96 1,975,968
2013-2014 16,776 107 1,795,032
2014-2015 17,212 102 1,755,624
2015-2016 17,671 103 1,820,113
2016-2017 18,143 127 2,304,161
2017-2018 18,586 100 1,858,600
Total 3,630 $32,911,188
Notes:
(A) From Appendix GL - D, Page 2, Column (H).
(B) From Appendix GL - D, Page 2, Column (B).
(C) (A) x (B).
This exhibit shows the calculation of the estimated
ultimate losses for each year based on the
observed average frequency and severity of
claims.
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DRAFT
Appendix GL - D
Page 2
City of Newport Beach - General Liability
Frequency and Severity Method
Ultimate Adjusted Ultimate Trended
Accident Limited Ultimate Limited Trend Limited Limited Factor to Program
Year Losses Claims Severity Factor Severity Severity SIR Severity
(A) (B) (C) (D) (E) (F) (G) (H)
Prior $4,506,367 1,276 $3,532 1.232 $4,351 $3,532 1.276 $4,507
1998-1999 370,067 101 3,664 1.219 4,466 3,664 1.468 5,379
1999-2000 613,638 158 3,884 1.208 4,692 3,884 1.488 5,779
2000-2001 371,963 118 3,152 1.196 3,770 3,152 1.512 4,766
2001-2002 869,819 159 5,471 1.184 6,478 5,471 1.534 8,393
2002-2003 908,045 141 6,440 1.173 7,554 6,440 1.558 10,034
2003-2004 720,636 149 4,836 1.161 5,615 4,836 1.584 7,660
2004-2005 753,995 154 4,896 1.150 5,630 4,896 1.608 7,873
2005-2006 305,582 83 3,682 1.138 4,190 3,682 1.634 6,016
2006-2007 716,294 126 5,685 1.126 6,401 5,685 1.660 9,437
2007-2008 500,336 98 5,105 1.116 5,697 5,105 1.688 8,617
2008-2009 669,988 103 6,505 1.105 7,188 6,505 1.716 11,163
2009-2010 1,009,000 131 7,702 1.094 8,426 7,702 1.742 13,417
2010-2011 1,005,316 106 9,484 1.083 10,271 9,484 1.770 16,787
2011-2012 728,191 92 7,915 1.073 8,493 7,915 1.798 14,231
2012-2013 1,081,000 96 11,260 1.062 11,958 11,260 1.828 20,583
2013-2014 879,000 107 8,215 1.051 8,634 9,039 1.856 16,776
2014-2015 854,000 102 8,373 1.041 8,716 9,126 1.886 17,212
2015-2016 1,082,000 103 10,505 1.030 10,820 9,223 1.916 17,671
2016-2017 1,183,000 127 9,315 1.019 9,492 9,323 1.946 18,143
2017-2018 1,034,000 100 10,340 1.010 10,443 9,406 1.976 18,586
Average Limited Severity: $7,299
Average 12/13-16/17 Limited Severity: 9,924
Average 13/14-17/18 Limited Severity: 9,621
Selected Limited Severity: $9,500
Prior: $10,750
Notes:
(A) Selected average of results from Appendices G, G, and G.
(B) Appendix GL - D, Page 3, Column (C).
(C) (A) / (B).
(D) From Appendix GL - E, Page 1, Column (J).
(E) (C) x (D).
(F) Selected Limited Severity / (D).
(G) Based on a Burr distribution, a mathematical model
of claim sizes.
(H) (F) x (G).
This exhibit shows the calculation of the historical average cost per claim, or severity. The observed
average severity is used in the method shown on page 1 of this Appendix.
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DRAFT
Appendix GL - D
Page 3
City of Newport Beach - General Liability
Frequency and Severity Method
Projection of Ultimate Claims
Reported Closed Selected Trended
Accident Claim Claim Ultimate Composite Claim Trend Claim
Year Development Development Claims ($000,000) Frequency Factor Frequency
(A) (B) (C) (D) (E) (F) (G)
Prior 1,276 1,276 1,276 70.6 18.078 1.000 18.078
1998-1999 101 101 101 68.5 1.475 1.000 1.475
1999-2000 158 158 158 70.4 2.245 1.000 2.245
2000-2001 118 118 118 77.8 1.516 1.000 1.516
2001-2002 159 159 159 80.5 1.975 1.000 1.975
2002-2003 141 141 141 84.7 1.665 1.000 1.665
2003-2004 149 149 149 86.7 1.719 1.000 1.719
2004-2005 154 154 154 88.1 1.747 1.000 1.747
2005-2006 83 83 83 90.8 0.914 1.000 0.914
2006-2007 126 126 126 92.3 1.365 1.000 1.365
2007-2008 98 98 98 95.4 1.027 1.000 1.027
2008-2009 103 103 103 99.4 1.036 1.000 1.036
2009-2010 131 129 131 99.8 1.313 1.000 1.313
2010-2011 106 106 106 102.1 1.038 1.000 1.038
2011-2012 92 92 92 92.5 0.994 1.000 0.994
2012-2013 96 96 96 93.3 1.029 1.000 1.029
2013-2014 107 108 107 93.5 1.145 1.000 1.145
2014-2015 102 104 102 95.9 1.064 1.000 1.064
2015-2016 103 105 103 97.5 1.057 1.000 1.057
2016-2017 127 142 127 96.6 1.315 1.000 1.315
2017-2018 83 109 100 95.3 1.049 1.000 1.049
Total 3,613 3,657 3,630 1,871.7 1.939
12/13-16/17 535 555 535 476.7 1.122
13/14-17/18 522 568 539 478.8 1.126
(H) Selected Frequency: 1.125
Prior: 1.150
Program Year: 2018-2019 2019-2020 2020-2021
(I) Trend Factor: 1.000 1.000 1.000
(J) Selected Frequency: 1.125 1.125 1.125
(K) Est. Composite ($000,000): 96.0 97.7 99.5
(L) Ultimate Claims: 108 110 112
Notes:
(A) From Appendix GL - D, Page 4, (C). (G) (E) x (F).
(B) From Appendix GL - D, Page 5, (C). (H) The selected frequency of 1.125 is based on (G).
(C) Selected from (A) and (B). (I) From Appendix GL - E, Page 1, Column (H).
(D) From Appendix GL - N, Page 2, Column (G) / 10,000. (J) (H) x (I).
(E) (C) / (D). (K) From Appendix GL - N, Page 2, Column (G) / 10,00
(F) From Appendix GL - E, Page 1, Column (H). (L) (J) x (K).
This exhibit summarizes the estimated numbers of claims and shows the
estimated frequencies per $1,000,000 of trended payroll.
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DRAFT
Appendix GL - D
Page 4
City of Newport Beach - General Liability
Frequency and Severity Method
Reported Claim Count Development
Claims Reported
Reported Claim Trended
Accident as of Development Ultimate Claim
Year 6/30/2018 Factor Claims Frequency
(A) (B) (C) (D)
Prior 1,276 1.000 1,276 18.078
1998-1999 101 1.000 101 1.475
1999-2000 158 1.000 158 2.245
2000-2001 118 1.000 118 1.516
2001-2002 159 1.000 159 1.975
2002-2003 141 1.000 141 1.665
2003-2004 149 1.000 149 1.719
2004-2005 154 1.000 154 1.747
2005-2006 83 1.000 83 0.914
2006-2007 126 1.000 126 1.365
2007-2008 98 1.000 98 1.027
2008-2009 103 1.000 103 1.036
2009-2010 131 1.000 131 1.313
2010-2011 106 1.000 106 1.038
2011-2012 92 1.000 92 0.994
2012-2013 96 1.000 96 1.029
2013-2014 107 1.001 107 1.145
2014-2015 102 1.004 102 1.064
2015-2016 102 1.009 103 1.057
2016-2017 124 1.026 127 1.315
2017-2018 66 1.257 83 0.871
Total 3,592 3,613 1.930
Notes:
(A) Provided by the City.
(B) From Appendix GL - D, Page 6.
(C) (A) x (B).
(D) (C) / [Appendix GL - D, Page 3, (D)] x [Appendix GL - D, Page 3, (F)].
This exhibit shows the calculation of estimated ultimate claims for each year
based on reported claims as provided by the City. These numbers of
claims tend to "develop" or change from period to period as more claims are filed.
This development tends to follow quantifiable patterns over time.
-62-
DRAFT
Appendix GL - D
Page 5
City of Newport Beach - General Liability
Frequency and Severity Method
Closed Claim Count Development
Claims Closed
Closed Claim Trended
Accident as of Development Ultimate Claim
Year 6/30/2018 Factor Claims Frequency
(A) (B) (C) (D)
Prior 1,276 1.000 1,276 18.078
1998-1999 101 1.000 101 1.475
1999-2000 158 1.000 158 2.245
2000-2001 118 1.000 118 1.516
2001-2002 159 1.000 159 1.975
2002-2003 141 1.000 141 1.665
2003-2004 149 1.000 149 1.719
2004-2005 154 1.000 154 1.747
2005-2006 83 1.000 83 0.914
2006-2007 126 1.000 126 1.365
2007-2008 98 1.000 98 1.027
2008-2009 103 1.000 103 1.036
2009-2010 129 1.000 129 1.293
2010-2011 106 1.001 106 1.038
2011-2012 92 1.004 92 0.994
2012-2013 95 1.013 96 1.029
2013-2014 106 1.023 108 1.155
2014-2015 99 1.054 104 1.085
2015-2016 95 1.101 105 1.077
2016-2017 115 1.233 142 1.470
2017-2018 44 2.466 109 1.143
Total 3,547 3,657 1.954
Notes:
(A) Provided by the City.
(B) From Appendix GL - D, Page 7.
(C) (A) x (B).
(D) (C) / [Appendix GL - D, Page 3, (D)] x [Appendix GL - D, Page 3, (F)].
This exhibit shows the calculation of estimated ultimate claims for each year
based on closed claims as provided by the City. These numbers of
closed claims tend to "develop" or change from period to period as more claims are
closed. This development tends to follow quantifiable patterns over time.
-63-
DRAFT
Appendix GL - D
Page 6
City of Newport Beach - General Liability
Reported Claim Count Development
Claims Reported as of:
Accident 12 24 36 48 60 72 84 96 108 120 132 144 156
Year Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 136 167 181 184 184 185 185 185 185 184 184 184 184
1998-1999 63 96 102 102 101 101 101 101 101 101 101 101 101
1999-2000 104 155 158 158 158 158 158 158 158 158 158 158 158
2000-2001 103 117 119 118 118 118 118 118 118 118 118 118 118
2001-2002 124 155 158 159 159 159 159 159 159 159 159 159 159
2002-2003 120 140 141 141 141 141 141 141 141 141 141 141 141
2003-2004 124 145 148 148 149 149 149 149 149 149 149 149 149
2004-2005 127 149 151 153 154 154 154 154 154 154 154 154 154
2005-2006 67 81 83 83 83 83 83 83 83 83 83 83 83
2006-2007 102 122 123 123 125 125 125 126 126 126 126 126
2007-2008 75 94 97 98 98 98 98 98 98 98 98
2008-2009 83 101 102 103 103 103 103 103 103 103
2009-2010 103 125 128 131 131 131 131 131 131
2010-2011 87 102 103 105 106 106 106 106
2011-2012 69 91 92 92 92 92 92
2012-2013 70 96 96 96 96 96
2013-2014 89 107 107 107 107
2014-2015 77 102 102 102
2015-2016 87 100 102
2016-2017 106 124
2017-2018 66
Reported Claim Count Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 1.228 1.084 1.017 1.000 1.005 1.000 1.000 1.000 0.995 1.000 1.000 1.000 1.000
1998-1999 1.524 1.063 1.000 0.990 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1999-2000 1.490 1.019 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2000-2001 1.136 1.017 0.992 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2001-2002 1.250 1.019 1.006 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2002-2003 1.167 1.007 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2003-2004 1.169 1.021 1.000 1.007 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2004-2005 1.173 1.013 1.013 1.007 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2005-2006 1.209 1.025 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.0001.000
2006-2007 1.196 1.008 1.000 1.016 1.000 1.000 1.008 1.000 1.000 1.000 1.000
2007-2008 1.253 1.032 1.010 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2008-2009 1.217 1.010 1.010 1.000 1.000 1.000 1.000 1.000 1.000
2009-2010 1.214 1.024 1.023 1.000 1.000 1.000 1.000 1.000
2010-2011 1.172 1.010 1.019 1.010 1.000 1.000 1.000
2011-2012 1.319 1.011 1.000 1.000 1.000 1.000
2012-2013 1.371 1.000 1.000 1.000 1.000
2013-2014 1.202 1.000 1.000 1.000
2014-2015 1.325 1.000 1.000
2015-2016 1.149 1.020
2016-2017 1.170
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
Average 1.247 1.020 1.005 1.002 1.000 1.000 1.001 1.000 1.000 1.000 1.000 1.000 1.000
Claim-Weighted
Averages
3-yr 1.207 1.006 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
4-yr 1.206 1.005 1.000 1.003 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Comparative
Factors 1.270 1.030 1.005 1.005 1.005 1.004 1.003 1.002 1.001 1.001 1.000 1.000 1.000
Prior 1.250 1.015 1.009 1.004 1.001 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Selected 1.225 1.017 1.005 1.003 1.001 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Cumulated 1.257 1.026 1.009 1.004 1.001 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
-64-
DRAFT
Appendix GL - D
Page 7
City of Newport Beach - General Liability
Closed Claim Development
Claims Closed as of:
Accident 12 24 36 48 60 72 84 96 108 120 132 144 156
Year Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 135 166 179 180 183 185 185 184 184 183 183 183 184
1998-1999 60 86 89 93 99 101 101 101 101 101 101 101 101
1999-2000 79 98 123 154 155 156 158 158 158 158 158 158 158
2000-2001 41 92 109 113 116 118 118 116 118 118 118 118 118
2001-2002 25 109 143 152 158 158 158 157 159 159 159 159 159
2002-2003 40 106 130 137 139 138 140 141 141 141 141 141 141
2003-2004 50 109 134 139 144 147 149 149 149 149 149 149 149
2004-2005 44 112 136 140 151 153 154 154 154 154 154 154 154
2005-2006 27 68 76 80 81 82 82 82 83 83 83 83 83
2006-2007 36 96 113 118 122 124 124 125 126 126 126 126
2007-2008 23 64 83 96 98 98 98 98 98 98 98
2008-2009 17 77 94 102 102 102 103 103 103 103
2009-2010 37 104 118 124 128 130 130 130 129
2010-2011 27 79 97 99 103 104 106 106
2011-2012 34 77 86 89 92 91 92
2012-2013 32 80 93 92 95 95
2013-2014 43 98 101 106 106
2014-2015 37 89 95 99
2015-2016 48 85 95
2016-2017 70 115
2017-2018 44
Closed Claim Count Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 1.230 1.078 1.006 1.017 1.011 1.000 0.995 1.000 0.995 1.000 1.000 1.005 1.000
1998-1999 1.433 1.035 1.045 1.065 1.020 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1999-2000 1.241 1.255 1.252 1.006 1.006 1.013 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2000-2001 2.244 1.185 1.037 1.027 1.017 1.000 0.983 1.017 1.000 1.000 1.000 1.000 1.000
2001-2002 4.360 1.312 1.063 1.039 1.000 1.000 0.994 1.013 1.000 1.000 1.000 1.000 1.000
2002-2003 2.650 1.226 1.054 1.015 0.993 1.014 1.007 1.000 1.000 1.000 1.000 1.000 1.000
2003-2004 2.180 1.229 1.037 1.036 1.021 1.014 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2004-2005 2.545 1.214 1.029 1.079 1.013 1.007 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2005-2006 2.519 1.118 1.053 1.013 1.012 1.000 1.000 1.012 1.000 1.000 1.0001.000
2006-2007 2.667 1.177 1.044 1.034 1.016 1.000 1.008 1.008 1.000 1.000 1.000
2007-2008 2.783 1.297 1.157 1.021 1.000 1.000 1.000 1.000 1.000 1.000
2008-2009 4.529 1.221 1.085 1.000 1.000 1.010 1.000 1.000 1.000
2009-2010 2.811 1.135 1.051 1.032 1.016 1.000 1.000 0.992
2010-2011 2.926 1.228 1.021 1.040 1.010 1.019 1.000
2011-2012 2.265 1.117 1.035 1.034 0.989 1.011
2012-2013 2.500 1.163 0.989 1.033 1.000
2013-2014 2.279 1.031 1.050 1.000
2014-2015 2.405 1.067 1.042
2015-2016 1.771 1.118
2016-2017 1.643
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
Average 2.449 1.169 1.058 1.029 1.008 1.006 0.999 1.003 1.000 1.000 1.000 1.001 1.000
Claim-Weighted
Averages
3-yr 1.865 1.070 1.028 1.021 1.000 1.009 1.000 0.997 1.000 1.000 1.000 1.000 1.000
4-yr 1.955 1.091 1.029 1.026 1.005 1.009 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Comparative
Factors 2.150 1.191 1.064 1.040 1.024 1.015 1.010 1.009 1.006 1.005 1.004 1.003 1.002
Prior 2.250 1.125 1.050 1.035 1.013 1.007 1.003 1.001 1.000 1.000 1.000 1.000 1.000
Selected 2.000 1.120 1.045 1.030 1.010 1.009 1.003 1.001 1.000 1.000 1.000 1.000 1.000
Cumulated 2.466 1.233 1.101 1.054 1.023 1.013 1.004 1.001 1.000 1.000 1.000 1.000 1.000
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Appendix GL - E
Page 1
City of Newport Beach - General Liability
Loss Trend Factors
Factor to Factor to Factor to Factor to Factor to Factor to Factor to Factor to Factor to
Benefit 2018-2019 2019-2020 2020-2021 2021-2022 2018-2019 2019-2020 2020-2021 2021-2022 2018-2019
Accident Level Loss Rate Loss Rate Loss Rate Loss Rate Frequency Frequency Frequency Frequency Severity
Year Factor Level Level Level Level Level Level Level Level Level
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
Prior 1.000 1.232 1.244 1.256 1.269 1.000 1.000 1.000 1.000 1.232
1998-1999 1.000 1.219 1.231 1.244 1.256 1.000 1.000 1.000 1.000 1.219
1999-2000 1.000 1.208 1.220 1.232 1.244 1.000 1.000 1.000 1.000 1.208
2000-2001 1.000 1.196 1.208 1.220 1.232 1.000 1.000 1.000 1.000 1.196
2001-2002 1.000 1.184 1.196 1.208 1.220 1.000 1.000 1.000 1.000 1.184
2002-2003 1.000 1.173 1.184 1.196 1.208 1.000 1.000 1.000 1.000 1.173
2003-2004 1.000 1.161 1.173 1.184 1.196 1.000 1.000 1.000 1.000 1.161
2004-2005 1.000 1.150 1.161 1.172 1.184 1.000 1.000 1.000 1.000 1.150
2005-2006 1.000 1.138 1.149 1.160 1.172 1.000 1.000 1.000 1.000 1.138
2006-2007 1.000 1.126 1.137 1.149 1.160 1.000 1.000 1.000 1.000 1.126
2007-2008 1.000 1.116 1.126 1.138 1.149 1.000 1.000 1.000 1.000 1.116
2008-2009 1.000 1.105 1.116 1.127 1.138 1.000 1.000 1.000 1.000 1.105
2009-2010 1.000 1.094 1.105 1.116 1.127 1.000 1.000 1.000 1.000 1.094
2010-2011 1.000 1.083 1.094 1.105 1.116 1.000 1.000 1.000 1.000 1.083
2011-2012 1.000 1.073 1.083 1.094 1.105 1.000 1.000 1.000 1.000 1.073
2012-2013 1.000 1.062 1.073 1.083 1.094 1.000 1.000 1.000 1.000 1.062
2013-2014 1.000 1.051 1.062 1.072 1.083 1.000 1.000 1.000 1.000 1.051
2014-2015 1.000 1.041 1.051 1.061 1.072 1.000 1.000 1.000 1.000 1.041
2015-2016 1.000 1.030 1.040 1.050 1.061 1.000 1.000 1.000 1.000 1.030
2016-2017 1.000 1.019 1.029 1.040 1.050 1.000 1.000 1.000 1.000 1.019
2017-2018 1.000 1.010 1.020 1.030 1.040 1.000 1.000 1.000 1.000 1.010
2018-2019 1.000 1.000 1.010 1.020 1.030 1.000 1.000 1.000 1.000 1.000
2019-2020 1.000 -- 1.000 1.010 1.020 -- 1.000 1.000 1.000 --
2020-2021 1.000 -- -- 1.000 1.010 -- -- 1.000 1.000 --
2021-2022 1.000 -- -- -- 1.000 -- -- -- 1.000 --
Notes:
(A) No benefit level adjustment applied.
(B) - (E) (A) adjusted for a 1.0% annual loss rate trend.
(F) - (I) (A) adjusted for a 0.0% annual frequency trend.
(J) (A) adjusted for a 1.0% annual severity trend.
This exhibit shows the calculation of the ways in which we expect claims costs to have changed over the
past twenty years due to changes in inflation.
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Appendix GL - E
Page 2
City of Newport Beach - General Liability
Residual Trend Factors
Initial
Estimate of
Ultimate Ultimate Adjusted
Accident Limited Reported Limited Composite Ultimate
Year Losses Claims BLF Severity Exposures Frequency
(A) (B) (C) (D) (E) (F)
Prior $4,506,367 1,276 1.000 3,532 705,833 18.078
1998-1999 370,067 101 1.000 3,664 684,653 1.475
1999-2000 613,638 158 1.000 3,884 703,795 2.245
2000-2001 371,963 118 1.000 3,152 778,168 1.516
2001-2002 869,819 159 1.000 5,471 805,232 1.975
2002-2003 908,045 141 1.000 6,440 846,633 1.665
2003-2004 720,636 149 1.000 4,836 866,935 1.719
2004-2005 753,995 154 1.000 4,896 881,402 1.747
2005-2006 305,582 83 1.000 3,682 908,125 0.914
2006-2007 716,294 126 1.000 5,685 922,925 1.365
2007-2008 500,336 98 1.000 5,105 954,264 1.027
2008-2009 669,988 103 1.000 6,505 994,333 1.036
2009-2010 1,009,000 131 1.000 7,702 997,806 1.313
2010-2011 1,005,316 106 1.000 9,484 1,021,164 1.038
2011-2012 728,191 92 1.000 7,915 925,177 0.994
2012-2013 1,081,000 96 1.000 11,260 932,888 1.029
2013-2014 878,000 107 1.000 8,206 934,728 1.145
2014-2015 852,000 102 1.000 8,353 958,766 1.064
2015-2016 1,083,000 103 1.000 10,515 974,899 1.057
2016-2017 1,214,000 127 1.000 9,559 966,137 1.315
2017-2018 1,033,000 100 1.000 10,330 953,323 1.049
Severity Trend Factors Frequency Trend Factors
Latest 10 x 2017-2018 1.058 1.010
Latest 5 x 2017-2018 0.992 1.042
Prior 1.025 0.980
Default 1.030 0.975
Selected Residual Trend 1.010 1.000
Notes:
(A) Selected average of results from Appendix GL - A and Appendix GL - B.
(B) Appendix GL - D, Page 3, Column (C).
(C) Appendix GL - E, Page 1, (A).
(D) (A) x (C) / (B).
(E) From Appendix GL - N, Page 2, Column (G).
(F) (B) / (E) x 10,000.
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Appendix GL - F
Page 1
City of Newport Beach - General Liability
Outstanding Liability for
Unallocated Loss Adjustment Expenses
as of 6/30/18
Number of Average Trended
Claims Active ULAE ULAE
During Charge Inflation Charge ULAE
Fiscal Fiscal per Active Trend per Active Paid During
Year Year Claim Factor Claim Year
(A) (B) (C) (D) (E) (F)
2018-2019 78.0 $1,150 1.000 $1,150 $89,700
2019-2020 30.5 1,150 1.050 1,208 36,844
2020-2021 15.3 1,150 1.103 1,268 19,400
2021-2022 7.6 1,150 1.158 1,332 10,123
2022-2023 3.3 1,150 1.216 1,398 4,613
2023-2024 1.5 1,150 1.277 1,469 2,204
2024-2025 0.5 1,150 1.341 1,542 771
2025-2026 0.1 1,150 1.408 1,619 162
2026-2027 0.0 1,150 1.478 1,700 0
2027-2028 0.0 1,150 1.552 1,785 0
2028-2029 0.0 1,150 1.630 1,875 0
2029-2030 0.0 1,150 1.712 1,969 0
2030-2031 0.0 1,150 1.798 2,068 0
2031-2032 0.0 1,150 1.888 2,171 0
2032-2033 0.0 1,150 1.982 2,279 0
2033-2034 0.0 1,150 2.081 2,393 0
2034-2035 0.0 1,150 2.185 2,513 0
2035-2036 0.0 1,150 2.294 2,638 0
(G) Total ULAE Outstanding as of 6/30/18: $163,817
Notes:
(A) We assume fiscal years will be 7/1 to 6/30.
(B) Based on an estimated claim closing pattern.
(C) Based on claims administration payment information
provided by the City.
(D) We assume ULAE costs will increase at 5.0% per year.
(E) (C) x (D).
(F) (B) x (E).
(G) Total of Column (F).
This exhibit shows the calculation of the outstanding ULAE based
on the expected pattern of claims closings and assumptions about
future claims administration costs per open claim.
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Appendix GL - F
Page 2
City of Newport Beach - General Liability
Outstanding Liability for
Unallocated Loss Adjustment Expenses
as of 6/30/19
Number of Average Trended
Claims Active ULAE ULAE
During Charge Inflation Charge ULAE
Fiscal Fiscal per Active Trend per Active Paid During
Year Year Claim Factor Claim Year
(A) (B) (C) (D) (E) (F)
2019-2020 91.6 $1,150 1.050 $1,208 $110,653
2020-2021 34.8 1,150 1.103 1,268 44,126
2021-2022 17.6 1,150 1.158 1,332 23,443
2022-2023 8.7 1,150 1.216 1,398 12,163
2023-2024 3.8 1,150 1.277 1,469 5,582
2024-2025 1.8 1,150 1.341 1,542 2,776
2025-2026 0.5 1,150 1.408 1,619 810
2026-2027 0.1 1,150 1.478 1,700 170
2027-2028 0.0 1,150 1.552 1,785 0
2028-2029 0.0 1,150 1.630 1,875 0
2029-2030 0.0 1,150 1.712 1,969 0
2030-2031 0.0 1,150 1.798 2,068 0
2031-2032 0.0 1,150 1.888 2,171 0
2032-2033 0.0 1,150 1.982 2,279 0
2033-2034 0.0 1,150 2.081 2,393 0
2034-2035 0.0 1,150 2.185 2,513 0
2035-2036 0.0 1,150 2.294 2,638 0
2036-2037 0.0 1,150 2.409 2,770 0
(G) Total ULAE Outstanding as of 6/30/19: $199,723
Notes:
(A) We assume fiscal years will be 7/1 to 6/30.
(B) Based on an estimated claim closing pattern.
(C) Based on claims administration payment information
provided by the City.
(D) We assume ULAE costs will increase at 5.0% per year.
(E) (C) x (D).
(F) (B) x (E).
(G) Total of Column (F).
This exhibit shows the calculation of the outstanding ULAE based
on the expected pattern of claims closings and assumptions about
future claims administration costs per open claim.
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DRAFT
Appendix GL - F
Page 3
City of Newport Beach - General Liability
Outstanding Liability for
Unallocated Loss Adjustment Expenses
as of 6/30/20
Number of Average Trended
Claims Active ULAE ULAE
During Charge Inflation Charge ULAE
Fiscal Fiscal per Active Trend per Active Paid During
Year Year Claim Factor Claim Year
(A) (B) (C) (D) (E) (F)
2020-2021 96.9 $1,150 1.103 $1,268 $122,869
2021-2022 37.4 1,150 1.158 1,332 49,817
2022-2023 18.8 1,150 1.216 1,398 26,282
2023-2024 9.2 1,150 1.277 1,469 13,515
2024-2025 4.1 1,150 1.341 1,542 6,322
2025-2026 1.8 1,150 1.408 1,619 2,914
2026-2027 0.5 1,150 1.478 1,700 850
2027-2028 0.1 1,150 1.552 1,785 179
2028-2029 0.0 1,150 1.630 1,875 0
2029-2030 0.0 1,150 1.712 1,969 0
2030-2031 0.0 1,150 1.798 2,068 0
2031-2032 0.0 1,150 1.888 2,171 0
2032-2033 0.0 1,150 1.982 2,279 0
2033-2034 0.0 1,150 2.081 2,393 0
2034-2035 0.0 1,150 2.185 2,513 0
2035-2036 0.0 1,150 2.294 2,638 0
2036-2037 0.0 1,150 2.409 2,770 0
2037-2038 0.0 1,150 2.529 2,908 0
(G) Total ULAE Outstanding as of 6/30/20: $222,748
Notes:
(A) We assume fiscal years will be 7/1 to 6/30.
(B) Based on an estimated claim closing pattern.
(C) Based on claims administration payment information
provided by the City.
(D) We assume ULAE costs will increase at 5.0% per year.
(E) (C) x (D).
(F) (B) x (E).
(G) Total of Column (F).
This exhibit shows the calculation of the outstanding ULAE based
on the expected pattern of claims closings and assumptions about
future claims administration costs per open claim.
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DRAFT
Appendix GL - G
Page 1
City of Newport Beach - General Liability
Payment and Reserve Forecast
Calendar Period
7/1/2018 7/1/2019 7/1/2020
As of to to to
Accident Year 6/30/2018 6/30/2019 6/30/2020 6/30/2021
Prior
Ultimate Loss $10,620,878 $10,620,878 $10,620,878 $10,620,878
Paid in Calendar Period -
Paid to Date 10,620,878 10,620,878 10,620,878 10,620,878
Outstanding Liability
2002-2003
Ultimate Loss $1,097,716 $1,097,716 $1,097,716 $1,097,716
Paid in Calendar Period -
Paid to Date 1,097,716 1,097,716 1,097,716 1,097,716
Outstanding Liability
2003-2004
Ultimate Loss $951,067 $951,067 $951,067 $951,067
Paid in Calendar Period -
Paid to Date 951,067 951,067 951,067 951,067
Outstanding Liability
2004-2005
Ultimate Loss $883,647 $883,647 $883,647 $883,647
Paid in Calendar Period -
Paid to Date 883,647 883,647 883,647 883,647
Outstanding Liability
2005-2006
Ultimate Loss $305,582 $305,582 $305,582 $305,582
Paid in Calendar Period -
Paid to Date 305,582 305,582 305,582 305,582
Outstanding Liability
2006-2007
Ultimate Loss $1,789,857 $1,789,857 $1,789,857 $1,789,857
Paid in Calendar Period -
Paid to Date 1,789,857 1,789,857 1,789,857 1,789,857
Outstanding Liability
2007-2008
Ultimate Loss $500,336 $500,336 $500,336 $500,336
Paid in Calendar Period -
Paid to Date 500,336 500,336 500,336 500,336
Outstanding Liability
2008-2009
Ultimate Loss $1,069,988 $1,069,988 $1,069,988 $1,069,988
Paid in Calendar Period -
Paid to Date 1,069,988 1,069,988 1,069,988 1,069,988
Outstanding Liability
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Appendix GL - G
Page 2
City of Newport Beach - General Liability
Payment and Reserve Forecast
Calendar Period
7/1/2018 7/1/2019 7/1/2020
As of to to to
Accident Year 6/30/2018 6/30/2019 6/30/2020 6/30/2021
2009-2010
Ultimate Loss $1,758,000 $1,758,000 $1,758,000 $1,758,000
Paid in Calendar Period - 215,997
Paid to Date 1,542,003 1,758,000 1,758,000 1,758,000
Outstanding Liability 215,997
2010-2011
Ultimate Loss $2,487,271 $2,487,271 $2,487,271 $2,487,271
Paid in Calendar Period -
Paid to Date 2,487,271 2,487,271 2,487,271 2,487,271
Outstanding Liability
2011-2012
Ultimate Loss $1,987,712 $1,987,712 $1,987,712 $1,987,712
Paid in Calendar Period -
Paid to Date 1,987,712 1,987,712 1,987,712 1,987,712
Outstanding Liability
2012-2013
Ultimate Loss $1,934,000 $1,934,000 $1,934,000 $1,934,000
Paid in Calendar Period - 96,796 70,140 39,453
Paid to Date 1,727,611 1,824,407 1,894,547 1,934,000
Outstanding Liability 206,389 109,593 39,453
2013-2014
Ultimate Loss $1,730,000 $1,730,000 $1,730,000 $1,730,000
Paid in Calendar Period - 99,575 78,502 56,883
Paid to Date 1,463,044 1,562,619 1,641,121 1,698,004
Outstanding Liability 266,956 167,381 88,879 31,996
2014-2015
Ultimate Loss $1,893,000 $1,893,000 $1,893,000 $1,893,000
Paid in Calendar Period - 299,959 126,676 99,867
Paid to Date 1,253,428 1,553,387 1,680,063 1,779,930
Outstanding Liability 639,572 339,613 212,937 113,070
2015-2016
Ultimate Loss $2,403,000 $2,403,000 $2,403,000 $2,403,000
Paid in Calendar Period - 357,797 191,522 80,882
Paid to Date 1,636,840 1,994,637 2,186,159 2,267,041
Outstanding Liability 766,160 408,363 216,841 135,959
2016-2017
Ultimate Loss $2,308,000 $2,308,000 $2,308,000 $2,308,000
Paid in Calendar Period - 662,409 370,535 198,341
Paid to Date 852,155 1,514,564 1,885,099 2,083,440
Outstanding Liability 1,455,845 793,436 422,901 224,560
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Appendix GL - G
Page 3
City of Newport Beach - General Liability
Payment and Reserve Forecast
Calendar Period
7/1/2018 7/1/2019 7/1/2020
As of to to to
Accident Year 6/30/2018 6/30/2019 6/30/2020 6/30/2021
2017-2018
Ultimate Loss $2,440,000 $2,440,000 $2,440,000 $2,440,000
Paid in Calendar Period - 518,086 811,956 454,187
Paid to Date 137,395 655,481 1,467,437 1,921,624
Outstanding Liability 2,302,605 1,784,519 972,563 518,376
2018-2019
Ultimate Loss - $2,313,000 $2,313,000 $2,313,000
Paid in Calendar Period - 240,552 466,301 730,797
Paid to Date - 240,552 706,853 1,437,650
Outstanding Liability - 2,072,448 1,606,147 875,350
2019-2020
Ultimate Loss - - $2,414,000 $2,414,000
Paid in Calendar Period - - 251,056 486,662
Paid to Date - - 251,056 737,718
Outstanding Liability - - 2,162,944 1,676,282
2020-2021
Ultimate Loss - - - $2,522,000
Paid in Calendar Period - - - 262,288
Paid to Date - - - 262,288
Outstanding Liability - - - 2,259,712
Totals
Ultimate Loss $36,160,054 $38,473,054 $40,887,054 $43,409,054
Paid in Calendar Period - 2,491,171 2,366,688 2,409,360
Paid to Date 30,306,530 32,797,701 35,164,389 37,573,749
Outstanding Liability 5,853,524 5,675,353 5,722,665 5,835,305
Total Outstanding ULAE 163,817 199,723 222,748 243,754
Outstanding Liability
plus ULAE 6,017,341 5,875,076 5,945,413 6,079,059
Notes appear on the next page.
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Appendix GL - G
Page 4
City of Newport Beach - General Liability
Payment and Reserve Forecast
Notes to previous page:
· Accident Year is associated with date of loss. Calendar Period is associated with date of
transaction. For example, for the losses which occurred during 2016-2017, $662,409 is
expected to be paid between 7/1/18 and 6/30/19, $1,514,564 will have been paid by 6/30/19,
and the reserve for remaining payments on these claims should be $793,436.
· Ultimate Losses for each accident year are from Exhibit GL - 4, Page 1.
· Paid in Calendar Period is a proportion of the Outstanding Liability from the
previous calendar period. These proportions are derived from the paid loss development
pattern selected in Appendix B. For example, $370,535 = $793,436 x 46.7%.
· Paid to Date is Paid in Calendar Period plus Paid to Date from previous
calendar period. For example, $1,885,099 = $370,535 + $1,514,564.
· Outstanding Liability is Ultimate Loss minus Paid to Date. For example,
$793,436 = $2,308,000 - $1,514,564.
This exhibit shows the calculation of the liability for outstanding claims as of the date of evaluation, the end of
the current fiscal year, and the end of the coming fiscal year. It also shows the expected claims payout during
the remainder of the current fiscal year and the coming fiscal year. Refer to the Totals at the end of the exhibit
for the balance sheet information. The top parts of the exhibit show information for each program year.
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DRAFT
Appendix GL - H
City of Newport Beach - General Liability
Short- and Long-Term Liabilities
Liabilities as of 6/30/18:Expected Discounted
Current (Short Term)Loss and ALAE: $2,250,619 $2,217,601
ULAE: 89,700 88,384
Short-Term Loss and LAE: $2,340,319 $2,305,985
Non-Current (Long Term)Loss and ALAE: $3,602,905 $3,334,411
ULAE: 74,117 66,995
Long-Term Loss and LAE: $3,677,022 $3,401,406
Total Liability Loss and ALAE: $5,853,524 $5,552,012
ULAE: 163,817 155,379
Total Loss and LAE: $6,017,341 $5,707,391
Liabilities as of 6/30/19:
Current (Short Term)Loss and ALAE: $2,115,632 $2,084,594
ULAE: 110,653 109,030
Short-Term Loss and LAE: $2,226,285 $2,193,624
Non-Current (Long Term)Loss and ALAE: $3,559,721 $3,292,465
ULAE: 89,070 80,196
Long-Term Loss and LAE: $3,648,791 $3,372,661
Total Liability Loss and ALAE: $5,675,353 $5,377,059
ULAE: 199,723 189,226
Total Loss and LAE: $5,875,076 $5,566,285
Discounted with a Margin for Contingencies
70% 75% 80% 85% 90%
Confidence Confidence Confidence Confidence Confidence
Liabilities as of 6/30/18:
Current (Short Term)Loss and ALAE: $2,472,625 $2,583,505 $2,716,561 $2,880,664 $3,097,989
ULAE: 98,548 102,967 108,270 114,811 123,472
Short-Term Loss and LAE: $2,571,173 $2,686,472 $2,824,831 $2,995,475 $3,221,461
Non-Current (Long Term)Loss and ALAE: $3,717,868 $3,884,589 $4,084,654 $4,331,400 $4,658,172
ULAE: 74,700 78,050 82,069 87,026 93,592
Long-Term Loss and LAE: $3,792,568 $3,962,639 $4,166,723 $4,418,426 $4,751,764
Total Liability Loss and ALAE: $6,190,493 $6,468,094 $6,801,215 $7,212,064 $7,756,161
ULAE: 173,248 181,017 190,339 201,837 217,064
Total Loss and LAE: $6,363,741 $6,649,111 $6,991,554 $7,413,901 $7,973,225
Liabilities as of 6/30/19:
Current (Short Term)Loss and ALAE: $2,324,322 $2,428,552 $2,553,628 $2,707,888 $2,912,178
ULAE: 121,568 127,020 133,562 141,630 152,315
Short-Term Loss and LAE: $2,445,890 $2,555,572 $2,687,190 $2,849,518 $3,064,493
Non-Current (Long Term)Loss and ALAE: $3,671,099 $3,835,722 $4,033,269 $4,276,912 $4,599,573
ULAE: 89,419 93,428 98,240 104,174 112,034
Long-Term Loss and LAE: $3,760,518 $3,929,150 $4,131,509 $4,381,086 $4,711,607
Total Liability Loss and ALAE: $5,995,421 $6,264,274 $6,586,897 $6,984,800 $7,511,751
ULAE: 210,987 220,448 231,802 245,804 264,349
Total Loss and LAE: $6,206,408 $6,484,722 $6,818,699 $7,230,604 $7,776,100
Note: Current (short term) liabilities are the portion of the total estimated liability shown on Appendix GL - G that is expected to be paid
out within the coming year. Totals may vary from Exhibit GL - 1, due to rounding.
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Appendix GL - I
Page 1
City of Newport Beach - General Liability
Discount Factors to be Applied to Overall Reserves
Full Value Discounted Full Value Discounted
Accident of Reserve Discount Reserve of Reserve Discount Reserve
Year at 6/30/18 Factor at 6/30/18 at 6/30/19 Factor at 6/30/19
(A) (B) (C) (D) (E) (F)
Prior $0 1.000 $0 $0 1.000 $0
1998-1999 0 1.000 0 0 1.000 0
1999-2000 0 1.000 0 0 1.000 0
2000-2001 0 1.000 0 0 1.000 0
2001-2002 0 1.000 0 0 1.000 0
2002-2003 0 1.000 0 0 1.000 0
2003-2004 0 1.000 0 0 1.000 0
2004-2005 0 1.000 0 0 1.000 0
2005-2006 0 1.000 0 0 1.000 0
2006-2007 0 1.000 0 0 1.000 0
2007-2008 0 1.000 0 0 1.000 0
2008-2009 0 1.000 0 0 1.000 0
2009-2010 215,997 1.000 215,997 0 1.000 0
2010-2011 0 0.985 0 0 1.000 0
2011-2012 0 0.974 0 0 0.985 0
2012-2013 206,389 0.964 198,966 109,593 0.974 106,756
2013-2014 266,956 0.954 254,570 167,381 0.964 161,361
2014-2015 639,572 0.953 609,556 339,613 0.954 323,856
2015-2016 766,160 0.952 729,601 408,363 0.953 389,198
2016-2017 1,455,845 0.951 1,385,143 793,436 0.952 755,575
2017-2018 2,302,605 0.937 2,158,179 1,784,519 0.951 1,697,855
2018-2019 0 - - 2,072,448 0.937 1,942,458
Totals $5,853,524 $5,552,012 $5,675,353 $5,377,059
(G) Discount Factor at 6/30/18 for Overall Reserve: 0.948
(H) Discount Factor at 6/30/19 for Overall Reserve: 0.947
Notes:
(A) From Appendix GL - G, Outstanding Liability at 6/30/18.
(B) Based on Appendix GL - I, Page 2, Column (E).
(C) (A) x (B).
(D) From Appendix GL - G, Outstanding Liability at 6/30/19.
(E) Based on Appendix GL - I, Page 2, Column (E).
(F) (D) x (E).
(G) Total of (C) / Total of (A).
(H) Total of (F) / Total of (D).
This exhibit shows the expected impact of anticipated investment income on the liability for
outstanding claims at the date of evaluation and the end of the current fiscal year. For
example, if the discount factor in item (G) is 0.948, the discounted liability for outstanding
claims is 94.8% of the full value.
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Appendix GL - I
Page 2
City of Newport Beach - General Liability
Calculation of Discount Factors
Payment Payment Return on Discounted Undiscounted Discount
Year Pattern Investment Reserves Reserves Factor
(A) (B) (C) (D) (E) (F)
22 0.0% 3.0% 0.000 0.000 1.000
21 0.0% 3.0% 0.000 0.000 1.000
20 0.0% 3.0% 0.000 0.000 1.000
19 0.0% 3.0% 0.000 0.000 1.000
18 0.0% 3.0% 0.000 0.000 1.000
17 0.0% 3.0% 0.000 0.000 1.000
16 0.0% 3.0% 0.000 0.000 1.000
15 0.0% 3.0% 0.000 0.000 1.000
14 0.0% 3.0% 0.000 0.000 1.000
13 0.0% 3.0% 0.000 0.000 1.000
12 0.0% 3.0% 0.000 0.000 1.000
11 0.0% 3.0% 0.000 0.000 1.000
10 0.0% 3.0% 0.000 0.000 1.000
9 1.6% 3.0% 0.016 0.016 0.985
8 2.5% 3.0% 0.039 0.040 0.974
7 3.5% 3.0% 0.072 0.075 0.964
6 4.2% 3.0% 0.111 0.117 0.954
5 9.8% 3.0% 0.205 0.215 0.953
4 17.6% 3.0% 0.372 0.391 0.952
3 31.0% 3.0% 0.666 0.701 0.951
2 19.8% 3.0% 0.842 0.898 0.937
1 10.2% 3.0% 0.918 1.000 0.918
(G) Discount Factor for Future Funding: 2018-2019 0.931
2019-2020 0.931
2020-2021 0.931
Notes:
(A) This is the year of payment relative to the accident year. For example, year 7
refers to payments made in the seventh year after the inception of the accident
year. We assume that payments are made at midyear.
(B) Percent of ultimate loss paid this year. This payment pattern is based on the paid
loss development pattern selected in Appendix GL - B, Page 2.
(C) Assumed Investment Income Rates.
(D) Discounted Reserves at the beginning of this year is next year's Discounted Reserves
discounted one year plus this year's payments discounted six months. For
example, in year 2, 84.2% = [66.6% / 1.030] + [19.8% / (1.015)].
(E) Summation of future (B) values. This is the percent of ultimate loss unpaid at the
beginning of the year.
(F) (D) / (E).
(G) (F) at year 1, with interest accumulated for six months. We assume that the
required funding is deposited at the middle of the first year.
This exhibit shows the calculation of the effect of anticipated investment income on future
claims costs. Thus, if the discount factor in item (F) is 0.93, on a discounted basis, $0.93
must be budgeted for every $1 that will actually be paid on claims that will be incurred in
the next fiscal year.
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Appendix GL - J
City of Newport Beach - General Liability
Confidence Level Table
Probability Projected Losses Outstanding Losses
95% 1.929 1.559
90% 1.651 1.397
85% 1.484 1.299
80% 1.359 1.225
75% 1.260 1.165
70% 1.175 1.115
65% 1.101 1.070
60% 1.034 1.029
55% 0.973 0.992
50% 0.914 0.956
45% 0.860 0.922
40% 0.806 0.888
35% 0.753 0.855
30% 0.700 0.821
25% 0.646 0.785
To read table: For the above retention, there is a 90% chance
that final loss settlements will be less than
1.651 times the average expected amount of losses.
This exhibit shows the loads that must be applied to bring estimated losses
at the expected level to the various indicated confidence levels.
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DRAFT
Appendix GL - K
City of Newport Beach - General Liability
Program History
Policy Policy Self-Insured Retention
Year Year Policy Per
Start Date End Date Year Occurrence Aggregate
7/1/1972 6/30/1998 Prior $750,000 $25,000,000
7/1/1998 6/30/1999 1998-1999 500,000 25,000,000
7/1/1999 6/30/2000 1999-2000 500,000 25,000,000
7/1/2000 6/30/2001 2000-2001 500,000 25,000,000
7/1/2001 6/30/2002 2001-2002 500,000 25,000,000
7/1/2002 6/30/2003 2002-2003 500,000 21,000,000
7/1/2003 6/30/2004 2003-2004 500,000 21,000,000
7/1/2004 6/30/2005 2004-2005 500,000 26,000,000
7/1/2005 6/30/2006 2005-2006 500,000 26,000,000
7/1/2006 6/30/2007 2006-2007 500,000 26,000,000
7/1/2007 6/30/2008 2007-2008 500,000 26,000,000
7/1/2008 6/30/2009 2008-2009 500,000 26,000,000
7/1/2009 6/30/2010 2009-2010 500,000 50,000,000
7/1/2010 6/30/2011 2010-2011 500,000 50,000,000
7/1/2011 6/30/2012 2011-2012 500,000 50,000,000
7/1/2012 6/30/2013 2012-2013 500,000 50,000,000
7/1/2013 6/30/2014 2013-2014 500,000 50,000,000
7/1/2014 6/30/2015 2014-2015 500,000 50,000,000
7/1/2015 6/30/2016 2015-2016 500,000 50,000,000
7/1/2016 6/30/2017 2016-2017 500,000 50,000,000
7/1/2017 6/30/2018 2017-2018 500,000 50,000,000
7/1/2018 6/30/2019 2018-2019 500,000 50,000,000
7/1/2019 6/30/2020 2019-2020 500,000 50,000,000
Third Party
Claims Begin End
Administrator Date Date
Carl Warren 7/1/1999 Current
This exhibit summarizes some of the key facts about the history of the program.
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Appendix GL - L
City of Newport Beach - General Liability
Estimated Total Assets as of 6/30/19
(A) Total Assets as of 6/30/18:$7,944,000
(B) Total Income to Fund during 2018-2019
Contributions: $6,239,000
Interest: 24,000
Other: 4,200,000
Total Income: $10,463,000
(C) Total Payments from Fund during 2018-2019
Loss and ALAE: $2,525,000
Additional Allocated Loss Adjustment Expense: 0
In-House Unallocated Loss Adjustment Expense: 75,000
Fees to Outside Administrator (TPA): 125,000
Excess Insurance: 2,009,000
Other: 5,133,000
Total Payments: $9,867,000
(D) Estimated Total Assets as of 6/30/19:$8,540,000
Notes:
(A) Provided by the City.
(B) Provided by the City.
(C) Provided by the City.
(D) (A) + (B) - (C).
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DRAFT
Appendix GL - M
Page 1
City of Newport Beach - General Liability
Incurred Losses as of 6/30/18
Incurred
Additions Subtractions Incurred Incurred Incurred Incurred Capped at
Accident Unlimited to from Adjusted Incurred Over Capped at $100,000 Capped at SIR &
Year Incurred Losses Losses Incurred Over SIR $100,000 $100,000 to SIR Layer SIR Aggregate
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior $6,994,007 $0 $0 $6,994,007 $0 $2,487,640 $4,506,367 $2,487,640 $6,994,007 $6,994,007
1998-1999 865,545 0 0 865,545 95,478 495,478 370,067 400,000 770,067 770,067
1999-2000 613,638 0 0 613,638 0 0 613,638 0 613,638 613,638
2000-2001 646,463 0 0 646,463 0 274,500 371,963 274,500 646,463 646,463
2001-2002 1,932,515 0 0 1,932,515 335,812 1,062,696 869,819 726,884 1,596,703 1,596,703
2002-2003 1,097,716 0 0 1,097,716 0 189,671 908,045 189,671 1,097,716 1,097,716
2003-2004 952,383 0 1,315 951,067 0 230,431 720,636 230,431 951,067 951,067
2004-2005 885,415 0 1,768 883,647 0 129,652 753,995 129,652 883,647 883,647
2005-2006 305,582 0 0 305,582 0 0 305,582 0 305,582 305,582
2006-2007 2,099,948 0 0 2,099,948 310,091 1,383,654 716,294 1,073,564 1,789,857 1,789,857
2007-2008 500,476 0 139 500,336 0 0 500,336 0 500,336 500,336
2008-2009 1,197,653 0 0 1,197,653 127,665 527,665 669,988 400,000 1,069,988 1,069,988
2009-2010 1,762,335 0 80 1,762,256 5,013 753,450 1,008,806 748,437 1,757,242 1,757,242
2010-2011 2,767,472 0 0 2,767,472 280,202 1,762,156 1,005,316 1,481,955 2,487,271 2,487,271
2011-2012 2,795,679 0 629,731 2,165,948 178,236 1,437,757 728,191 1,259,520 1,987,712 1,987,712
2012-2013 2,410,905 0 152 2,410,753 491,108 1,330,232 1,080,521 839,125 1,919,645 1,919,645
2013-2014 1,742,187 0 0 1,742,187 52,743 864,590 877,597 811,847 1,689,444 1,689,444
2014-2015 1,836,006 0 0 1,836,006 0 987,039 848,967 987,039 1,836,006 1,836,006
2015-2016 2,387,007 0 0 2,387,007 302,724 1,342,063 1,044,944 1,039,339 2,084,283 2,084,283
2016-2017 1,643,351 0 0 1,643,351 0 567,220 1,076,131 567,220 1,643,351 1,643,351
2017-2018 1,192,518 0 0 1,192,518 0 425,000 767,518 425,000 1,192,518 1,192,518
2018-2019 0 0 0 0 0 0 0 0 0 0
Total $36,628,800 $0 $633,184 $35,995,615 $2,179,071 $16,250,894 $19,744,722 $14,071,823 $33,816,545 $33,816,545
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City.
(C) No adjustments were made.
(D) Subrogation recoveries.
(E) (B) + (C) - (D).
(F) Sum of incurred losses in excess of SIR.
(G) Sum of incurred losses in excess of $100,000.
(H) (E) - (G).
(I) (G) - (F).
(J) (E) - (F).
(K) Minimum of (J) and the aggregate stop loss. See Appendix GL - K.
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Appendix GL - M
Page 2
City of Newport Beach - General Liability
Paid Losses as of 6/30/18
Paid
Additions Subtractions Paid Paid Paid Paid Capped at
Accident Unlimited to from Adjusted Paid Over Capped at $100,000 Capped at SIR &
Year Paid Losses Losses Paid Over SIR $100,000 $100,000 to SIR Layer SIR Aggregate
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior $6,994,007 $0 $0 $6,994,007 $0 $2,487,640 $4,506,367 $2,487,640 $6,994,007 $6,994,007
1998-1999 865,545 0 0 865,545 95,478 495,478 370,067 400,000 770,067 770,067
1999-2000 613,638 0 0 613,638 0 0 613,638 0 613,638 613,638
2000-2001 646,463 0 0 646,463 0 274,500 371,963 274,500 646,463 646,463
2001-2002 1,932,515 0 0 1,932,515 335,812 1,062,696 869,819 726,884 1,596,703 1,596,703
2002-2003 1,097,716 0 0 1,097,716 0 189,671 908,045 189,671 1,097,716 1,097,716
2003-2004 952,383 0 1,315 951,067 0 230,431 720,636 230,431 951,067 951,067
2004-2005 885,415 0 1,768 883,647 0 129,652 753,995 129,652 883,647 883,647
2005-2006 305,582 0 0 305,582 0 0 305,582 0 305,582 305,582
2006-2007 2,099,948 0 0 2,099,948 310,091 1,383,654 716,294 1,073,564 1,789,857 1,789,857
2007-2008 500,476 0 139 500,336 0 0 500,336 0 500,336 500,336
2008-2009 1,197,653 0 0 1,197,653 127,665 527,665 669,988 400,000 1,069,988 1,069,988
2009-2010 1,542,083 0 80 1,542,003 0 561,691 980,313 561,691 1,542,003 1,542,003
2010-2011 2,767,472 0 0 2,767,472 280,202 1,762,156 1,005,316 1,481,955 2,487,271 2,487,271
2011-2012 2,795,679 0 629,731 2,165,948 178,236 1,437,757 728,191 1,259,520 1,987,712 1,987,712
2012-2013 2,218,870 0 152 2,218,718 491,108 1,138,197 1,080,521 647,090 1,727,611 1,727,611
2013-2014 1,463,044 0 0 1,463,044 0 585,447 877,597 585,447 1,463,044 1,463,044
2014-2015 1,253,428 0 0 1,253,428 0 441,473 811,955 441,473 1,253,428 1,253,428
2015-2016 1,636,840 0 0 1,636,840 0 738,718 898,122 738,718 1,636,840 1,636,840
2016-2017 852,155 0 0 852,155 0 277,112 575,043 277,112 852,155 852,155
2017-2018 137,395 0 0 137,395 0 0 137,395 0 137,395 137,395
2018-2019 0 0 0 0 0 0 0 0 0 0
Total $32,758,305 $0 $633,184 $32,125,121 $1,818,591 $13,723,937 $18,401,183 $11,905,346 $30,306,530 $30,306,530
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City.
(C) No adjustments were made.
(D) Subrogation recoveries.
(E) (B) + (C) - (D).
(F) Sum of paid losses in excess of SIR.
(G) Sum of paid losses in excess of $100,000.
(H) (E) - (G).
(I) (G) - (F).
(J) (E) - (F).
(K) Minimum of (J) and the aggregate stop loss. See Appendix GL - K.
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Appendix GL - M
Page 3
City of Newport Beach - General Liability
Case Reserves as of 6/30/18
Reserves
Additions Subtractions Reserves Reserves Reserves Reserves Capped at
Accident Unlimited to from Adjusted Reserves Over Capped at $100,000 Capped at SIR &
Year Reserves Losses Losses Reserves Over SIR $100,000 $100,000 to SIR Layer SIR Aggregate
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
1998-1999 0 0 0 0 0 0 0 0 0 0
1999-2000 0 0 0 0 0 0 0 0 0 0
2000-2001 0 0 0 0 0 0 0 0 0 0
2001-2002 0 0 0 0 0 0 0 0 0 0
2002-2003 0 0 0 0 0 0 0 0 0 0
2003-2004 0 0 0 0 0 0 0 0 0 0
2004-2005 0 0 0 0 0 0 0 0 0 0
2005-2006 0 0 0 0 0 0 0 0 0 0
2006-2007 0 0 0 0 0 0 0 0 0 0
2007-2008 0 0 0 0 0 0 0 0 0 0
2008-2009 0 0 0 0 0 0 0 0 0 0
2009-2010 220,252 0 0 220,252 5,013 191,760 28,493 186,746 215,239 215,239
2010-2011 0 0 0 0 0 0 0 0 0 0
2011-2012 0 0 0 0 0 0 0 0 0 0
2012-2013 192,035 0 0 192,035 0 192,035 0 192,035 192,035 192,035
2013-2014 279,143 0 0 279,143 52,743 279,143 0 226,400 226,400 226,400
2014-2015 582,579 0 0 582,579 0 545,566 37,012 545,566 582,579 582,579
2015-2016 750,167 0 0 750,167 302,724 603,345 146,822 300,621 447,443 447,443
2016-2017 791,196 0 0 791,196 0 290,108 501,088 290,108 791,196 791,196
2017-2018 1,055,124 0 0 1,055,124 0 425,000 630,124 425,000 1,055,124 1,055,124
2018-2019 0 0 0 0 0 0 0 0 0 0
Total $3,870,495 $0 $0 $3,870,495 $360,480 $2,526,956 $1,343,538 $2,166,476 $3,510,015 $3,510,015
Notes:
(A) Years are 7/1 to 6/30.
(B) Appendix GL - M, Page 1, Column (B) - Appendix GL - M, Page 2, Column (B).
(C) Appendix GL - M, Page 1, Column (C) - Appendix GL - M, Page 2, Column (C).
(D) Appendix GL - M, Page 1, Column (D) - Appendix GL - M, Page 2, Column (D).
(E) (B) + (C) - (D).
(F) Sum of case reserves in excess of SIR.
(G) Sum of case reserves in excess of $100,000.
(H) (E) - (G).
(I) (G) - (F).
(J) (E) - (F).
(K) Minimum of (J) and the aggregate stop loss. See Appendix GL - K.
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Appendix GL - M
Page 4
City of Newport Beach - General Liability
Claim Counts as of 6/30/18
Additions Subtractions Additions Subtractions
to from Adjusted to from Adjusted Adjusted
Accident Reported Reported Reported Reported Closed Closed Closed Closed Open Open
Year Claims Claims Claims Claims Claims Claims Claims Claims Claims Claims
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior 1,276 0 0 1,276 1,276 0 0 1,276 0 0
1998-1999 101 0 0 101 101 0 0 101 0 0
1999-2000 158 0 0 158 158 0 0 158 0 0
2000-2001 118 0 0 118 118 0 0 118 0 0
2001-2002 159 0 0 159 159 0 0 159 0 0
2002-2003 141 0 0 141 141 0 0 141 0 0
2003-2004 149 0 0 149 149 0 0 149 0 0
2004-2005 154 0 0 154 154 0 0 154 0 0
2005-2006 83 0 0 83 83 0 0 83 0 0
2006-2007 126 0 0 126 126 0 0 126 0 0
2007-2008 98 0 0 98 98 0 0 98 0 0
2008-2009 103 0 0 103 103 0 0 103 0 0
2009-2010 131 0 0 131 129 0 0 129 2 2
2010-2011 106 0 0 106 106 0 0 106 0 0
2011-2012 92 0 0 92 92 0 0 92 0 0
2012-2013 96 0 0 96 95 0 0 95 1 1
2013-2014 107 0 0 107 106 0 0 106 1 1
2014-2015 102 0 0 102 99 0 0 99 3 3
2015-2016 102 0 0 102 95 0 0 95 7 7
2016-2017 124 0 0 124 115 0 0 115 9 9
2017-2018 66 0 0 66 44 0 0 44 22 22
2018-2019 0 0 0 0 0 0 0 0 0 0
Total 3,592 0 0 3,592 3,547 0 0 3,547 45 45
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City.
(C) No adjustments were made.
(D) No adjustments were made.
(E) (B) + (C) - (D).
(F) Provided by the City.
(G) No adjustments were made.
(H) No adjustments were made.
(I) (F) + (G) - (H).
(J) (B) - (F).
(K) (E) - (I).
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DRAFT
Appendix GL - N
Page 1
City of Newport Beach - General Liability
Exposure Measures
Gross Total Sheriff's Number of Number of Inflation
Accident Revenue Payroll Payroll Police Employees Trend
Year Population ($00) ($00) ($00) Vehicles (FTE) Factor
(A) (B) (C) (D) (E) (F) (G)
Prior 70,030 1,296,157 419,437 109,783 29 679 1.679
1998-1999 72,623 1,048,697 439,604 105,708 29 688 1.638
1999-2000 74,000 1,115,977 454,015 114,531 30 703 1.598
2000-2001 74,000 1,133,858 510,296 173,973 30 728 1.559
2001-2002 70,032 1,305,750 549,504 185,351 30 771 1.521
2002-2003 75,360 1,573,585 584,816 194,690 31 775 1.484
2003-2004 80,800 1,661,819 607,537 196,743 33 781 1.448
2004-2005 83,120 1,861,020 620,623 200,223 33 788 1.413
2005-2006 83,361 1,811,840 684,270 224,630 33 801 1.379
2006-2007 84,218 2,028,987 703,907 228,985 33 814 1.345
2007-2008 84,554 2,199,504 751,830 245,640 34 827 1.312
2008-2009 86,252 2,164,329 795,852 253,050 44 832 1.280
2009-2010 86,738 2,120,150 841,591 262,007 44 833 1.249
2010-2011 85,376 3,374,265 775,521 239,090 45 792 1.219
2011-2012 85,990 2,437,180 752,752 218,076 45 763 1.189
2012-2013 86,436 2,410,388 784,219 238,451 45 752 1.160
2013-2014 86,874 2,565,381 792,402 245,856 45 736 1.132
2014-2015 87,249 2,889,531 814,987 266,090 45 728 1.104
2015-2016 84,270 2,782,437 909,961 293,470 45 730 1.077
2016-2017 84,915 2,970,841 887,556 282,135 47 724 1.051
2017-2018 85,764 2,852,733 907,620 283,338 47 725 1.025
2018-2019 86,622 3,054,974 933,104 287,082 47 726 1.000
2019-2020 87,488 3,116,073 965,762 297,130 47 726 1.000
2020-2021 88,363 3,178,394 999,564 307,529 47 726 1.000
Notes: All exposure data provided by the City.
-85-
DRAFT
Appendix GL - N
Page 2
City of Newport Beach - General Liability
Adjusted Exposure Measures
Trended Trended
Gross Trended Sheriff's Number of Number of
Accident Revenue Payroll Payroll Police Employees Composite
Year Population ($00) ($00) ($00) Vehicles (FTE) Exposures
(A) (B) (C) (D) (E) (F) (G)
Prior 767,529 729,043 704,235 592,239 670,492 809,857 705,833
1998-1999 795,948 575,452 720,071 556,331 670,492 820,591 684,653
1999-2000 811,040 597,416 725,516 588,046 693,612 838,482 703,795
2000-2001 811,040 592,174 795,551 871,443 693,612 868,300 778,168
2001-2002 767,551 665,325 835,796 905,806 693,612 919,587 805,232
2002-2003 825,946 782,292 867,867 928,300 716,733 924,358 846,633
2003-2004 885,568 806,115 879,714 915,332 762,974 931,514 866,935
2004-2005 910,995 880,923 876,940 909,006 762,974 939,863 881,402
2005-2006 913,637 837,007 943,608 995,275 762,974 955,369 908,125
2006-2007 923,029 914,211 946,755 989,556 762,974 970,874 922,925
2007-2008 926,712 966,726 986,401 1,035,486 786,094 986,379 954,264
2008-2009 945,322 928,064 1,018,691 1,040,704 1,017,298 992,343 994,333
2009-2010 950,648 887,102 1,051,147 1,051,445 1,017,298 993,536 997,806
2010-2011 935,721 1,377,932 945,360 936,432 1,040,418 944,634 1,021,164
2011-2012 942,450 970,765 895,022 833,105 1,040,418 910,045 925,177
2012-2013 947,339 936,677 909,694 888,725 1,040,418 896,925 932,888
2013-2014 952,139 972,844 896,999 894,207 1,040,418 877,842 934,728
2014-2015 956,249 1,068,664 899,746 943,861 1,040,418 868,300 958,766
2015-2016 923,599 1,003,889 980,028 1,015,523 1,040,418 870,686 974,899
2016-2017 930,668 1,045,989 932,821 952,732 1,086,659 863,529 966,137
2017-2018 939,973 979,557 930,311 933,123 1,086,659 864,722 953,323
2018-2019 949,377 1,023,416 933,104 922,394 1,086,659 865,915 959,905
2019-2020 958,868 1,043,884 965,762 954,679 1,086,659 865,915 977,387
2020-2021 968,458 1,064,762 999,564 988,091 1,086,659 865,915 995,400
Weight 15.0% 15.0% 20.0% 20.0% 15.0% 15.0%
Notes: Monetary exposures have been adjusted for inflation before calculating the adjusted
exposure measures. All exposures from page 1 have been adjusted to a common level.
Composite Exposure = (15.0% x Population) + (15.0% x Revenue ($00)) + (20.0% x Payroll ($00)) +
(20.0% x Sheriff's Payroll ($00)) + (15.0% x Police Vehicles) + (15.0% x (FTE)).
-86-
DRAFT
ATTACHMENT B
WORKERS’ COMPENSATION FISCAL YEAR 2018-2019 VALUATION
Actuarial Review of the Self-Insured
:RUNHUV
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Outstanding Liabilities as of June 30, 201-XQH and June 30, 20
Forecast for Program Years 201-1 and 201 -
Presented to
City of 1HZSRUW%HDFK
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Exhibit WC - 1
Page 1
City of Newport Beach - Workers' Compensation
Funding Guidelines for Outstanding Liabilities at
June 30, 2018
(A) Estimated Ultimate Losses
Incurred through 6/30/18: $86,359,000
(From Appendix WC - G)
(B) Estimated Paid Losses
through 6/30/18:67,767,000
(From Appendix WC - G)
(C) Estimated Liability for Claims
Outstanding at 6/30/18:$18,592,000
(From Appendix WC - G)
(D) Estimated Liability for Outstanding
Claims Administration Fees at 6/30/18:1,055,000
(From Appendix WC - F)
(E) Total Outstanding Liability for
Claims at 6/30/18:$19,647,000
((C) + (D))
(F) Reserve Discount Factor (Based on a Discount Rate of 3.0%.): 0.839
(Appendix WC - I, Page 1, (G))
(G) Discounted Outstanding Liability for
Claims at 6/30/18:$16,489,000
((E) x (F))
Marginally
Acceptable Recommended Conservative
Confidence Level of Adequacy: 70% 75% 80% 85% 90%
(H) Confidence Level Factor: 1.090 1.127 1.170 1.222 1.291
(From Appendix WC - J)
(I) Margin for Adverse Experience: 1,484,000 2,094,000 2,803,000 3,661,000 4,798,000
((G) x [(H) - 1])
(J) Total Required Assets
at 6/30/18: $17,973,000 $18,583,000 $19,292,000 $20,150,000 $21,287,000
((G) + (I))
(K) Estimated Total Assets
at 6/30/18: 15,547,000 15,547,000 15,547,000 15,547,000 15,547,000
(From Appendix WC - L)
(L) Indicated Funding Redundancy/
(Deficiency): ($2,426,000) ($3,036,000) ($3,745,000) ($4,603,000) ($5,740,000)
((K) - (J))
-30-
DRAFT
Exhibit WC - 1
Page 2
City of Newport Beach - Workers' Compensation
Funding Guidelines for Outstanding Liabilities at
June 30, 2019
(A) Estimated Ultimate Losses
Incurred through 6/30/19: $89,781,000
(From Appendix WC - G)
(B) Estimated Paid Losses
through 6/30/19:71,356,000
(From Appendix WC - G)
(C) Estimated Liability for Claims
Outstanding at 6/30/19:$18,425,000
(From Appendix WC - G)
(D) Estimated Liability for Outstanding
Claims Administration Fees at 6/30/19:962,000
(From Appendix WC - F)
(E) Total Outstanding Liability for
Claims at 6/30/19:$19,387,000
((C) + (D))
(F) Reserve Discount Factor (Based on a Discount Rate of 3.0%.): 0.839
(Appendix WC - I, Page 1, (H))
(G) Discounted Outstanding Liability for
Claims at 6/30/19:$16,270,000
((E) x (F))
Marginally
Acceptable Recommended Conservative
Confidence Level of Adequacy: 70% 75% 80% 85% 90%
(H) Confidence Level Factor: 1.090 1.127 1.170 1.222 1.291
(From Appendix WC - J)
(I) Margin for Adverse Experience: 1,464,000 2,066,000 2,766,000 3,612,000 4,735,000
((G) x [(H) - 1])
(J) Total Required Assets
at 6/30/19: $17,734,000 $18,336,000 $19,036,000 $19,882,000 $21,005,000
((G) + (I))
(K) Estimated Total Assets
at 6/30/19: 14,954,000 14,954,000 14,954,000 14,954,000 14,954,000
(From Appendix WC - L)
(L) Indicated Funding Redundancy/
(Deficiency): ($2,780,000) ($3,382,000) ($4,082,000) ($4,928,000) ($6,051,000)
((K) - (J))
-31-
DRAFT
Exhibit WC - 1
Page 3
City of Newport Beach - Workers' Compensation
Funding Guidelines for Outstanding Liabilities at
June 30, 2020
(A) Estimated Ultimate Losses
Incurred through 6/30/20: $93,375,000
(From Appendix WC - G)
(B) Estimated Paid Losses
through 6/30/20:74,914,000
(From Appendix WC - G)
(C) Estimated Liability for Claims
Outstanding at 6/30/20:$18,461,000
(From Appendix WC - G)
(D) Estimated Liability for Outstanding
Claims Administration Fees at 6/30/20:895,000
(From Appendix WC - F)
(E) Total Outstanding Liability for
Claims at 6/30/20:$19,356,000
((C) + (D))
(F) Reserve Discount Factor (Based on a Discount Rate of 3.0%.): 0.839
(Appendix WC - I, Page 1, (H))
(G) Discounted Outstanding Liability for
Claims at 6/30/20:$16,244,000
((E) x (F))
Marginally
Acceptable Recommended Conservative
Confidence Level of Adequacy: 70% 75% 80% 85% 90%
(H) Confidence Level Factor: 1.090 1.127 1.170 1.222 1.291
(From Appendix WC - J)
(I) Margin for Adverse Experience: 1,462,000 2,063,000 2,761,000 3,606,000 4,727,000
((G) x [(H) - 1])
(J) Total Required Assets
at 6/30/20: $17,706,000 $18,307,000 $19,005,000 $19,850,000 $20,971,000
((G) + (I))
(K) Estimated Total Assets
at 6/30/20: 19,525,000 19,525,000 19,525,000 19,525,000 19,525,000
(From Appendix WC - L, Page 2)
(L) Indicated Funding Redundancy/
(Deficiency): $1,819,000 $1,218,000 $520,000 ($325,000) ($1,446,000)
((K) - (J))
-32-
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Exhibit WC - 2
Page 1E
City of Newport Beach - Workers' Compensation
Funding Options for Program Year 2018-2019 (SIR = $500,000)
Dollar Payroll
Amount Rate
(A) Estimated Ultimate Losses Incurred in
Accident Year 2018-2019:$3,422,000 $3.667
(From Appendix WC - G)
(B)Estimated Claims Administration Fees
Incurred in Accident Year 2018-2019: 227,000 0.243
(From Exhibit WC - 5, Page 1, (L))
(C) Total Claims Costs
Incurred in Accident Year 2018-2019: $3,649,000 $3.911
((A) + (B))
(D) Loss Discount Factor (Based on a Discount Rate of 3.0%.): 0.867
(Appendix WC - I, Page 2, (G))
(E) Discounted Total Claims Costs
Incurred in Accident Year 2018-2019: $3,162,000 $3.389
((C) x (D))
Marginally
Acceptable Recommended Conservative
70% 75% 80% 85% 90%
(F) Confidence Level Factor:
(From Appendix WC - J) 1.153 1.218 1.294 1.386 1.511
(G) Margin for Adverse Experience: 484,000 689,000 930,000 1,221,000 1,616,000
((E) x [(F) - 1])
(H) Recommended Funding in 2018-2019
for Claims Costs and Other Expenses: $3,646,000 $3,851,000 $4,092,000 $4,383,000 $4,778,000
((E) + (G))
(I) Budgeted Non Claims Related Expenses: 545,000 545,000 545,000 545,000 545,000
(Provided by the City)
(J) Recommended Funding in 2018-2019
for Claims Costs, Other Expenses,
and Non Claims Related Expenses: $4,191,000 $4,396,000 $4,637,000 $4,928,000 $5,323,000
((H) + (I))
(K) Rate per $100 of Payroll: $4.491 $4.711 $4.969 $5.281 $5.705
((J) / $933,104)
Payroll rates are per hundred dollars of 2018-2019 payroll of $93,310,400.
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Exhibit WC - 2
Page 2E
City of Newport Beach - Workers' Compensation
Funding Options for Program Year 2019-2020 (SIR = $500,000)
Dollar Payroll
Amount Rate
(A) Estimated Ultimate Losses Incurred in
Accident Year 2019-2020:$3,594,000 $3.721
(From Appendix WC - G)
(B)Estimated Claims Administration Fees
Incurred in Accident Year 2019-2020: 242,000 0.251
(From Exhibit WC - 5, Page 1, (L))
(C) Total Claims Costs
Incurred in Accident Year 2019-2020: $3,836,000 $3.972
((A) + (B))
(D) Loss Discount Factor (Based on a Discount Rate of 3.0%.): 0.867
(Appendix WC - I, Page 2, (G))
(E) Discounted Total Claims Costs
Incurred in Accident Year 2019-2020: $3,324,000 $3.442
((C) x (D))
Marginally
Acceptable Recommended Conservative
70% 75% 80% 85% 90%
(F) Confidence Level Factor:
(From Appendix WC - J) 1.153 1.218 1.294 1.386 1.511
(G) Margin for Adverse Experience: 509,000 725,000 977,000 1,283,000 1,699,000
((E) x [(F) - 1])
(H) Recommended Funding in 2019-2020
for Claims Costs and Other Expenses: $3,833,000 $4,049,000 $4,301,000 $4,607,000 $5,023,000
((E) + (G))
(I) Budgeted Non Claims Related Expenses: 561,000 561,000 561,000 561,000 561,000
(Provided by the City)
(J) Recommended Funding Including
Recognition of the June 30, 2019
Redundancy/(Deficiency): $4,394,000 $4,610,000 $4,862,000 $5,168,000 $5,584,000
((H) + (I))
(K) Rate per $100 of Payroll: $4.550 $4.773 $5.034 $5.351 $5.782
((J) / $965,762)
Payroll rates are per hundred dollars of 2019-2020 payroll of $96,576,200.
-3-
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Exhibit WC - 3
City of Newport Beach - Workers' Compensation
IBNR as of 6/30/19 at Expected Claims Level
Estimated
Percent of
IBNR
Estimated Reported Estimated
IBNR Between Estimated IBNR
Accident Estimated Reported as of 7/1/18 and IBNR as of
Year Ultimate as of 6/30/18 6/30/18 6/30/19 Reported 6/30/19
(A) (B) (C) (D) (E) (F)
Prior $28,731,000 $28,567,502 $163,498 14.2% $23,000 $140,498
1998-1999 2,206,000 2,186,662 19,338 22.1% 4,000 15,338
1999-2000 2,382,000 2,353,313 28,687 24.8% 7,000 21,687
2000-2001 2,029,000 1,996,646 32,354 24.7% 8,000 24,354
2001-2002 3,278,000 3,207,215 70,785 26.8% 19,000 51,785
2002-2003 2,949,000 2,860,576 88,424 28.4% 25,000 63,424
2003-2004 3,199,000 3,067,025 131,975 27.1% 36,000 95,975
2004-2005 2,434,000 2,309,582 124,418 19.5% 24,000 100,418
2005-2006 2,602,000 2,438,230 163,770 18.4% 30,000 133,770
2006-2007 2,148,000 1,986,849 161,151 16.2% 26,000 135,151
2007-2008 1,940,000 1,764,813 175,187 16.8% 29,000 146,187
2008-2009 3,040,000 2,872,026 167,974 16.5% 28,000 139,974
2009-2010 4,452,000 3,889,565 562,435 15.8% 89,000 473,435
2010-2011 2,645,000 2,219,042 425,958 15.6% 66,000 359,958
2011-2012 2,159,000 1,837,560 321,440 5.7% 18,000 303,440
2012-2013 3,342,000 2,835,142 506,858 14.8% 75,000 431,858
2013-2014 2,853,000 2,458,435 394,565 14.3% 56,000 338,565
2014-2015 2,826,000 2,162,632 663,368 12.7% 84,000 579,368
2015-2016 5,347,000 4,466,643 880,357 16.3% 143,000 737,357
2016-2017 2,707,000 1,514,437 1,192,563 24.8% 296,000 896,563
2017-2018 3,090,000 1,065,327 2,024,673 31.9% 646,000 1,378,673
2018-2019 3,422,000 41.1% 1,406,000 2,016,000
Totals $89,781,000 $78,059,222 $8,299,778 $3,138,000 $8,583,778
Notes:
(A) From Exhibit WC - 4, Page 1.
(B) Provided by the City. These losses exclude amounts
incurred above the City's SIR for each year.
(C) (A) - (B).
(D) Percentage of incurred but not reported (IBNR) expected to be
reported between 7/1/18 and 6/30/19. The percentage is based
on the development pattern selected in Appendix WC - A.
(E) ((A) - (B)) x (D).
(F) (A) - (B) - (E).
This exhibit shows the calculation of the amount of incurred but not reported losses we expect as of
6/30/19. This amount is dependent on both the strength of the case reserves and the average
frequency and severity of the losses incurred.
-41-
DRAFT
Exhibit WC - 4
Page 1
City of Newport Beach - Workers' Compensation
Estimated Ultimate Program Losses
Exposure Exposure
Reported Paid Method Method Selected
Loss Loss Based on Based on Frequency- Estimate of
Accident Development Development Reported Paid Severity Ultimate
Year Method Method Losses Losses Method Losses
(A) (B) (C) (D) (E) (F)
Prior $28,767,475 $28,397,972 $28,728,859 $28,217,956 $23,051,028 $28,731,000
1998-1999 2,206,342 2,175,719 2,203,486 2,161,946 1,868,945 2,206,000
1999-2000 2,381,553 2,349,726 2,377,856 2,333,349 2,045,160 2,382,000
2000-2001 2,028,592 2,077,935 2,027,844 2,068,738 1,950,222 2,029,000
2001-2002 3,277,774 3,227,259 3,271,314 3,202,231 2,913,888 3,278,000
2002-2003 2,949,254 2,805,834 2,951,155 2,825,950 3,019,422 2,949,000
2003-2004 3,198,907 3,067,480 3,197,087 3,078,542 3,171,560 3,199,000
2004-2005 2,434,299 2,379,356 2,422,018 2,355,049 2,204,433 2,434,000
2005-2006 2,601,591 2,586,904 2,625,311 2,645,178 2,969,648 2,602,000
2006-2007 2,147,784 2,155,981 2,183,253 2,232,482 2,619,180 2,148,000
2007-2008 1,939,529 2,046,649 1,954,528 2,058,729 2,108,160 1,940,000
2008-2009 3,219,541 2,861,209 3,178,978 2,856,018 2,841,552 3,040,000
2009-2010 4,461,331 4,423,459 4,412,818 4,346,162 4,088,481 4,452,000
2010-2011 2,616,251 2,733,170 2,683,751 2,814,699 3,056,600 2,645,000
2011-2012 2,190,372 2,085,561 2,226,050 2,170,967 2,413,026 2,159,000
2012-2013 3,495,730 3,055,259 3,331,682 2,930,922 2,627,249 3,342,000
2013-2014 3,154,172 2,557,273 3,070,194 2,628,773 3,996,944 2,853,000
2014-2015 2,893,602 2,421,027 2,897,895 2,613,082 4,115,016 2,826,000
2015-2016 6,396,233 4,863,320 5,451,626 4,088,035 3,361,932 5,347,000
2016-2017 2,529,110 1,837,665 2,809,063 2,679,876 2,757,105 2,707,000
2017-2018 2,591,941 2,024,116 3,046,178 3,134,703 2,896,384 3,090,000
Totals $86,359,000
Projected Losses for the Year 2018-2019 (G) $3,422,000
Projected Losses for the Year 2019-2020 (H) $3,594,000
Projected Losses for the Year 2020-2021 (I) $3,773,000
Notes:
(A) From Appendix WC - A, Page 1, Column (G).
(B) From Appendix WC - B, Page 1, Column (G).
(C) From Appendix WC - C, Page 1, Column (G).
(D) From Appendix WC - C, Page 2, Column (G).
(E) From Appendix WC - D, Page 1, Column (C).
(F) Selected averages of (A), (B), (C), (D), and (E).
(G) From Exhibit WC - 5, Page 1, Line (K).
(H) From Exhibit WC - 5, Page 1, Line (K).
(I) From Exhibit WC - 5, Page 1, Line (K).
This exhibit summarizes the results of the actuarial methods we have applied to estimate ultimate
losses for each year. It is important to apply a number of estimation methods because each one relies
on specific assumptions about the claims process that tend to hold generally true, but that may be
violated in specific situations. Thus, the more estimation methods that can be applied, the better.
-42-
DRAFT
Exhibit WC - 4
Page 2
City of Newport Beach - Workers' Compensation
Estimated Ultimate Limited Losses Capped at $100,000 per Claim
Exposure Exposure
Reported Paid Method Method Selected
Loss Loss Based on Based on Frequency- Ultimate
Accident Development Development Reported Paid Severity Limited
Year Method Method Losses Losses Method Losses
(A) (B) (C) (D) (E) (F)
Prior $19,859,398 $19,609,931 $19,859,733 $19,615,631 $19,797,316 $19,797,000
1998-1999 1,543,407 1,468,449 1,543,503 1,470,136 1,542,970 1,543,000
1999-2000 1,678,798 1,576,094 1,678,964 1,579,101 1,678,968 1,679,000
2000-2001 1,592,042 1,559,513 1,592,267 1,559,902 1,592,032 1,592,000
2001-2002 2,282,431 2,115,317 2,282,926 2,120,459 2,282,016 2,282,000
2002-2003 2,247,375 2,052,134 2,248,082 2,059,803 2,246,973 2,247,000
2003-2004 2,212,824 1,913,428 2,213,791 1,924,837 2,213,042 2,213,000
2004-2005 1,519,300 1,496,350 1,518,625 1,497,683 1,518,979 1,519,000
2005-2006 2,021,405 1,935,593 2,020,920 1,939,788 2,021,008 2,021,000
2006-2007 1,760,037 1,674,281 1,760,132 1,678,894 1,760,040 1,760,000
2007-2008 1,398,722 1,340,558 1,399,269 1,344,468 1,399,040 1,399,000
2008-2009 1,860,540 1,759,151 1,860,294 1,766,141 1,861,020 1,861,000
2009-2010 2,655,543 2,643,480 2,656,169 2,643,639 2,643,032 2,643,000
2010-2011 1,949,883 1,888,702 1,950,465 1,895,649 1,949,985 1,950,000
2011-2012 1,651,503 1,533,933 1,652,299 1,547,636 1,652,035 1,652,000
2012-2013 1,782,015 1,806,222 1,782,403 1,803,489 1,781,959 1,782,000
2013-2014 2,005,521 1,788,070 1,993,379 1,800,755 2,685,872 1,971,000
2014-2015 1,659,358 1,426,202 1,685,841 1,533,983 2,738,772 1,641,000
2015-2016 3,354,532 2,777,689 3,215,409 2,598,335 2,216,340 3,244,000
2016-2017 1,721,041 1,267,982 1,790,585 1,626,828 1,800,565 1,709,000
2017-2018 1,774,835 1,358,425 1,935,354 1,967,139 1,873,152 1,863,000
Totals $58,368,000
Projected Losses for the Year 2018-2019 (G) $2,193,000
Projected Losses for the Year 2019-2020 (H) $2,281,000
Projected Losses for the Year 2020-2021 (I) $2,372,000
Notes:
(A) From Appendix WC - A, Page 1, Column (D).
(B) From Appendix WC - B, Page 1, Column (D).
(C) Based on results in Appendix WC - C, Page 1.
(D) Based on results in Appendix WC - C, Page 2.
(E) Based on results in Appendix WC - D, Page 1.
(F) Selected averages of (A), (B), (C), (D), and (E).
(G) From Exhibit WC - 5, Page 1, Line (K) / Line (G).
(H) From Exhibit WC - 5, Page 1, Line (K) / Line (G).
(I) From Exhibit WC - 5, Page 1, Line (K) / Line (G).
This exhibit summarizes the results of the actuarial methods we have applied to estimate limited losses
for each year. These results are used to select a limited loss rate for future years.
-43-
DRAFT
Exhibit WC - 5
Page 1
City of Newport Beach - Workers' Compensation
Selection of Projected Limited Loss Rate
and Projection of Program Losses and ULAE
Ultimate Trended Trended Trended
Accident Limited Trend Limited Payroll Limited
Year Losses Factor Losses ($00) Loss Rate
(A) (B) (C) (D) (E)
Prior 19,797,000 1.511 29,913,267 704,235 42.476
1998-1999 1,543,000 1.063 1,640,209 720,071 2.278
1999-2000 1,679,000 0.955 1,603,445 725,516 2.210
2000-2001 1,592,000 0.893 1,421,656 795,551 1.787
2001-2002 2,282,000 0.892 2,035,544 835,796 2.435
2002-2003 2,247,000 0.936 2,103,192 867,867 2.423
2003-2004 2,213,000 1.154 2,553,802 879,714 2.903
2004-2005 1,519,000 1.482 2,251,158 876,940 2.567
2005-2006 2,021,000 1.601 3,235,621 943,608 3.429
2006-2007 1,760,000 1.509 2,655,840 946,755 2.805
2007-2008 1,399,000 1.395 1,951,605 986,401 1.979
2008-2009 1,861,000 1.296 2,411,856 1,018,691 2.368
2009-2010 2,643,000 1.183 3,126,669 1,051,147 2.975
2010-2011 1,950,000 1.136 2,215,200 945,360 2.343
2011-2012 1,652,000 1.142 1,886,584 895,022 2.108
2012-2013 1,782,000 1.146 2,042,172 909,694 2.245
2013-2014 1,971,000 1.133 2,233,143 896,999 2.490
2014-2015 1,641,000 1.093 1,793,613 899,746 1.993
2015-2016 3,244,000 1.071 3,474,324 980,028 3.545
2016-2017 1,709,000 1.040 1,777,360 932,821 1.905
2017-2018 1,863,000 1.005 1,872,315 930,311 2.013
Totals $58,368,000 $74,198,575 18,742,273 $3.959
12/13-16/17 10,347,000 11,320,612 4,619,288 2.451
13/14-17/18 10,428,000 11,150,755 4,639,905 2.403
(F) Selected Limited Rate: $2.350
Prior: $2.450
Program Year: 2018-2019 2019-2020 2020-2021
(G) Factor to SIR: 1.561 1.576 1.591
(H) Trend Factor: 1.000 1.005 1.010
(I) Program Rate: $3.667 $3.721 $3.775
(J) Trended Payroll ($00): 933,104 965,762 999,564
(K) Projected Program Losses:3,422,000 3,594,000 3,773,000
(L) Projected ULAE: 227,000 242,000 258,000
(M) Projected Loss and ULAE:$3,649,000 $3,836,000 $4,031,000
Notes appear on the next page.
-44-
DRAFT
Exhibit WC - 5
Page 2
City of Newport Beach - Workers' Compensation
Selection of Projected Limited Loss Rate
and Projection of Program Losses and ULAE
Notes:
(A) From Exhibit WC - 4, Page 2, Column (F).
For purposes of projecting future losses, losses
are capped at $100,000 per occurrence.
(B) From Appendix WC - E, Page 1, Column (B).
(C) (A) x (B).
(D) From Appendix WC - N, Column (C).
(E) (C) / (D).
(F) Selected based on (E).
(G) Based on a Weibull distribution, a mathematical model
of claim sizes.
(H) From Appendix WC - E.
(I) (F) x (G) x (H).
(J) From Appendix WC - N, Column (C).
(K) (I) x (J).
(L) Based on an estimated claim closing pattern and the City's
historical claims administration expenses.
(M) (K) + (L).
This exhibit shows the calculation of future loss costs based on the past loss
rates. The projections will be accurate only to the extent that what has
happened in the past is representative of what will happen in the future.
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DRAFT
Appendix WC - A
Page 1
City of Newport Beach - Workers' Compensation
Reported Loss Development
Limited Reported Program Reported
Reported Loss Ultimate Reported Loss Ultimate
Accident Losses as Development Limited Losses Development Program
Year of 6/30/18 Factor Losses of 6/30/18 Factor Losses
(A) (B) (C) (D) (E) (F) (G)
Prior $19,740,952 1.006 $19,859,398 $28,567,502 1.007 $28,767,475
1998-1999 1,531,158 1.008 1,543,407 2,186,662 1.009 2,206,342
1999-2000 1,662,176 1.010 1,678,798 2,353,313 1.012 2,381,553
2000-2001 1,573,164 1.012 1,592,042 1,996,646 1.016 2,028,592
2001-2002 2,248,700 1.015 2,282,431 3,207,215 1.022 3,277,774
2002-2003 2,207,638 1.018 2,247,375 2,860,576 1.031 2,949,254
2003-2004 2,167,310 1.021 2,212,824 3,067,025 1.043 3,198,907
2004-2005 1,483,691 1.024 1,519,300 2,309,582 1.054 2,434,299
2005-2006 1,966,347 1.028 2,021,405 2,438,230 1.067 2,601,591
2006-2007 1,703,811 1.033 1,760,037 1,986,849 1.081 2,147,784
2007-2008 1,347,516 1.038 1,398,722 1,764,813 1.099 1,939,529
2008-2009 1,782,126 1.044 1,860,540 2,872,026 1.121 3,219,541
2009-2010 2,526,682 1.051 2,655,543 3,889,565 1.147 4,461,331
2010-2011 1,841,249 1.059 1,949,883 2,219,042 1.179 2,616,251
2011-2012 1,544,905 1.069 1,651,503 1,837,560 1.192 2,190,372
2012-2013 1,646,964 1.082 1,782,015 2,835,142 1.233 3,495,730
2013-2014 1,831,526 1.095 2,005,521 2,458,435 1.283 3,154,172
2014-2015 1,496,265 1.109 1,659,358 2,162,632 1.338 2,893,602
2015-2016 2,965,988 1.131 3,354,532 4,466,643 1.432 6,396,233
2016-2017 1,415,330 1.216 1,721,041 1,514,437 1.670 2,529,110
2017-2018 1,065,327 1.666 1,774,835 1,065,327 2.433 2,591,941
Totals $55,748,825 $58,530,510 $78,059,222 $87,481,383
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City. These losses exclude
amounts over $100,000 per occurrence.
(C) From Appendix WC - A, Page 2.
(D) (B) x (C). These estimated losses exclude
amounts over $100,000 per occurrence.
(E) Losses capped at the City's SIR. Amounts are provided by the City.
(F) Derived from factors on Appendix WC - A, Page 4.
(G) (E) x (F).
This method tends to understate ultimate losses for the most recent several years
because the large losses for those years generally have not yet emerged at the time
of our review.
This exhibit shows the calculation of estimated ultimate losses for each year based
on paid losses and case reserves as reported by the claims administrator. These
losses tend to "develop" or change from period to period as more information
becomes available about the cases. This development tends to follow quantifiable
patterns over time.
-46-
DRAFT
Appendix WC - A
Page 2
City of Newport Beach - Workers' Compensation
Reported Loss Development
Limited Losses Reported as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 1,213,924 1,226,880 1,284,069 1,361,292 1,502,387 1,412,204 1,364,279
1998-1999 1,251,070 1,192,428 1,236,832 1,215,754 1,364,012 1,316,081 1,318,691 1,304,932
1999-2000 1,261,839 1,212,021 1,301,754 1,391,053 1,560,798 1,528,518 1,501,644 1,568,553 1,571,291
2000-2001 912,878 1,016,489 1,251,108 1,211,981 1,422,873 1,375,430 1,456,116 1,601,342 1,683,408 1,628,802
2001-2002 770,277 1,474,811 1,885,616 1,983,149 1,852,081 1,982,940 2,056,801 2,076,103 2,073,081 2,117,389
2002-2003 1,061,582 1,720,542 1,802,912 1,794,463 1,697,543 1,688,200 1,933,528 2,006,188 2,030,077 2,047,452
2003-2004 1,125,544 1,910,200 1,958,274 1,821,142 1,829,552 1,921,354 1,966,614 1,938,071 1,853,951 1,858,581
2004-2005 1,103,273 1,405,761 1,354,428 1,394,512 1,439,649 1,468,103 1,493,997 1,446,458 1,456,582 1,453,116
2005-2006 1,169,250 1,515,775 1,541,614 1,610,915 1,853,807 1,826,497 1,892,560 1,939,283 1,827,297 1,970,487
2006-2007 1,370,186 1,578,939 1,696,702 1,677,611 1,671,842 1,695,939 1,600,288 1,671,916 1,616,512 1,680,082
2007-2008 877,457 1,327,743 1,432,256 1,454,273 1,374,369 1,337,722 1,345,668 1,272,758 1,269,246 1,333,742
2008-2009 1,167,588 1,796,293 1,894,332 1,739,676 1,610,865 1,660,206 1,747,160 1,794,065 1,843,476 1,782,126
2009-2010 1,584,629 2,329,026 2,458,184 2,495,062 2,405,659 2,456,278 2,508,719 2,539,300 2,526,682
2010-2011 1,283,036 1,855,359 1,905,917 1,735,596 1,885,315 1,899,886 1,852,380 1,841,249
2011-2012 1,098,158 1,279,730 1,403,244 1,447,132 1,445,427 1,477,599 1,544,905
2012-2013 1,389,841 1,603,503 1,640,031 1,768,331 1,663,843 1,646,964
2013-2014 1,120,465 1,645,171 2,048,933 1,924,920 1,831,526
2014-2015 941,761 1,358,224 1,447,712 1,496,265
2015-2016 2,149,185 2,814,444 2,965,988
2016-2017 1,210,639 1,415,330
2017-2018 1,065,327
Reported Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 1.011 1.047 1.060 1.104 0.940 0.966 0.969
1998-1999 0.953 1.037 0.983 1.122 0.965 1.002 0.990 1.055
1999-2000 0.961 1.074 1.069 1.122 0.979 0.982 1.045 1.002 0.974
2000-2001 1.113 1.231 0.969 1.174 0.967 1.059 1.100 1.051 0.968 0.994
2001-2002 1.915 1.279 1.052 0.934 1.071 1.037 1.009 0.999 1.021 0.986
2002-2003 1.621 1.048 0.995 0.946 0.994 1.145 1.038 1.012 1.009 1.019
2003-2004 1.697 1.025 0.930 1.005 1.050 1.024 0.985 0.957 1.002 0.991
2004-2005 1.274 0.963 1.030 1.032 1.020 1.018 0.968 1.007 0.998 1.021
2005-2006 1.296 1.017 1.045 1.151 0.985 1.036 1.025 0.942 1.078 1.001
2006-2007 1.152 1.075 0.989 0.997 1.014 0.944 1.045 0.967 1.039 1.002
2007-2008 1.513 1.079 1.015 0.945 0.973 1.006 0.946 0.997 1.051 1.010
2008-2009 1.538 1.055 0.918 0.926 1.031 1.052 1.027 1.028 0.967
2009-2010 1.470 1.055 1.015 0.964 1.021 1.021 1.012 0.995
2010-2011 1.446 1.027 0.911 1.086 1.008 0.975 0.994
2011-2012 1.165 1.097 1.031 0.999 1.022 1.046
2012-2013 1.154 1.023 1.078 0.941 0.990
2013-2014 1.468 1.245 0.939 0.951
2014-2015 1.442 1.066 1.034
2015-2016 1.310 1.054
2016-2017 1.169
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 1.397 1.076 0.999 1.010 1.019 1.035 1.014 0.996 1.008 1.002
Dollar-Weighted
Averages
3-yr 1.299 1.111 1.010 0.961 1.006 1.012 1.011 1.006 1.014 1.004
4-yr 1.334 1.092 1.015 0.993 1.011 1.021 0.999 0.997 1.032 1.008
Comparative
Factors 1.470 1.120 1.025 1.015 1.010 1.010 1.009 1.008 1.007 1.006
Prior 1.375 1.075 1.020 1.015 1.010 1.010 1.009 1.008 1.007 1.006
Selected 1.370 1.075 1.020 1.013 1.012 1.012 1.009 1.008 1.007 1.006
Cumulated 1.666 1.216 1.131 1.109 1.095 1.082 1.069 1.059 1.051 1.044
-47-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix WC - A
Page 3
City of Newport Beach - Workers' Compensation
Reported Loss Development
Limited Losses Reported as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
1,322,523 1,349,452 1,387,888 1,387,888 1,374,703 1,378,623 1,382,592 1,466,515 1,492,193 1,496,273 1,447,923
1,377,064 1,441,698 1,462,377 1,462,357 1,474,637 1,445,278 1,471,056 1,500,199 1,513,908 1,531,158
1,530,437 1,552,372 1,538,268 1,563,758 1,531,535 1,593,529 1,600,725 1,665,314 1,662,176
1,618,670 1,583,814 1,560,289 1,582,053 1,585,274 1,597,988 1,572,078 1,573,164
2,087,811 2,073,969 2,039,533 2,096,427 2,129,363 2,245,630 2,248,700
2,085,417 2,097,980 2,125,699 2,181,979 2,225,773 2,207,638
1,841,596 1,946,101 2,006,726 2,172,951 2,167,310
1,483,256 1,484,294 1,485,570 1,483,691
1,972,006 1,989,230 1,966,347
1,683,508 1,703,811
1,347,516
Reported Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.020 1.028 1.000 0.990 1.003 1.003 1.061 1.018 1.003 0.968
1.047 1.014 1.000 1.008 0.980 1.018 1.020 1.009 1.011
1.014 0.991 1.017 0.979 1.040 1.005 1.040 0.998
0.978 0.985 1.014 1.002 1.008 0.984 1.001
0.993 0.983 1.028 1.016 1.055 1.001
1.006 1.013 1.026 1.020 0.992
1.057 1.031 1.083 0.997
1.001 1.001 0.999
1.009 0.988
1.012
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.014 1.004 1.021 1.002 1.013 1.002 1.031 1.008 1.007 0.968
1.008 1.007 1.039 1.011 1.019 0.997 1.020 1.008
1.020 1.009 1.036 1.009 1.023 1.001 1.030
1.005 1.005 1.004 1.003 1.003 1.003 1.003 1.002 1.002 1.002 1.006
1.005 1.005 1.004 1.003 1.003 1.003 1.003 1.002 1.002 1.002 1.006
1.005 1.005 1.004 1.003 1.003 1.003 1.003 1.002 1.002 1.002 1.006
1.038 1.033 1.028 1.024 1.021 1.018 1.015 1.012 1.010 1.008 1.006
-48-
DRAFT
Appendix WC - A
Page 4
City of Newport Beach - Workers' Compensation
Reported between $100,000 and $500,000 Loss Development
Losses Reported as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 162,449 272,852 293,380 291,542 475,254 468,038 466,854
1998-1999 397,745 666,944 718,675 792,509 977,325 1,011,035 1,023,922 1,029,017
1999-2000 286,504 421,234 544,157 789,754 971,695 979,695 979,694 886,992 1,073,154
2000-2001 290,559 388,009 566,994 803,258 814,257 951,687 835,496 502,800 502,885
2001-2002 50,925 58,984 213,636 507,796 651,215 669,660 783,391 739,406 739,406 802,965
2002-2003 23,447 181,424 226,897 227,029 209,572 441,049 447,840 565,083 571,489
2003-2004 37,500 123,650 310,924 400,433 508,130 603,702 867,424 834,384 786,949 786,949
2004-2005 68,550 263,905 286,680 517,991 441,662 436,537 436,537 476,578 629,107 567,528
2005-2006 25,255 167,821 152,967 169,223 168,185 154,171 156,671 231,273 366,095
2006-2007 59,000 148,148 180,776 188,924 207,949 149,303 150,289 145,792 166,883 328,398
2007-2008 164,353 341,087 402,044 400,000 400,000 400,000 400,000 400,000 402,881
2008-2009 476,355 935,746 733,826 754,240 894,627 944,647 930,291 894,547 973,768
2009-2010 76,748 745,413 841,838 883,779 907,290 1,030,405 1,222,215 1,410,278 1,362,883
2010-2011 52,413 251,810 293,622 266,125 320,245 409,264 486,433 377,793
2011-2012 32,841 115,937 69,145 99,823 153,621 292,654 292,656
2012-2013 216,002 649,837 702,925 1,183,525 1,188,178
2013-2014 41,325 117,974 386,321 467,908 626,909
2014-2015 204,086 518,250 612,800 666,367
2015-2016 627,241 1,056,473 1,500,655
2016-2017 59,063 99,107
2017-2018
Reported Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 1.680 1.075 0.994 1.630 0.985 0.997 0.974
1998-1999 1.677 1.078 1.103 1.233 1.034 1.013 1.005 1.051
1999-2000 1.470 1.292 1.451 1.230 1.008 1.000 0.905 1.210 0.918
2000-2001 1.335 1.461 1.417 1.014 1.169 0.878 0.602 1.000 1.000
2001-2002 1.158 3.622 2.377 1.282 1.028 1.170 0.944 1.000 1.086 1.132
2002-2003 7.738 1.251 1.001 0.923 2.105 1.015 1.262 1.011 1.017
2003-2004 3.297 2.515 1.288 1.269 1.188 1.437 0.962 0.943 1.000 0.998
2004-2005 3.850 1.086 1.807 0.853 0.988 1.000 1.092 1.320 0.902 1.167
2005-2006 6.645 0.911 1.106 0.994 0.917 1.016 1.476 1.583 1.423
2006-2007 2.511 1.220 1.045 1.101 0.718 1.007 0.970 1.145 1.968 1.046
2007-2008 2.075 1.179 0.995 1.000 1.000 1.000 1.000 1.007 0.993
2008-2009 1.964 0.784 1.028 1.186 1.056 0.985 0.962 1.089
2009-2010 9.712 1.129 1.050 1.027 1.136 1.186 1.154 0.966
2010-2011 4.804 1.166 0.906 1.203 1.278 1.189 0.777
2011-2012 3.530 0.596 1.444 1.539 1.905 1.000
2012-2013 3.008 1.082 1.684 1.004
2013-2014 2.855 3.275 1.211 1.340
2014-2015 2.539 1.182 1.087
2015-2016 1.684 1.420
2016-2017 1.678
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 3.420 2.438 1.285 1.238 1.111 1.165 1.033 1.045 1.155 1.065
Dollar-Weighted
Averages
3-yr 1.880 1.477 1.114 1.546 1.140 1.155 1.025 0.970 1.167 1.152
4-yr 1.923 1.650 1.127 1.486 1.139 1.121 1.021 0.979 1.224 1.157
Comparative
Factors 2.750 1.900 1.380 1.270 1.130 1.100 1.080 1.070 1.055 1.050
Prior 2.750 1.900 1.300 1.150 1.130 1.100 1.080 1.070 1.055 1.050
Selected 2.750 1.900 1.300 1.150 1.130 1.100 1.080 1.070 1.055 1.050
Cumulated 15.436 5.613 2.954 2.272 1.976 1.749 1.590 1.472 1.376 1.304
-49-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix WC - A
Page 5
City of Newport Beach - Workers' Compensation
Reported between $100,000 and $500,000 Loss Development
Losses Reported as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
454,646 454,646 454,646 454,646 454,646 454,646 443,514 443,470 448,768 456,602 445,799
1,081,027 1,155,532 1,066,442 951,600 1,123,487 1,120,337 1,126,254 1,211,571 1,156,614 1,156,614
985,374 826,163 781,108 1,005,927 922,071 907,032 961,277 1,023,196 994,313
502,885 498,215 564,052 619,332 638,697 638,697 619,997 593,631
909,028 941,602 1,070,078 1,084,491 1,084,535 1,089,439 1,041,017
580,970 580,937 580,937 580,937 664,077 652,938
785,409 824,130 860,409 890,234 827,570
662,225 851,867 937,765 825,891
521,110 548,603 471,884
343,522 283,038
400,000
Reported Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.000 1.000 1.000 1.000 1.000 0.976 1.000 1.012 1.017 0.976
1.069 0.923 0.892 1.181 0.997 1.005 1.076 0.955 1.000
0.838 0.945 1.288 0.917 0.984 1.060 1.064 0.972
0.991 1.132 1.098 1.031 1.000 0.971 0.957
1.036 1.136 1.013 1.000 1.005 0.956
1.000 1.000 1.000 1.143 0.983
1.049 1.044 1.035 0.930
1.286 1.101 0.881
1.053 0.860
0.824
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.015 1.016 1.026 1.029 0.995 0.994 1.024 0.980 1.009 0.976
1.103 1.020 0.966 1.008 0.997 0.995 1.045 0.971
1.084 1.016 0.980 1.013 0.994 0.998 1.038
1.040 1.029 1.030 1.026 1.024 1.020 1.015 1.011 1.008 1.005 1.010
1.040 1.029 1.030 1.026 1.024 1.020 1.015 1.011 1.008 1.005 1.010
1.040 1.029 1.030 1.026 1.024 1.020 1.015 1.011 1.008 1.005 1.010
1.242 1.194 1.160 1.126 1.097 1.071 1.050 1.034 1.023 1.015 1.010
-50-
DRAFT
Appendix WC - B
Page 1
City of Newport Beach - Workers' Compensation
Paid Loss Development
Limited Program
Paid Paid Loss Ultimate Paid Paid Loss Ultimate
Accident Losses as Development Limited Losses Development Program
Year of 6/30/18 Factor Losses of 6/30/18 Factor Losses
(A) (B) (C) (D) (E) (F) (G)
Prior $19,358,273 1.013 $19,609,931 $27,411,170 1.036 $28,397,972
1998-1999 1,443,903 1.017 1,468,449 2,074,089 1.049 2,175,719
1999-2000 1,542,166 1.022 1,576,094 2,218,816 1.059 2,349,726
2000-2001 1,518,513 1.027 1,559,513 1,941,995 1.070 2,077,935
2001-2002 2,049,726 1.032 2,115,317 2,966,231 1.088 3,227,259
2002-2003 1,978,914 1.037 2,052,134 2,530,058 1.109 2,805,834
2003-2004 1,836,303 1.042 1,913,428 2,697,872 1.137 3,067,480
2004-2005 1,427,815 1.048 1,496,350 2,061,834 1.154 2,379,356
2005-2006 1,834,685 1.055 1,935,593 2,199,748 1.176 2,586,904
2006-2007 1,575,053 1.063 1,674,281 1,795,155 1.201 2,155,981
2007-2008 1,249,355 1.073 1,340,558 1,666,652 1.228 2,046,649
2008-2009 1,622,833 1.084 1,759,151 2,276,220 1.257 2,861,209
2009-2010 2,403,164 1.100 2,643,480 3,426,382 1.291 4,423,459
2010-2011 1,690,870 1.117 1,888,702 2,047,318 1.335 2,733,170
2011-2012 1,352,675 1.134 1,533,933 1,546,005 1.349 2,085,561
2012-2013 1,561,125 1.157 1,806,222 2,163,781 1.412 3,055,259
2013-2014 1,493,793 1.197 1,788,070 1,701,446 1.503 2,557,273
2014-2015 1,123,879 1.269 1,426,202 1,459,329 1.659 2,421,027
2015-2016 1,981,233 1.402 2,777,689 2,509,453 1.938 4,863,320
2016-2017 726,637 1.745 1,267,982 726,637 2.529 1,837,665
2017-2018 346,714 3.918 1,358,425 346,714 5.838 2,024,116
Totals $50,117,629 $54,991,504 $67,766,905 $82,132,874
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City. These losses exclude
amounts over $100,000 per occurrence.
(C) From Appendix WC - B, Page 2.
(D) (B) x (C). These estimated losses exclude
amounts over $100,000 per occurrence.
(E) Losses capped at the City's SIR. Amounts are provided by the City.
(F) Derived from factors on Appendix WC - B, Page 4.
(G) (E) x (F).
This method tends to understate ultimate losses for the most recent several years
because the large losses for those years generally have not yet emerged at the time
of our review.
This exhibit shows the calculation of estimated ultimate losses for each year based
on paid losses as reported by the claims administrator. These losses tend to
"develop" or change from period to period as more information becomes available
about the cases. This development tends to follow quantifiable patterns over time.
-51-
DRAFT
Appendix WC - B
Page 2
City of Newport Beach - Workers' Compensation
Paid Loss Development
Limited Losses Paid as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 965,766 1,028,316 1,094,714 1,168,343 1,307,658 1,321,198 1,322,402
1998-1999 867,563 973,868 1,114,644 1,146,831 1,283,879 1,284,447 1,287,414 1,287,765
1999-2000 668,993 826,828 1,004,843 1,127,911 1,328,180 1,388,527 1,414,989 1,426,750 1,446,630
2000-2001 314,703 540,961 823,249 968,880 1,230,741 1,304,807 1,365,247 1,479,495 1,493,378 1,500,168
2001-2002 383,383 758,073 1,194,940 1,569,450 1,645,130 1,717,477 1,872,749 1,889,573 1,938,739 1,966,064
2002-2003 276,208 942,959 1,275,950 1,418,922 1,493,825 1,534,349 1,680,677 1,740,334 1,821,128 1,849,462
2003-2004 357,695 993,124 1,311,462 1,473,983 1,514,015 1,552,278 1,655,949 1,717,341 1,737,597 1,746,678
2004-2005 457,120 946,767 1,013,608 1,133,116 1,192,950 1,236,779 1,300,041 1,334,619 1,363,136 1,384,242
2005-2006 416,691 903,062 1,069,126 1,211,152 1,445,455 1,499,104 1,590,545 1,683,083 1,729,964 1,800,096
2006-2007 471,129 1,001,027 1,231,044 1,318,407 1,394,061 1,437,141 1,468,496 1,571,510 1,557,509 1,560,752
2007-2008 405,824 862,774 1,023,899 1,077,477 1,157,730 1,196,209 1,210,644 1,218,129 1,224,863 1,238,544
2008-2009 510,372 1,081,664 1,291,232 1,418,718 1,444,761 1,488,169 1,509,197 1,570,139 1,613,360 1,622,833
2009-2010 722,926 1,615,801 2,087,481 2,215,282 2,309,462 2,341,038 2,365,875 2,368,160 2,403,164
2010-2011 679,062 1,273,074 1,382,694 1,490,274 1,544,063 1,653,561 1,676,242 1,690,870
2011-2012 437,028 882,174 1,072,624 1,176,341 1,253,345 1,302,186 1,352,675
2012-2013 465,179 1,089,093 1,293,275 1,406,603 1,524,768 1,561,125
2013-2014 418,492 937,154 1,230,264 1,418,419 1,493,793
2014-2015 372,422 927,354 1,036,651 1,123,879
2015-2016 764,369 1,502,277 1,981,233
2016-2017 389,553 726,637
2017-2018 346,714
Paid Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 1.065 1.065 1.067 1.119 1.010 1.001 1.000
1998-1999 1.123 1.145 1.029 1.120 1.000 1.002 1.000 1.030
1999-2000 1.236 1.215 1.122 1.178 1.045 1.019 1.008 1.014 1.003
2000-2001 1.719 1.522 1.177 1.270 1.060 1.046 1.084 1.009 1.005 1.002
2001-2002 1.977 1.576 1.313 1.048 1.044 1.090 1.009 1.026 1.014 1.009
2002-2003 3.414 1.353 1.112 1.053 1.027 1.095 1.035 1.046 1.016 1.006
2003-2004 2.776 1.321 1.124 1.027 1.025 1.067 1.037 1.012 1.005 1.003
2004-2005 2.071 1.071 1.118 1.053 1.037 1.051 1.027 1.021 1.015 1.018
2005-2006 2.167 1.184 1.133 1.193 1.037 1.061 1.058 1.028 1.041 1.004
2006-2007 2.125 1.230 1.071 1.057 1.031 1.022 1.070 0.991 1.002 1.004
2007-2008 2.126 1.187 1.052 1.074 1.033 1.012 1.006 1.006 1.011 1.009
2008-2009 2.119 1.194 1.099 1.018 1.030 1.014 1.040 1.028 1.006
2009-2010 2.235 1.292 1.061 1.043 1.014 1.011 1.001 1.015
2010-2011 1.875 1.086 1.078 1.036 1.071 1.014 1.009
2011-2012 2.019 1.216 1.097 1.065 1.039 1.039
2012-2013 2.341 1.187 1.088 1.084 1.024
2013-2014 2.239 1.313 1.153 1.053
2014-2015 2.490 1.118 1.084
2015-2016 1.965 1.319
2016-2017 1.865
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 2.207 1.259 1.123 1.083 1.047 1.050 1.037 1.016 1.011 1.008
Dollar-Weighted
Averages
3-yr 2.068 1.262 1.109 1.068 1.045 1.019 1.014 1.016 1.006 1.005
4-yr 2.105 1.244 1.106 1.059 1.034 1.018 1.013 1.011 1.016 1.008
Comparative
Factors 2.500 1.400 1.170 1.090 1.050 1.033 1.020 1.015 1.012 1.010
Prior 2.250 1.225 1.100 1.055 1.035 1.020 1.020 1.020 1.015 1.010
Selected 2.245 1.245 1.105 1.060 1.035 1.020 1.015 1.015 1.015 1.010
Cumulated 3.918 1.745 1.402 1.269 1.197 1.157 1.134 1.117 1.100 1.084
-52-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix WC - B
Page 3
City of Newport Beach - Workers' Compensation
Paid Loss Development
Limited Losses Paid as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
1,322,523 1,330,363 1,346,705 1,347,731 1,349,048 1,350,159 1,352,323 1,356,872 1,366,130 1,372,379 1,372,860
1,326,653 1,328,176 1,396,200 1,404,323 1,407,444 1,408,842 1,413,417 1,418,096 1,421,148 1,443,903
1,451,536 1,492,446 1,499,021 1,500,857 1,512,368 1,520,968 1,525,234 1,534,056 1,542,166
1,503,360 1,505,535 1,510,114 1,511,818 1,514,283 1,514,762 1,516,557 1,518,513
1,983,616 1,989,599 1,994,125 2,012,999 2,025,789 2,033,486 2,049,726
1,860,500 1,931,216 1,942,309 1,957,306 1,972,066 1,978,914
1,751,136 1,769,160 1,793,764 1,819,124 1,836,303
1,409,174 1,422,329 1,422,329 1,427,815
1,807,170 1,818,891 1,834,685
1,567,419 1,575,053
1,249,355
Paid Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.006 1.012 1.001 1.001 1.001 1.002 1.003 1.007 1.005 1.000
1.001 1.051 1.006 1.002 1.001 1.003 1.003 1.002 1.016
1.028 1.004 1.001 1.008 1.006 1.003 1.006 1.005
1.001 1.003 1.001 1.002 1.000 1.001 1.001
1.003 1.002 1.009 1.006 1.004 1.008
1.038 1.006 1.008 1.008 1.003
1.010 1.014 1.014 1.009
1.009 1.000 1.004
1.006 1.009
1.005
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.011 1.011 1.006 1.005 1.003 1.003 1.003 1.005 1.011 1.000
1.007 1.008 1.009 1.008 1.003 1.004 1.003 1.005
1.008 1.007 1.009 1.006 1.003 1.004 1.003
1.009 1.008 1.007 1.006 1.005 1.005 1.004 1.004 1.004 1.004 1.013
1.009 1.008 1.007 1.006 1.005 1.005 1.004 1.004 1.004 1.006 1.013
1.009 1.008 1.007 1.006 1.005 1.005 1.005 1.005 1.005 1.004 1.013
1.073 1.063 1.055 1.048 1.042 1.037 1.032 1.027 1.022 1.017 1.013
-53-
DRAFT
Appendix WC - B
Page 4
City of Newport Beach - Workers' Compensation
Paid between $100,000 and $500,000 Loss Development
Losses Paid as of:
Accident 12 24 36 48 60 72 84 96 108 120
Year Months Months Months Months Months Months Months Months Months Months
1997-1998 69,434 128,531 139,095 186,386 314,564 327,353 335,227
1998-1999 11,282 94,532 141,668 245,565 500,332 601,047 639,760 680,543
1999-2000 54,813 143,839 152,138 205,442 357,034 378,057 805,323 825,866841,142
2000-2001 7,362 97,234 278,780 455,844 535,624 637,690 656,354 409,713 423,141
2001-2002 20,457 306,775 458,866 524,312 656,577 664,229 682,112 693,201
2002-2003 2,144 124,064 128,383 130,742 161,118 323,415 323,415 443,485 501,355
2003-2004 27,667 238,961 280,889 355,404 562,657 586,804 624,106 647,455
2004-2005 95,974 149,297 205,492 156,566 187,263 213,297 250,276 273,302317,269
2005-2006 119,440 119,799 119,799 119,799 119,799 119,799 213,394 302,032
2006-2007 17,790 102,946 138,832 144,946 145,882 145,792 156,611 192,689
2007-2008 5,568 168,107 360,910 388,155 400,000 400,000 400,000 400,000 400,000
2008-2009 58,538 94,508 172,273 210,758 406,333 485,124 507,898 596,602 653,387
2009-2010 265,357 426,064 515,558 605,481 750,586 856,905 980,535 1,023,218
2010-2011 5,142 68,362 96,622 173,275 177,069 315,453 342,630 356,448
2011-2012 55,198 55,987 55,987 55,987 170,816 193,330
2012-2013 97,634 290,011 338,976 465,141 602,656
2013-2014 28,046 68,098 129,352 207,653
2014-2015 238,194 306,011 335,451
2015-2016 54,733 175,699 528,219
2016-2017
2017-2018
Paid Loss Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
1997-1998 1.851 1.082 1.340 1.688 1.041 1.024 1.013
1998-1999 8.379 1.499 1.733 2.037 1.201 1.064 1.064 1.193
1999-2000 2.624 1.058 1.350 1.738 1.059 2.130 1.026 1.018 0.899
2000-2001 13.208 2.867 1.635 1.175 1.191 1.029 0.624 1.033 1.012
2001-2002 14.996 1.496 1.143 1.252 1.012 1.027 1.016 1.102
2002-2003 57.866 1.035 1.018 1.232 2.007 1.000 1.371 1.130 1.055
2003-2004 8.637 1.175 1.265 1.583 1.043 1.064 1.037 1.189
2004-2005 1.556 1.376 0.762 1.196 1.139 1.173 1.092 1.161 1.595
2005-2006 1.003 1.000 1.000 1.000 1.000 1.781 1.415 1.203
2006-2007 5.787 1.349 1.044 1.006 0.999 1.074 1.230 1.214
2007-2008 30.192 2.147 1.075 1.031 1.000 1.000 1.000 1.000 1.000
2008-2009 1.614 1.823 1.223 1.928 1.194 1.047 1.175 1.095
2009-2010 1.606 1.210 1.174 1.240 1.142 1.144 1.044
2010-2011 13.295 1.413 1.793 1.022 1.782 1.086 1.040
2011-2012 1.014 1.000 1.000 3.051 1.132
2012-2013 2.970 1.169 1.372 1.296
2013-2014 2.428 1.900 1.605
2014-2015 1.285 1.096
2015-2016 3.210 3.006
2016-2017
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132
Months Months Months Months Months Months Months Months Months Months
Average 8.253 9.291 3.369 1.271 1.434 1.278 1.179 1.106 1.102 1.134
Dollar-Weighted
Averages
3-yr 2.042 1.210 1.390 1.560 1.126 1.095 1.070 1.081 1.115
4-yr 2.210 1.194 1.299 1.411 1.143 1.077 1.070 1.133 1.240
Comparative
Factors 4.000 3.100 2.400 1.750 1.500 1.300 1.250 1.175 1.100 1.080
Prior 3.450 2.200 1.750 1.350 1.200 1.150 1.125 1.075 1.050 1.050
Selected 3.450 2.200 1.750 1.350 1.200 1.150 1.125 1.075 1.050 1.050
Cumulated 56.621 16.412 7.460 4.263 3.158 2.632 2.289 2.035 1.893 1.803
-54-
DRAFT
Accident
Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
Average
Dollar-Weighted
Averages
3-yr
4-yr
Comparative
Factors
Prior
Selected
Cumulated
Appendix WC - B
Page 5
City of Newport Beach - Workers' Compensation
Paid between $100,000 and $500,000 Loss Development
Losses Paid as of:
132 144 156 168 180 192 204 216 228 240 252
Months Months Months Months Months Months Months Months Months Months Months
339,494 343,730 347,750 351,770 356,468 360,605 364,750 366,152 372,502 376,733 380,966
812,149 869,333 921,606 823,249 1,064,003 1,066,115 1,071,054 1,075,370 1,078,372 1,082,569
755,927 630,901 635,888 861,046 863,676 866,557 872,169 888,674 901,650
428,406 436,666 507,399 515,286 525,740 532,030 537,184 541,761
763,667 787,103 851,955 896,433 917,314 929,395 964,176
528,934 533,460 537,671 541,464 543,155 551,144
769,891 770,889 789,189 789,424 789,424
506,122 539,324 582,753 634,019
363,431 365,051 365,063
233,874 220,101
400,000
Paid Loss Development Factors:
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
1.012 1.012 1.012 1.013 1.012 1.011 1.004 1.017 1.011 1.011
1.070 1.060 0.893 1.292 1.002 1.005 1.004 1.003 1.004
0.835 1.008 1.354 1.003 1.003 1.006 1.019 1.015
1.019 1.162 1.016 1.020 1.012 1.010 1.009
1.031 1.082 1.052 1.023 1.013 1.037
1.009 1.008 1.007 1.003 1.015
1.001 1.024 1.000 1.000
1.066 1.081 1.088
1.004 1.000
0.941
132-144 144-156 156-168 168-180 180-192 192-204 204-216 216-228 228-240 240-252 252-Ult.
Months Months Months Months Months Months Months Months Months Months Months
0.999 1.049 1.053 1.051 1.010 1.014 1.009 1.012 1.008 1.011
1.019 1.037 1.029 1.010 1.013 1.020 1.010 1.010
1.012 1.030 1.036 1.012 1.010 1.015 1.009
1.070 1.055 1.045 1.035 1.035 1.030 1.030 1.030 1.030 1.030 1.275
1.050 1.050 1.045 1.035 1.035 1.030 1.030 1.030 1.030 1.030 1.200
1.050 1.050 1.045 1.035 1.035 1.030 1.030 1.030 1.030 1.030 1.200
1.717 1.635 1.557 1.490 1.440 1.391 1.350 1.311 1.273 1.236 1.200
-55-
DRAFT
Appendix WC - C
Page 1
City of Newport Beach - Workers' Compensation
Exposure and Development Method
Based on Reported Losses
Percentage Incurred
Trended Reported Loss of Losses but not Ultimate
Accident Payroll Losses as Development Yet to Be Program Reported Program
Year ($00) of 6/30/18 Factor Reported Rate (IBNR) Losses
(A) (B) (C) (D) (E) (F) (G)
Prior 704,235 28,567,502 1.007 0.007 32.732 161,357 28,728,859
1998-1999 720,071 2,186,662 1.009 0.009 2.596 16,824 2,203,486
1999-2000 725,516 2,353,313 1.012 0.012 2.819 24,543 2,377,856
2000-2001 795,551 1,996,646 1.016 0.016 2.451 31,198 2,027,844
2001-2002 835,796 3,207,215 1.022 0.022 3.486 64,099 3,271,314
2002-2003 867,867 2,860,576 1.031 0.030 3.479 90,579 2,951,155
2003-2004 879,714 3,067,025 1.043 0.041 3.606 130,062 3,197,087
2004-2005 876,940 2,309,582 1.054 0.051 2.514 112,436 2,422,018
2005-2006 943,608 2,438,230 1.067 0.063 3.147 187,081 2,625,311
2006-2007 946,755 1,986,849 1.081 0.075 2.766 196,404 2,183,253
2007-2008 986,401 1,764,813 1.099 0.090 2.137 189,715 1,954,528
2008-2009 1,018,691 2,872,026 1.121 0.108 2.790 306,952 3,178,978
2009-2010 1,051,147 3,889,565 1.147 0.128 3.889 523,253 4,412,818
2010-2011 945,360 2,219,042 1.179 0.152 3.234 464,709 2,683,751
2011-2012 895,022 1,837,560 1.192 0.161 2.696 388,490 2,226,050
2012-2013 909,694 2,835,142 1.233 0.189 2.888 496,540 3,331,682
2013-2014 896,999 2,458,435 1.283 0.221 3.086 611,759 3,070,194
2014-2015 899,746 2,162,632 1.338 0.253 3.230 735,263 2,897,895
2015-2016 980,028 4,466,643 1.432 0.302 3.328 984,983 5,451,626
2016-2017 932,821 1,514,437 1.670 0.401 3.461 1,294,626 2,809,063
2017-2018 930,311 1,065,327 2.433 0.589 3.615 1,980,851 3,046,178
Totals 18,742,273 $78,059,222 $8,991,724 $87,050,946
Notes:
(A) From Appendix WC - N, Column (C).
(B) Provided by the City. These losses exclude
amounts incurred above the City's SIR for each year.
(C) From Appendix WC - A, Page 1, Column (F).
(D) 1 - 1/(C).
(E) From Appendix WC - C, Page 3, Column (H).
(F) (A) x (D) x (E).
(G) (B) + (F).
This exhibit shows the calculation of ultimate losses based on the assumption that there is an underlying relationship
between losses and exposure that changes in regular ways over time. The method relies on the premise that
the losses that are currently unreported will cost what this relationship would suggest.
-56-
DRAFT
Appendix WC - C
Page 2
City of Newport Beach - Workers' Compensation
Exposure and Development Method
Based on Paid Losses
Percentage
Trended Paid Loss of Losses Incurred Ultimate
Accident Payroll Losses as Development Yet to Be Program but not Program
Year ($00) of 6/30/18 Factor Paid Rate Paid Losses
(A) (B) (C) (D) (E) (F) (G)
Prior 704,235 27,411,170 1.036 0.035 32.732 806,786 28,217,956
1998-1999 720,071 2,074,089 1.049 0.047 2.596 87,857 2,161,946
1999-2000 725,516 2,218,816 1.059 0.056 2.819 114,533 2,333,349
2000-2001 795,551 1,941,995 1.070 0.065 2.451 126,743 2,068,738
2001-2002 835,796 2,966,231 1.088 0.081 3.486 236,000 3,202,231
2002-2003 867,867 2,530,058 1.109 0.098 3.479 295,892 2,825,950
2003-2004 879,714 2,697,872 1.137 0.120 3.606 380,670 3,078,542
2004-2005 876,940 2,061,834 1.154 0.133 2.514 293,215 2,355,049
2005-2006 943,608 2,199,748 1.176 0.150 3.147 445,430 2,645,178
2006-2007 946,755 1,795,155 1.201 0.167 2.766 437,327 2,232,482
2007-2008 986,401 1,666,652 1.228 0.186 2.137 392,077 2,058,729
2008-2009 1,018,691 2,276,220 1.257 0.204 2.790 579,798 2,856,018
2009-2010 1,051,147 3,426,382 1.291 0.225 3.889 919,780 4,346,162
2010-2011 945,360 2,047,318 1.335 0.251 3.234 767,381 2,814,699
2011-2012 895,022 1,546,005 1.349 0.259 2.696 624,962 2,170,967
2012-2013 909,694 2,163,781 1.412 0.292 2.888 767,141 2,930,922
2013-2014 896,999 1,701,446 1.503 0.335 3.086 927,327 2,628,773
2014-2015 899,746 1,459,329 1.659 0.397 3.230 1,153,753 2,613,082
2015-2016 980,028 2,509,453 1.938 0.484 3.328 1,578,582 4,088,035
2016-2017 932,821 726,637 2.529 0.605 3.461 1,953,239 2,679,876
2017-2018 930,311 346,714 5.838 0.829 3.615 2,787,989 3,134,703
Totals 18,742,273 $67,766,905 $15,676,482 $83,443,387
Notes:
(A) From Appendix WC - N, Column (C).
(B) Provided by the City. These losses exclude
amounts paid above the City's SIR for each year.
(C) From Appendix WC - B, Page 1, Column (F).
(D) 1 - 1/(C).
(E) From Appendix WC - C, Page 3, Column (H).
(F) (A) x (D) x (E).
(G) (B) + (F).
This exhibit shows the calculation of ultimate losses based on the assumption that there is an underlying relationship
between losses and exposure that changes in regular ways over time. The method relies on the premise that
the losses that are currently unpaid will cost what this relationship would suggest.
-57-
DRAFT
Appendix WC - C
Page 3
City of Newport Beach - Workers' Compensation
Exposure and Development Method
Trended Ultimate Trended Trended
Accident Payroll Limited Trend Limited Limited Limited Factor to Program
Year ($00) Losses Factor Losses Loss Rate Loss Rate SIR Loss Rate
(A) (B) (C) (D) (E) (F) (G) (H)
Prior 704,235 19,797,000 1.511 29,913,267 42.476 28.111 1.164 32.732
1998-1999 720,071 1,543,000 1.063 1,640,209 2.278 2.143 1.211 2.596
1999-2000 725,516 1,679,000 0.955 1,603,445 2.210 2.314 1.218 2.819
2000-2001 795,551 1,592,000 0.893 1,421,656 1.787 2.001 1.225 2.451
2001-2002 835,796 2,282,000 0.892 2,035,544 2.435 2.730 1.277 3.486
2002-2003 867,867 2,247,000 0.936 2,103,192 2.423 2.589 1.344 3.479
2003-2004 879,714 2,213,000 1.154 2,553,802 2.903 2.516 1.433 3.606
2004-2005 876,940 1,519,000 1.482 2,251,158 2.567 1.732 1.451 2.514
2005-2006 943,608 2,021,000 1.601 3,235,621 3.429 2.142 1.469 3.147
2006-2007 946,755 1,760,000 1.509 2,655,840 2.805 1.859 1.488 2.766
2007-2008 986,401 1,399,000 1.395 1,951,605 1.979 1.418 1.507 2.137
2008-2009 1,018,691 1,861,000 1.296 2,411,856 2.368 1.827 1.527 2.790
2009-2010 1,051,147 2,643,000 1.183 3,126,669 2.975 2.514 1.547 3.889
2010-2011 945,360 1,950,000 1.136 2,215,200 2.343 2.063 1.568 3.234
2011-2012 895,022 1,652,000 1.142 1,886,584 2.108 1.846 1.461 2.696
2012-2013 909,694 1,782,000 1.146 2,042,172 2.245 1.959 1.474 2.888
2013-2014 896,999 1,973,000 1.133 2,235,409 2.492 2.074 1.488 3.086
2014-2015 899,746 1,636,000 1.093 1,788,148 1.987 2.150 1.503 3.230
2015-2016 980,028 3,326,000 1.071 3,562,146 3.635 2.194 1.517 3.328
2016-2017 932,821 1,721,000 1.040 1,789,840 1.919 2.260 1.531 3.461
2017-2018 930,311 1,775,000 1.005 1,783,875 1.918 2.338 1.546 3.615
Total/Avg 18,742,273 $58,371,000 $74,207,238 $3.959
10/11-16/17 6,459,670 14,040,000 15,519,499 2.403
11/12-17/18 6,444,621 13,865,000 15,088,174 2.341
Selected Limited Rate: $2.350
Prior: $2.400
Notes:
(A) From Appendix WC - N, Column (C).
(B) Selected average of results from Appendices W and W.
(C) From Appendix WC - E, Page 1, Column (B).
(D) (B) x (C).
(E) (D) / (A).
(F) Selected Limited Rate / (C). For 2012-2013 and prior (B) / (A).
(G) Based on a Weibull distribution, a mathematical model
of claim sizes.
(H) (F) x (G).
This exhibit shows the calculation of the underlying historical relationship between losses and exposure that is
needed to apply the estimation methods shown on pages 1 and 2 of this Appendix.
-58-
DRAFT
Appendix WC - D
Page 1
City of Newport Beach - Workers' Compensation
Frequency and Severity Method
Ultimate Adjusted Ultimate
Accident Program Ultimate Program
Year Severity Claims Losses
(A) (B) (C)
Prior $15,756 1,463 $23,051,028
1998-1999 28,753 65 1,868,945
1999-2000 28,405 72 2,045,160
2000-2001 22,677 86 1,950,222
2001-2002 30,353 96 2,913,888
2002-2003 27,202 111 3,019,422
2003-2004 33,740 94 3,171,560
2004-2005 28,629 77 2,204,433
2005-2006 33,746 88 2,969,648
2006-2007 29,102 90 2,619,180
2007-2008 26,352 80 2,108,160
2008-2009 33,828 84 2,841,552
2009-2010 37,509 109 4,088,481
2010-2011 35,960 85 3,056,600
2011-2012 31,338 77 2,413,026
2012-2013 19,177 137 2,627,249
2013-2014 35,687 112 3,996,944
2014-2015 38,102 108 4,115,016
2015-2016 40,023 84 3,361,932
2016-2017 42,417 65 2,757,105
2017-2018 45,256 64 2,896,384
Total 3,247 $80,075,935
Notes:
(A) From Appendix WC - D, Page 2, Column (H).
(B) From Appendix WC - D, Page 2, Column (B).
(C) (A) x (B).
This exhibit shows the calculation of the estimated
ultimate losses for each year based on the
observed average frequency and severity of
claims.
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DRAFT
Appendix WC - D
Page 2
City of Newport Beach - Workers' Compensation
Frequency and Severity Method
Ultimate Adjusted Ultimate Trended
Accident Limited Ultimate Limited Trend Limited Limited Factor to Program
Year Losses Claims Severity Factor Severity Severity SIR Severity
(A) (B) (C) (D) (E) (F) (G) (H)
Prior $19,797,000 1,463 $13,532 2.291 $31,002 $13,532 1.164 $15,756
1998-1999 1,543,000 65 23,738 1.581 37,530 23,738 1.211 28,753
1999-2000 1,679,000 72 23,319 1.392 32,460 23,319 1.218 28,405
2000-2001 1,592,000 86 18,512 1.277 23,640 18,512 1.225 22,677
2001-2002 2,282,000 96 23,771 1.252 29,761 23,771 1.277 30,353
2002-2003 2,247,000 111 20,243 1.287 26,053 20,243 1.344 27,202
2003-2004 2,213,000 94 23,543 1.555 36,609 23,543 1.433 33,740
2004-2005 1,519,000 77 19,727 1.958 38,625 19,727 1.451 28,629
2005-2006 2,021,000 88 22,966 2.073 47,609 22,966 1.469 33,746
2006-2007 1,760,000 90 19,556 1.915 37,450 19,556 1.488 29,102
2007-2008 1,399,000 80 17,488 1.736 30,359 17,488 1.507 26,352
2008-2009 1,861,000 84 22,155 1.581 35,027 22,155 1.527 33,828
2009-2010 2,643,000 109 24,248 1.414 34,287 24,248 1.547 37,509
2010-2011 1,950,000 85 22,941 1.332 30,557 22,941 1.568 35,960
2011-2012 1,652,000 77 21,455 1.313 28,170 21,455 1.461 31,338
2012-2013 1,782,000 137 13,007 1.291 16,792 13,007 1.474 19,177
2013-2014 1,971,000 112 17,598 1.251 22,015 23,981 1.488 35,687
2014-2015 1,641,000 108 15,194 1.183 17,975 25,359 1.503 38,102
2015-2016 3,244,000 84 38,619 1.137 43,910 26,385 1.517 40,023
2016-2017 1,709,000 65 26,292 1.083 28,474 27,701 1.531 42,417
2017-2018 1,863,000 64 29,109 1.025 29,837 29,268 1.546 45,256
Average Limited Severity: $31,340
Average 12/13-16/17 Limited Severity: 25,833
Average 13/14-17/18 Limited Severity: 28,442
Selected Limited Severity: $30,000
Prior: $30,000
Notes:
(A) Selected average of results from Appendices W, W, and W.
(B) Appendix WC - D, Page 3, Column (C).
(C) (A) / (B).
(D) From Appendix WC - E, Page 1, Column (J).
(E) (C) x (D).
(F) Selected Limited Severity / (D).
(G) Based on a Weibull distribution, a mathematical model
of claim sizes.
(H) (F) x (G).
This exhibit shows the calculation of the historical average cost per claim, or severity. The observed
average severity is used in the method shown on page 1 of this Appendix.
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DRAFT
Appendix WC - D
Page 3
City of Newport Beach - Workers' Compensation
Frequency and Severity Method
Projection of Ultimate Claims
Reported Closed Selected Trended Trended
Accident Claim Claim Ultimate Payroll Claim Trend Claim
Year Development Development Claims ($000,000) Frequency Factor Frequency
(A) (B) (C) (D) (E) (F) (G)
Prior 1,463 1,439 1,463 70.4 20.774 0.655 13.607
1998-1999 65 59 65 72.0 0.903 0.668 0.603
1999-2000 72 67 72 72.6 0.992 0.682 0.677
2000-2001 86 82 86 79.6 1.081 0.696 0.752
2001-2002 96 85 96 83.6 1.149 0.710 0.816
2002-2003 111 98 111 86.8 1.279 0.725 0.927
2003-2004 94 80 94 88.0 1.069 0.740 0.791
2004-2005 77 71 77 87.7 0.878 0.755 0.663
2005-2006 88 79 88 94.4 0.933 0.769 0.717
2006-2007 90 82 90 94.7 0.951 0.785 0.747
2007-2008 80 77 80 98.6 0.811 0.801 0.650
2008-2009 84 75 84 101.9 0.825 0.817 0.674
2009-2010 109 101 109 105.1 1.037 0.834 0.865
2010-2011 85 82 85 94.5 0.899 0.851 0.765
2011-2012 77 73 77 89.5 0.860 0.868 0.746
2012-2013 137 141 137 91.0 1.506 0.886 1.334
2013-2014 112 102 112 89.7 1.249 0.904 1.129
2014-2015 108 108 108 90.0 1.200 0.922 1.106
2015-2016 84 58 84 98.0 0.857 0.942 0.807
2016-2017 65 57 65 93.3 0.697 0.961 0.670
2017-2018 64 61 64 93.0 0.688 0.980 0.674
Total 3,247 3,077 3,247 1,874.2 1.288
12/13-16/17 506 466 506 461.9 1.004
13/14-17/18 433 386 433 464.0 0.873
(H) Selected Frequency: 0.875
Prior: 0.850
Program Year: 2018-2019 2019-2020 2020-2021
(I) Trend Factor: 1.000 0.980 0.960
(J) Selected Frequency: 0.875 0.858 0.840
(K) Est. Payroll ($000,000): 93.3 96.6 100.0
(L) Ultimate Claims: 82 83 84
Notes:
(A) From Appendix WC - D, Page 4, (C). (G) (E) x (F).
(B) From Appendix WC - D, Page 5, (C). (H) The selected frequency of 0.875 is based on (G).
(C) Selected from (A) and (B). (I) From Appendix WC - E, Page 1, Column (H).
(D) From Appendix WC - N, Column (C) / 10,000. (J) (H) x (I).
(E) (C) / (D). (K) From Appendix WC - N, Column (C) / 10,000.
(F) From Appendix WC - E, Page 1, Column (H). (L) (J) x (K).
This exhibit summarizes the estimated numbers of claims and shows the
estimated frequencies per $1,000,000 of trended payroll.
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DRAFT
Appendix WC - D
Page 4
City of Newport Beach - Workers' Compensation
Frequency and Severity Method
Reported Claim Count Development
Claims Reported
Reported Claim Trended
Accident as of Development Ultimate Claim
Year 6/30/2018 Factor Claims Frequency
(A) (B) (C) (D)
Prior 1,463 1.000 1,463 13.607
1998-1999 65 1.000 65 0.603
1999-2000 72 1.000 72 0.677
2000-2001 86 1.000 86 0.752
2001-2002 96 1.000 96 0.816
2002-2003 111 1.000 111 0.927
2003-2004 94 1.000 94 0.791
2004-2005 77 1.000 77 0.663
2005-2006 88 1.000 88 0.717
2006-2007 90 1.000 90 0.746
2007-2008 80 1.000 80 0.650
2008-2009 84 1.000 84 0.674
2009-2010 109 1.000 109 0.865
2010-2011 85 1.000 85 0.765
2011-2012 77 1.001 77 0.747
2012-2013 137 1.002 137 1.334
2013-2014 112 1.004 112 1.129
2014-2015 107 1.007 108 1.107
2015-2016 83 1.011 84 0.807
2016-2017 63 1.021 65 0.670
2017-2018 57 1.113 64 0.674
Total 3,236 3,247 1.288
Notes:
(A) Provided by the City.
(B) From Appendix WC - D, Page 6.
(C) (A) x (B).
(D) (C) / [Appendix WC - D, Page 3, (D)] x [Appendix WC - D, Page 3, (F)].
This exhibit shows the calculation of estimated ultimate claims for each year
based on reported claims as provided by the City. These numbers of
claims tend to "develop" or change from period to period as more claims are filed.
This development tends to follow quantifiable patterns over time.
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DRAFT
Appendix WC - D
Page 5
City of Newport Beach - Workers' Compensation
Frequency and Severity Method
Closed Claim Count Development
Claims Closed
Closed Claim Trended
Accident as of Development Ultimate Claim
Year 6/30/2018 Factor Claims Frequency
(A) (B) (C) (D)
Prior 1,432 1.005 1,439 13.384
1998-1999 59 1.006 59 0.547
1999-2000 67 1.007 67 0.630
2000-2001 81 1.008 82 0.717
2001-2002 84 1.009 85 0.722
2002-2003 97 1.010 98 0.819
2003-2004 79 1.011 80 0.673
2004-2005 70 1.012 71 0.611
2005-2006 78 1.013 79 0.644
2006-2007 81 1.015 82 0.680
2007-2008 76 1.018 77 0.625
2008-2009 73 1.022 75 0.602
2009-2010 98 1.027 101 0.801
2010-2011 79 1.035 82 0.738
2011-2012 69 1.056 73 0.708
2012-2013 129 1.093 141 1.373
2013-2014 90 1.135 102 1.028
2014-2015 91 1.192 108 1.107
2015-2016 45 1.287 58 0.557
2016-2017 39 1.474 57 0.587
2017-2018 26 2.358 61 0.643
Total 2,943 3,077 1.217
Notes:
(A) Provided by the City.
(B) From Appendix WC - D, Page 7.
(C) (A) x (B).
(D) (C) / [Appendix WC - D, Page 3, (D)] x [Appendix WC - D, Page 3, (F)].
This exhibit shows the calculation of estimated ultimate claims for each year
based on closed claims as provided by the City. These numbers of
closed claims tend to "develop" or change from period to period as more claims are
closed. This development tends to follow quantifiable patterns over time.
-63-
DRAFT
Appendix WC - D
Page 6
City of Newport Beach - Workers' Compensation
Reported Claim Count Development
Claims Reported as of:
Accident 12 24 36 48 60 72 84 96 108 120 132 144 156
Year Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 76 76 76 76 76 76 76 76
1998-1999 64 64 64 64 65 65 65 65 65
1999-2000 69 69 69 69 70 71 72 72 72 72
2000-2001 84 85 86 86 86 86 86 86 86 86 86
2001-2002 94 97 97 96 96 96 96 96 96 96 96 96
2002-2003 92 108 108 110 110 110 110 110 110 111 111 111 111
2003-2004 74 90 94 94 94 94 94 94 94 94 94 94 94
2004-2005 64 73 74 76 76 76 76 76 76 77 77 77 77
2005-2006 82 84 86 87 88 88 88 88 88 88 88 88 88
2006-2007 82 87 89 89 89 89 89 91 90 90 90 90
2007-2008 67 77 78 78 78 78 80 80 80 80 80
2008-2009 76 83 84 84 84 84 84 84 84 84
2009-2010 88 105 108 109 109 109 109 109 109
2010-2011 77 84 85 85 85 85 85 85
2011-2012 57 75 75 75 76 76 77
2012-2013 126 137 137 137 137 137
2013-2014 101 110 111 111 112
2014-2015 102 106 107 107
2015-2016 78 83 83
2016-2017 51 63
2017-2018 57
Reported Claim Count Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
1998-1999 1.000 1.000 1.000 1.016 1.000 1.000 1.000 1.000 1.000
1999-2000 1.000 1.000 1.000 1.014 1.014 1.014 1.000 1.000 1.000 1.000
2000-2001 1.012 1.012 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2001-2002 1.032 1.000 0.990 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2002-2003 1.174 1.000 1.019 1.000 1.000 1.000 1.000 1.000 1.009 1.000 1.000 1.000 1.000
2003-2004 1.216 1.044 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2004-2005 1.141 1.014 1.027 1.000 1.000 1.000 1.000 1.000 1.013 1.000 1.000 1.000 1.000
2005-2006 1.024 1.024 1.012 1.011 1.000 1.000 1.000 1.000 1.000 1.000 1.0001.000
2006-2007 1.061 1.023 1.000 1.000 1.000 1.000 1.022 0.989 1.000 1.000 1.000
2007-2008 1.149 1.013 1.000 1.000 1.000 1.026 1.000 1.000 1.000 1.000
2008-2009 1.092 1.012 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2009-2010 1.193 1.029 1.009 1.000 1.000 1.000 1.000 1.000
2010-2011 1.091 1.012 1.000 1.000 1.000 1.000 1.000
2011-2012 1.316 1.000 1.000 1.013 1.000 1.013
2012-2013 1.087 1.000 1.000 1.000 1.000
2013-2014 1.089 1.009 1.000 1.009
2014-2015 1.039 1.009 1.000
2015-2016 1.064 1.000
2016-2017 1.235
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
Average 1.131 1.015 1.005 1.002 1.000 1.003 1.003 1.001 1.003 1.000 1.000 1.000 1.000
Claim-Weighted
Averages
3-yr 1.091 1.007 1.000 1.006 1.000 1.004 1.000 1.000 1.000 1.000 1.000 1.000 1.000
4-yr 1.090 1.005 1.000 1.005 1.000 1.003 1.000 0.997 1.000 1.000 1.000 1.000 1.000
Comparative
Factors 1.100 1.007 1.004 1.003 1.002 1.001 1.001 1.000 1.000 1.000 1.000 1.000 1.000
Prior 1.075 1.015 1.004 1.003 1.002 1.001 1.001 1.000 1.000 1.000 1.000 1.000 1.000
Selected 1.090 1.010 1.004 1.003 1.002 1.001 1.001 1.000 1.000 1.000 1.000 1.000 1.000
Cumulated 1.113 1.021 1.011 1.007 1.004 1.002 1.001 1.000 1.000 1.000 1.000 1.000 1.000
-64-
DRAFT
Appendix WC - D
Page 7
City of Newport Beach - Workers' Compensation
Closed Claim Development
Claims Closed as of:
Accident 12 24 36 48 60 72 84 96 108 120 132 144 156
Year Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 64 66 67 69 72 75 73 72
1998-1999 46 51 51 54 56 59 58 58 57
1999-2000 49 53 55 58 60 60 60 62 63 65
2000-2001 54 65 70 73 75 76 76 80 80 82 83
2001-2002 40 51 63 77 79 82 82 84 83 84 86 89
2002-2003 15 43 62 73 91 95 91 91 92 97 97 99 97
2003-2004 16 32 48 65 69 70 70 75 82 83 87 81 79
2004-2005 14 38 48 55 62 62 65 67 66 68 69 69 69
2005-2006 15 35 46 57 63 68 73 75 77 75 75 76 78
2006-2007 28 49 59 68 71 73 78 84 82 82 83 81
2007-2008 23 44 53 56 66 71 73 74 75 75 76
2008-2009 21 39 48 64 70 68 71 72 72 73
2009-2010 31 50 78 89 97 96 96 97 98
2010-2011 31 46 58 71 70 76 78 79
2011-2012 19 47 59 64 66 68 69
2012-2013 55 97 112 119 125 129
2013-2014 49 74 82 87 90
2014-2015 54 84 88 91
2015-2016 31 41 45
2016-2017 17 39
2017-2018 26
Closed Claim Count Development Factors:
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
1997-1998 1.031 1.015 1.030 1.043 1.042 0.973 0.986 1.000
1998-1999 1.109 1.000 1.059 1.037 1.054 0.983 1.000 0.983 1.018
1999-2000 1.082 1.038 1.055 1.034 1.000 1.000 1.033 1.016 1.032 1.015
2000-2001 1.204 1.077 1.043 1.027 1.013 1.000 1.053 1.000 1.025 1.012 1.000
2001-2002 1.275 1.235 1.222 1.026 1.038 1.000 1.024 0.988 1.012 1.024 1.035 0.978
2002-2003 2.867 1.442 1.177 1.247 1.044 0.958 1.000 1.011 1.054 1.000 1.021 0.980 0.979
2003-2004 2.000 1.500 1.354 1.062 1.014 1.000 1.071 1.093 1.012 1.048 0.931 0.975 0.987
2004-2005 2.714 1.263 1.146 1.127 1.000 1.048 1.031 0.985 1.030 1.015 1.000 1.000 1.014
2005-2006 2.333 1.314 1.239 1.105 1.079 1.074 1.027 1.027 0.974 1.000 1.0131.026
2006-2007 1.750 1.204 1.153 1.044 1.028 1.068 1.077 0.976 1.000 1.012 0.976
2007-2008 1.913 1.205 1.057 1.179 1.076 1.028 1.014 1.014 1.000 1.013
2008-2009 1.857 1.231 1.333 1.094 0.971 1.044 1.014 1.000 1.014
2009-2010 1.613 1.560 1.141 1.090 0.990 1.000 1.010 1.010
2010-2011 1.484 1.261 1.224 0.986 1.086 1.026 1.013
2011-2012 2.474 1.255 1.085 1.031 1.030 1.015
2012-2013 1.764 1.155 1.063 1.050 1.032
2013-2014 1.510 1.108 1.061 1.034
2014-2015 1.556 1.048 1.034
2015-2016 1.323 1.098
2016-2017 2.294
12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 120-132 132-144 144-156 156-168
Months Months Months Months Months Months Months Months Months Months Months Months Months
Average 1.963 1.261 1.167 1.095 1.038 1.027 1.027 1.016 1.019 1.014 0.998 1.003 0.999
Claim-Weighted
Averages
3-yr 1.608 1.080 1.053 1.041 1.046 1.013 1.012 1.008 1.004 1.009 0.996 1.000 0.992
4-yr 1.576 1.105 1.059 1.029 1.031 1.019 1.013 1.000 0.997 1.010 0.978 0.994 0.988
Comparative
Factors 1.600 1.080 1.050 1.030 1.025 1.015 1.010 1.008 1.005 1.004 1.003 1.002 1.001
Prior 1.550 1.150 1.085 1.050 1.040 1.035 1.020 1.008 1.005 1.004 1.003 1.002 1.001
Selected 1.600 1.145 1.080 1.050 1.038 1.035 1.020 1.008 1.005 1.004 1.003 1.002 1.001
Cumulated 2.358 1.474 1.287 1.192 1.135 1.093 1.056 1.035 1.027 1.022 1.018 1.015 1.013
-65-
DRAFT
Appendix WC - E
Page 1
City of Newport Beach - Workers' Compensation
Loss Trend Factors
Factor to Factor to Factor to Factor to Factor to Factor to Factor to Factor to Factor to
Benefit 2018-2019 2019-2020 2020-2021 2021-2022 2018-2019 2019-2020 2020-2021 2021-2022 2018-2019
Accident Level Loss Rate Loss Rate Loss Rate Loss Rate Frequency Frequency Frequency Frequency Severity
Year Factor Level Level Level Level Level Level Level Level Level
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
Prior 1.365 1.511 1.519 1.526 1.534 0.655 0.642 0.629 0.616 2.291
1998-1999 0.965 1.063 1.069 1.074 1.079 0.668 0.655 0.642 0.629 1.581
1999-2000 0.871 0.955 0.959 0.964 0.969 0.682 0.669 0.655 0.642 1.392
2000-2001 0.819 0.893 0.897 0.902 0.906 0.696 0.682 0.668 0.655 1.277
2001-2002 0.823 0.892 0.896 0.901 0.905 0.710 0.696 0.682 0.668 1.252
2002-2003 0.868 0.936 0.941 0.945 0.950 0.725 0.710 0.696 0.682 1.287
2003-2004 1.074 1.154 1.159 1.165 1.171 0.740 0.725 0.710 0.696 1.555
2004-2005 1.387 1.482 1.490 1.497 1.505 0.755 0.740 0.724 0.710 1.958
2005-2006 1.505 1.601 1.609 1.617 1.625 0.769 0.754 0.739 0.724 2.073
2006-2007 1.425 1.509 1.516 1.524 1.532 0.785 0.770 0.754 0.739 1.915
2007-2008 1.323 1.395 1.402 1.409 1.416 0.801 0.785 0.769 0.754 1.736
2008-2009 1.235 1.296 1.302 1.309 1.315 0.817 0.801 0.785 0.769 1.581
2009-2010 1.132 1.183 1.188 1.194 1.200 0.834 0.818 0.801 0.785 1.414
2010-2011 1.093 1.136 1.142 1.147 1.153 0.851 0.834 0.817 0.801 1.332
2011-2012 1.104 1.142 1.148 1.154 1.160 0.868 0.851 0.834 0.817 1.313
2012-2013 1.113 1.146 1.152 1.158 1.163 0.886 0.869 0.851 0.834 1.291
2013-2014 1.106 1.133 1.138 1.144 1.150 0.904 0.886 0.868 0.851 1.251
2014-2015 1.072 1.093 1.098 1.104 1.109 0.922 0.904 0.886 0.868 1.183
2015-2016 1.055 1.071 1.076 1.082 1.087 0.942 0.923 0.904 0.886 1.137
2016-2017 1.030 1.040 1.046 1.051 1.056 0.961 0.942 0.922 0.904 1.083
2017-2018 1.000 1.005 1.010 1.015 1.020 0.980 0.960 0.941 0.922 1.025
2018-2019 1.000 1.000 1.005 1.010 1.015 1.000 0.980 0.960 0.941 1.000
2019-2020 1.000 -- 1.000 1.005 1.010 -- 1.000 0.980 0.960 --
2020-2021 1.000 -- -- 1.000 1.005 -- -- 1.000 0.980 --
2021-2022 1.000 -- -- -- 1.000 -- -- -- 1.000 --
Notes:
(A) Based on WCIRB.
(B) - (E) (A) adjusted for a 0.5% annual loss rate trend.
(F) - (I)(A) adjusted for a -2.0% annual frequency trend.
(J) (A) adjusted for a 2.5% annual severity trend.
This exhibit shows the calculation of the ways in which we expect claims costs to have changed over the
past twenty years due to changes in statutory workers' compensation benefit levels and changes in actual
claims costs in excess of changes in payroll. Changes in the ways in which claims are filed as a result of
greater awareness of workers' compensation benefits are not generally reflected in the statutory benefit level
factors shown above, but may be part of the reason for changes in actual claims costs in excess of payroll
changes.
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DRAFT
Appendix WC - E
Page 2
City of Newport Beach - Workers' Compensation
Residual Trend Factors
Initial
Estimate of
Ultimate Ultimate Adjusted Trended
Accident Limited Reported Limited Payroll Ultimate
Year Losses Claims BLF Severity ($00) Frequency
(A) (B) (C) (D) (E) (F)
Prior $19,797,000 1,463 1.365 18,468 704,235 20.774
1998-1999 1,543,000 65 0.965 22,915 720,071 0.903
1999-2000 1,679,000 72 0.871 20,318 725,516 0.992
2000-2001 1,592,000 86 0.819 15,168 795,551 1.081
2001-2002 2,282,000 96 0.823 19,563 835,796 1.149
2002-2003 2,247,000 111 0.868 17,565 867,867 1.279
2003-2004 2,213,000 94 1.074 25,289 879,714 1.069
2004-2005 1,519,000 77 1.387 27,355 876,940 0.878
2005-2006 2,021,000 88 1.505 34,554 943,608 0.933
2006-2007 1,760,000 90 1.425 27,860 946,755 0.951
2007-2008 1,399,000 80 1.323 23,139 986,401 0.811
2008-2009 1,861,000 84 1.235 27,362 1,018,691 0.825
2009-2010 2,643,000 109 1.132 27,457 1,051,147 1.037
2010-2011 1,950,000 85 1.093 25,076 945,360 0.899
2011-2012 1,652,000 77 1.104 23,693 895,022 0.860
2012-2013 1,782,000 137 1.113 14,481 909,694 1.506
2013-2014 1,973,000 112 1.106 19,477 896,999 1.249
2014-2015 1,636,000 108 1.072 16,236 899,746 1.200
2015-2016 3,326,000 84 1.055 41,792 980,028 0.857
2016-2017 1,721,000 65 1.030 27,278 932,821 0.697
2017-2018 1,775,000 64 1.000 27,734 930,311 0.688
Severity Trend Factors Frequency Trend Factors
Latest 10 x 2017-2018 1.003 1.007
Latest 5 x 2017-2018 1.225 0.826
Prior 1.025 0.980
Default 1.025 0.980
Selected Residual Trend 1.025 0.980
Notes:
(A) Selected average of results from Appendix WC - A and Appendix WC - B.
(B) Appendix WC - D, Page 3, Column (C).
(C) Appendix WC - E, Page 1, (A).
(D) (A) x (C) / (B).
(E) From Appendix WC - N, Column (C).
(F) (B) / (E) x 10,000.
-67-
DRAFT
Appendix WC - F
Page 1
City of Newport Beach - Workers' Compensation
Outstanding Liability for
Unallocated Loss Adjustment Expenses
as of 6/30/18
Number of Average Trended
Claims Active ULAE ULAE
During Charge Inflation Charge ULAE
Fiscal Fiscal per Active Trend per Active Paid During
Year Year Claim Factor Claim Year
(A) (B) (C) (D) (E) (F)
2018-2019 263.0 $951 1.000 $951 $250,113
2019-2020 189.1 951 1.050 999 188,911
2020-2021 139.1 951 1.103 1,049 145,916
2021-2022 100.9 951 1.158 1,101 111,091
2022-2023 71.4 951 1.216 1,156 82,538
2023-2024 53.2 951 1.277 1,214 64,585
2024-2025 38.3 951 1.341 1,275 48,833
2025-2026 28.2 951 1.408 1,339 37,760
2026-2027 22.7 951 1.478 1,406 31,916
2027-2028 16.3 951 1.552 1,476 24,059
2028-2029 11.4 951 1.630 1,550 17,670
2029-2030 8.9 951 1.712 1,628 14,489
2030-2031 6.9 951 1.798 1,710 11,799
2031-2032 5.6 951 1.888 1,795 10,052
2032-2033 3.8 951 1.982 1,885 7,163
2033-2034 2.5 951 2.081 1,979 4,948
2034-2035 1.0 951 2.185 2,078 2,078
2035-2036 0.4 951 2.294 2,182 873
(G) Total ULAE Outstanding as of 6/30/18: $1,054,794
Notes:
(A) We assume fiscal years will be 7/1 to 6/30.
(B) Based on an estimated claim closing pattern.
(C) Based on claims administration payment information
provided by the City.
(D) We assume ULAE costs will increase at 5.0% per year.
(E) (C) x (D).
(F) (B) x (E).
(G) Total of Column (F).
This exhibit shows the calculation of the outstanding ULAE based
on the expected pattern of claims closings and assumptions about
future claims administration costs per open claim.
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Appendix WC - F
Page 2
City of Newport Beach - Workers' Compensation
Outstanding Liability for
Unallocated Loss Adjustment Expenses
as of 6/30/19
Number of Average Trended
Claims Active ULAE ULAE
During Charge Inflation Charge ULAE
Fiscal Fiscal per Active Trend per Active Paid During
Year Year Claim Factor Claim Year
(A) (B) (C) (D) (E) (F)
2019-2020 234.2 $951 1.050 $999 $233,966
2020-2021 164.5 951 1.103 1,049 172,561
2021-2022 118.2 951 1.158 1,101 130,138
2022-2023 83.7 951 1.216 1,156 96,757
2023-2024 63.2 951 1.277 1,214 76,725
2024-2025 45.4 951 1.341 1,275 57,885
2025-2026 32.6 951 1.408 1,339 43,651
2026-2027 25.5 951 1.478 1,406 35,853
2027-2028 18.5 951 1.552 1,476 27,306
2028-2029 13.2 951 1.630 1,550 20,460
2029-2030 10.4 951 1.712 1,628 16,931
2030-2031 8.2 951 1.798 1,710 14,022
2031-2032 6.7 951 1.888 1,795 12,027
2032-2033 4.8 951 1.982 1,885 9,048
2033-2034 3.4 951 2.081 1,979 6,729
2034-2035 1.8 951 2.185 2,078 3,740
2035-2036 1.1 951 2.294 2,182 2,400
2036-2037 0.6 951 2.409 2,291 1,375
(G) Total ULAE Outstanding as of 6/30/19: $961,574
Notes:
(A) We assume fiscal years will be 7/1 to 6/30.
(B) Based on an estimated claim closing pattern.
(C) Based on claims administration payment information
provided by the City.
(D) We assume ULAE costs will increase at 5.0% per year.
(E) (C) x (D).
(F) (B) x (E).
(G) Total of Column (F).
This exhibit shows the calculation of the outstanding ULAE based
on the expected pattern of claims closings and assumptions about
future claims administration costs per open claim.
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DRAFT
Appendix WC - F
Page 3
City of Newport Beach - Workers' Compensation
Outstanding Liability for
Unallocated Loss Adjustment Expenses
as of 6/30/20
Number of Average Trended
Claims Active ULAE ULAE
During Charge Inflation Charge ULAE
Fiscal Fiscal per Active Trend per Active Paid During
Year Year Claim Factor Claim Year
(A) (B) (C) (D) (E) (F)
2020-2021 210.1 $951 1.103 $1,049 $220,395
2021-2022 143.9 951 1.158 1,101 158,434
2022-2023 101.3 951 1.216 1,156 117,103
2023-2024 75.7 951 1.277 1,214 91,900
2024-2025 55.6 951 1.341 1,275 70,890
2025-2026 39.9 951 1.408 1,339 53,426
2026-2027 30.0 951 1.478 1,406 42,180
2027-2028 21.4 951 1.552 1,476 31,586
2028-2029 15.5 951 1.630 1,550 24,025
2029-2030 12.3 951 1.712 1,628 20,024
2030-2031 9.8 951 1.798 1,710 16,758
2031-2032 8.0 951 1.888 1,795 14,360
2032-2033 5.9 951 1.982 1,885 11,122
2033-2034 4.4 951 2.081 1,979 8,708
2034-2035 2.7 951 2.185 2,078 5,611
2035-2036 1.9 951 2.294 2,182 4,146
2036-2037 1.3 951 2.409 2,291 2,978
2037-2038 0.6 951 2.529 2,405 1,443
(G) Total ULAE Outstanding as of 6/30/20: $895,089
Notes:
(A) We assume fiscal years will be 7/1 to 6/30.
(B) Based on an estimated claim closing pattern.
(C) Based on claims administration payment information
provided by the City.
(D) We assume ULAE costs will increase at 5.0% per year.
(E) (C) x (D).
(F) (B) x (E).
(G) Total of Column (F).
This exhibit shows the calculation of the outstanding ULAE based
on the expected pattern of claims closings and assumptions about
future claims administration costs per open claim.
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Appendix WC - G
Page 1
City of Newport Beach - Workers' Compensation
Payment and Reserve Forecast
Calendar Period
7/1/2018 7/1/2019 7/1/2020
As of to to to
Accident Year 6/30/2018 6/30/2019 6/30/2020 6/30/2021
Prior
Ultimate Loss $38,626,000 $38,626,000 $38,626,000 $38,626,000
Paid in Calendar Period - 310,807 276,834 223,102
Paid to Date 36,612,301 36,923,108 37,199,942 37,423,044
Outstanding Liability 2,013,699 1,702,892 1,426,058 1,202,956
2002-2003
Ultimate Loss $2,949,000 $2,949,000 $2,949,000 $2,949,000
Paid in Calendar Period - 74,153 65,855 41,282
Paid to Date 2,530,058 2,604,211 2,670,066 2,711,348
Outstanding Liability 418,942 344,789 278,934 237,652
2003-2004
Ultimate Loss $3,199,000 $3,199,000 $3,199,000 $3,199,000
Paid in Calendar Period - 92,208 72,379 64,279
Paid to Date 2,697,872 2,790,080 2,862,459 2,926,738
Outstanding Liability 501,128 408,920 336,541 272,262
2004-2005
Ultimate Loss $2,434,000 $2,434,000 $2,434,000 $2,434,000
Paid in Calendar Period - 36,100 61,836 48,539
Paid to Date 2,061,834 2,097,934 2,159,770 2,208,309
Outstanding Liability 372,166 336,066 274,230 225,691
2005-2006
Ultimate Loss $2,602,000 $2,602,000 $2,602,000 $2,602,000
Paid in Calendar Period - 43,443 34,804 59,617
Paid to Date 2,199,748 2,243,191 2,277,995 2,337,612
Outstanding Liability 402,252 358,809 324,005 264,388
2006-2007
Ultimate Loss $2,148,000 $2,148,000 $2,148,000 $2,148,000
Paid in Calendar Period - 37,402 34,068 27,293
Paid to Date 1,795,155 1,832,557 1,866,625 1,893,918
Outstanding Liability 352,845 315,443 281,375 254,082
2007-2008
Ultimate Loss $1,940,000 $1,940,000 $1,940,000 $1,940,000
Paid in Calendar Period - 27,061 26,106 23,780
Paid to Date 1,666,652 1,693,713 1,719,819 1,743,599
Outstanding Liability 273,348 246,287 220,181 196,401
2008-2009
Ultimate Loss $3,040,000 $3,040,000 $3,040,000 $3,040,000
Paid in Calendar Period - 70,268 68,658 66,235
Paid to Date 2,276,220 2,346,488 2,415,146 2,481,381
Outstanding Liability 763,780 693,512 624,854 558,619
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Appendix WC - G
Page 2
City of Newport Beach - Workers' Compensation
Payment and Reserve Forecast
Calendar Period
7/1/2018 7/1/2019 7/1/2020
As of to to to
Accident Year 6/30/2018 6/30/2019 6/30/2020 6/30/2021
2009-2010
Ultimate Loss $4,452,000 $4,452,000 $4,452,000 $4,452,000
Paid in Calendar Period - 95,382 85,582 83,621
Paid to Date 3,426,382 3,521,764 3,607,346 3,690,967
Outstanding Liability 1,025,618 930,236 844,654 761,033
2010-2011
Ultimate Loss $2,645,000 $2,645,000 $2,645,000 $2,645,000
Paid in Calendar Period - 60,964 49,915 44,786
Paid to Date 2,047,318 2,108,282 2,158,197 2,202,983
Outstanding Liability 597,682 536,718 486,803 442,017
2011-2012
Ultimate Loss $2,159,000 $2,159,000 $2,159,000 $2,159,000
Paid in Calendar Period - 18,390 60,650 49,658
Paid to Date 1,546,005 1,564,395 1,625,045 1,674,703
Outstanding Liability 612,995 594,605 533,955 484,297
2012-2013
Ultimate Loss $3,342,000 $3,342,000 $3,342,000 $3,342,000
Paid in Calendar Period - 133,139 31,352 103,400
Paid to Date 2,163,781 2,296,920 2,328,272 2,431,672
Outstanding Liability 1,178,219 1,045,080 1,013,728 910,328
2013-2014
Ultimate Loss $2,853,000 $2,853,000 $2,853,000 $2,853,000
Paid in Calendar Period - 147,399 113,470 26,721
Paid to Date 1,701,446 1,848,845 1,962,315 1,989,036
Outstanding Liability 1,151,554 1,004,155 890,685 863,964
2014-2015
Ultimate Loss $2,826,000 $2,826,000 $2,826,000 $2,826,000
Paid in Calendar Period - 214,567 147,469 113,524
Paid to Date 1,459,329 1,673,896 1,821,365 1,934,889
Outstanding Liability 1,366,671 1,152,104 1,004,635 891,111
2015-2016
Ultimate Loss $5,347,000 $5,347,000 $5,347,000 $5,347,000
Paid in Calendar Period - 507,921 365,751 251,376
Paid to Date 2,509,453 3,017,374 3,383,125 3,634,501
Outstanding Liability 2,837,547 2,329,626 1,963,875 1,712,499
2016-2017
Ultimate Loss $2,707,000 $2,707,000 $2,707,000 $2,707,000
Paid in Calendar Period - 394,092 283,943 204,465
Paid to Date 726,637 1,120,729 1,404,672 1,609,137
Outstanding Liability 1,980,363 1,586,271 1,302,328 1,097,863
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Appendix WC - G
Page 3
City of Newport Beach - Workers' Compensation
Payment and Reserve Forecast
Calendar Period
7/1/2018 7/1/2019 7/1/2020
As of to to to
Accident Year 6/30/2018 6/30/2019 6/30/2020 6/30/2021
2017-2018
Ultimate Loss $3,090,000 $3,090,000 $3,090,000 $3,090,000
Paid in Calendar Period - 740,687 398,517 287,131
Paid to Date 346,714 1,087,401 1,485,918 1,773,049
Outstanding Liability 2,743,286 2,002,599 1,604,082 1,316,951
2018-2019
Ultimate Loss - $3,422,000 $3,422,000 $3,422,000
Paid in Calendar Period - 585,162 765,946 412,108
Paid to Date - 585,162 1,351,108 1,763,216
Outstanding Liability - 2,836,838 2,070,892 1,658,784
2019-2020
Ultimate Loss - - $3,594,000 $3,594,000
Paid in Calendar Period - - 614,574 804,445
Paid to Date - - 614,574 1,419,019
Outstanding Liability - - 2,979,426 2,174,981
2020-2021
Ultimate Loss - - - $3,773,000
Paid in Calendar Period - - - 645,183
Paid to Date - - - 645,183
Outstanding Liability - - - 3,127,817
Totals
Ultimate Loss $86,359,000 $89,781,000 $93,375,000 $97,148,000
Paid in Calendar Period - 3,589,145 3,557,709 3,580,545
Paid to Date 67,766,905 71,356,050 74,913,759 78,494,304
Outstanding Liability 18,592,095 18,424,950 18,461,241 18,653,696
Total Outstanding ULAE 1,054,794 961,574 895,089 853,758
Outstanding Liability
plus ULAE 19,646,889 19,386,524 19,356,330 19,507,454
Notes appear on the next page.
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Appendix WC - G
Page 4
City of Newport Beach - Workers' Compensation
Payment and Reserve Forecast
Notes to previous page:
· Accident Year is associated with date of loss. Calendar Period is associated with date of
transaction. For example, for the losses which occurred during 2016-2017, $394,092 is
expected to be paid between 7/1/18 and 6/30/19, $1,120,729 will have been paid by 6/30/19,
and the reserve for remaining payments on these claims should be $1,586,271.
· Ultimate Losses for each accident year are from Exhibit WC - 4, Page 1.
· Paid in Calendar Period is a proportion of the Outstanding Liability from the
previous calendar period. These proportions are derived from the paid loss development
pattern selected in Appendix B. For example, $283,943 = $1,586,271 x 17.9%.
· Paid to Date is Paid in Calendar Period plus Paid to Date from previous
calendar period. For example, $1,404,672 = $283,943 + $1,120,729.
· Outstanding Liability is Ultimate Loss minus Paid to Date. For example,
$1,586,271 = $2,707,000 - $1,120,729.
This exhibit shows the calculation of the liability for outstanding claims as of the date of evaluation, the end of
the current fiscal year, and the end of the coming fiscal year. It also shows the expected claims payout during
the remainder of the current fiscal year and the coming fiscal year. Refer to the Totals at the end of the exhibit
for the balance sheet information. The top parts of the exhibit show information for each program year.
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Appendix WC - H
City of Newport Beach - Workers' Compensation
Short- and Long-Term Liabilities
Liabilities as of 6/30/18:Expected Discounted
Current (Short Term)Loss and ALAE: $3,003,983 $2,959,912
ULAE: 250,113 246,444
Short-Term Loss and LAE: $3,254,096 $3,206,356
Non-Current (Long Term)Loss and ALAE: $15,588,112 $12,643,643
ULAE: 804,681 638,800
Long-Term Loss and LAE: $16,392,793 $13,282,443
Total Liability Loss and ALAE: $18,592,095 $15,603,555
ULAE: 1,054,794 885,244
Total Loss and LAE: $19,646,889 $16,488,799
Liabilities as of 6/30/19:
Current (Short Term)Loss and ALAE: $2,943,135 $2,899,957
ULAE: 233,966 230,534
Short-Term Loss and LAE: $3,177,101 $3,130,491
Non-Current (Long Term)Loss and ALAE: $15,481,815 $12,562,429
ULAE: 727,608 576,428
Long-Term Loss and LAE: $16,209,423 $13,138,857
Total Liability Loss and ALAE: $18,424,950 $15,462,386
ULAE: 961,574 806,962
Total Loss and LAE: $19,386,524 $16,269,348
Discounted with a Margin for Contingencies
70% 75% 80% 85% 90%
Confidence Confidence Confidence Confidence Confidence
Liabilities as of 6/30/18:
Current (Short Term)Loss and ALAE: $3,226,304 $3,335,821 $3,463,097 $3,617,012 $3,821,246
ULAE: 268,624 277,742 288,339 301,155 318,159
Short-Term Loss and LAE: $3,494,928 $3,613,563 $3,751,436 $3,918,167 $4,139,405
Non-Current (Long Term)Loss and ALAE: $13,781,571 $14,249,385 $14,793,062 $15,450,532 $16,322,944
ULAE: 696,292 719,928 747,397 780,613 824,691
Long-Term Loss and LAE: $14,477,863 $14,969,313 $15,540,459 $16,231,145 $17,147,635
Total Liability Loss and ALAE: $17,007,875 $17,585,206 $18,256,159 $19,067,544 $20,144,190
ULAE: 964,916 997,670 1,035,736 1,081,768 1,142,850
Total Loss and LAE: $17,972,791 $18,582,876 $19,291,895 $20,149,312 $21,287,040
Liabilities as of 6/30/19:
Current (Short Term)Loss and ALAE: $3,160,953 $3,268,252 $3,392,950 $3,543,747 $3,743,844
ULAE: 251,282 259,812 269,725 281,713 297,619
Short-Term Loss and LAE: $3,412,235 $3,528,064 $3,662,675 $3,825,460 $4,041,463
Non-Current (Long Term)Loss and ALAE: $13,693,048 $14,157,857 $14,698,042 $15,351,289 $16,218,096
ULAE: 628,306 649,634 674,420 704,394 744,169
Long-Term Loss and LAE: $14,321,354 $14,807,491 $15,372,462 $16,055,683 $16,962,265
Total Liability Loss and ALAE: $16,854,001 $17,426,109 $18,090,992 $18,895,036 $19,961,940
ULAE: 879,588 909,446 944,145 986,107 1,041,788
Total Loss and LAE: $17,733,589 $18,335,555 $19,035,137 $19,881,143 $21,003,728
Note: Current (short term) liabilities are the portion of the total estimated liability shown on Appendix WC - G that is expected to be paid
out within the coming year. Totals may vary from Exhibit WC - 1, due to rounding.
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Appendix WC - I
Page 1
City of Newport Beach - Workers' Compensation
Discount Factors to be Applied to Overall Reserves
Full Value Discounted Full Value Discounted
Accident of Reserve Discount Reserve of Reserve Discount Reserve
Year at 6/30/18 Factor at 6/30/18 at 6/30/19 Factor at 6/30/19
(A) (B) (C) (D) (E) (F)
Prior $1,319,830 0.985 $1,300,467 $1,141,653 1.000 $1,141,653
1998-1999 131,911 0.961 126,717 98,142 0.985 96,702
1999-2000 163,184 0.939 153,289 136,748 0.961 131,363
2000-2001 87,005 0.920 80,054 74,128 0.939 69,633
2001-2002 311,769 0.902 281,299 252,221 0.920 232,071
2002-2003 418,942 0.885 370,960 344,789 0.902 311,092
2003-2004 501,128 0.871 436,353 408,920 0.885 362,086
2004-2005 372,166 0.856 318,730 336,066 0.871 292,626
2005-2006 402,252 0.846 340,106 358,809 0.856 307,291
2006-2007 352,845 0.835 294,738 315,443 0.846 266,709
2007-2008 273,348 0.825 225,543 246,287 0.835 205,728
2008-2009 763,780 0.815 622,793 693,512 0.825 572,227
2009-2010 1,025,618 0.807 827,645 930,236 0.815 758,523
2010-2011 597,682 0.801 478,738 536,718 0.807 433,116
2011-2012 612,995 0.799 489,641 594,605 0.801 476,273
2012-2013 1,178,219 0.797 939,121 1,045,080 0.799 834,777
2013-2014 1,151,554 0.799 919,538 1,004,155 0.797 800,380
2014-2015 1,366,671 0.806 1,101,236 1,152,104 0.799 919,977
2015-2016 2,837,547 0.817 2,317,042 2,329,626 0.806 1,877,166
2016-2017 1,980,363 0.829 1,641,909 1,586,271 0.817 1,295,294
2017-2018 2,743,286 0.852 2,337,636 2,002,599 0.829 1,660,344
2018-2019 0 - - 2,836,838 0.852 2,417,355
Totals $18,592,095 $15,603,555 $18,424,950 $15,462,386
(G) Discount Factor at 6/30/18 for Overall Reserve: 0.839
(H) Discount Factor at 6/30/19 for Overall Reserve: 0.839
Notes:
(A) From Appendix WC - G, Outstanding Liability at 6/30/18.
(B) Based on Appendix WC - I, Page 2, Column (E).
(C) (A) x (B).
(D) From Appendix WC - G, Outstanding Liability at 6/30/19.
(E) Based on Appendix WC - I, Page 2, Column (E).
(F) (D) x (E).
(G) Total of (C) / Total of (A).
(H) Total of (F) / Total of (D).
This exhibit shows the expected impact of anticipated investment income on the liability for
outstanding claims at the date of evaluation and the end of the current fiscal year. For
example, if the discount factor in item (G) is 0.839, the discounted liability for outstanding
claims is 83.9% of the full value.
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Appendix WC - I
Page 2
City of Newport Beach - Workers' Compensation
Calculation of Discount Factors
Payment Payment Return on Discounted Undiscounted Discount
Year Pattern Investment Reserves Reserves Factor
(A) (B) (C) (D) (E) (F)
22 6.9% 3.0% 0.068 0.069 0.985
21 1.1% 3.0% 0.077 0.080 0.961
20 1.2% 3.0% 0.086 0.092 0.939
19 1.1% 3.0% 0.095 0.103 0.920
18 1.1% 3.0% 0.103 0.114 0.902
17 1.1% 3.0% 0.111 0.125 0.885
16 1.2% 3.0% 0.119 0.137 0.871
15 1.2% 3.0% 0.128 0.149 0.856
14 1.5% 3.0% 0.139 0.164 0.846
13 1.6% 3.0% 0.150 0.180 0.835
12 1.6% 3.0% 0.161 0.195 0.825
11 1.6% 3.0% 0.173 0.212 0.815
10 1.8% 3.0% 0.186 0.230 0.807
9 2.2% 3.0% 0.202 0.252 0.801
8 2.9% 3.0% 0.224 0.281 0.799
7 3.2% 3.0% 0.249 0.313 0.797
6 4.1% 3.0% 0.283 0.354 0.799
5 6.0% 3.0% 0.334 0.414 0.806
4 8.4% 3.0% 0.407 0.498 0.817
3 11.6% 3.0% 0.509 0.614 0.829
2 21.8% 3.0% 0.709 0.832 0.852
1 16.8% 3.0% 0.854 1.000 0.854
(G) Discount Factor for Future Funding: 2018-2019 0.867
2019-2020 0.867
2020-2021 0.867
Notes:
(A) This is the year of payment relative to the accident year. For example, year 7
refers to payments made in the seventh year after the inception of the accident
year. We assume that payments are made at midyear.
(B) Percent of ultimate loss paid this year. This payment pattern is based on the paid
loss development pattern selected in Appendix WC - B, Page 2.
(C) Assumed Investment Income Rates.
(D) Discounted Reserves at the beginning of this year is next year's Discounted Reserves
discounted one year plus this year's payments discounted six months. For
example, in year 2, 70.9% = [50.9% / 1.030] + [21.8% / (1.015)].
(E) Summation of future (B) values. This is the percent of ultimate loss unpaid at the
beginning of the year.
(F) (D) / (E).
(G) (F) at year 1, with interest accumulated for six months. We assume that the
required funding is deposited at the middle of the first year.
This exhibit shows the calculation of the effect of anticipated investment income on future
claims costs. Thus, if the discount factor in item (F) is 0.87, on a discounted basis, $0.87
must be budgeted for every $1 that will actually be paid on claims that will be incurred in
the next fiscal year.
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Appendix WC - J
City of Newport Beach - Workers' Compensation
Confidence Level Table
Probability Projected Losses Outstanding Losses
95% 1.712 1.403
90% 1.511 1.291
85% 1.386 1.222
80% 1.294 1.170
75% 1.218 1.127
70% 1.153 1.090
65% 1.096 1.057
60% 1.043 1.027
55% 0.994 0.999
50% 0.947 0.973
45% 0.902 0.947
40% 0.858 0.922
35% 0.814 0.896
30% 0.769 0.870
25% 0.723 0.843
To read table: For the above retention, there is a 90% chance
that final loss settlements will be less than
1.511 times the average expected amount of losses.
This exhibit shows the loads that must be applied to bring estimated losses
at the expected level to the various indicated confidence levels.
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Appendix WC - K
City of Newport Beach - Workers' Compensation
Program History
Policy Policy Self-Insured Retention
Year Year Policy Per
Start Date End Date Year Occurrence Aggregate
7/1/1972 6/30/1998 Prior $300,000 (none)
7/1/1998 6/30/1999 1998-1999 275,000 (none)
7/1/1999 6/30/2000 1999-2000 275,000 (none)
7/1/2000 6/30/2001 2000-2001 275,000 (none)
7/1/2001 6/30/2002 2001-2002 350,000 (none)
7/1/2002 6/30/2003 2002-2003 500,000 25,000,000
7/1/2003 6/30/2004 2003-2004 1,000,000 100,000,000
7/1/2004 6/30/2005 2004-2005 1,000,000 100,000,000
7/1/2005 6/30/2006 2005-2006 1,000,000 (none)
7/1/2006 6/30/2007 2006-2007 1,000,000 (none)
7/1/2007 6/30/2008 2007-2008 1,000,000 (none)
7/1/2008 6/30/2009 2008-2009 1,000,000 (none)
7/1/2009 6/30/2010 2009-2010 1,000,000 (none)
7/1/2010 6/30/2011 2010-2011 1,000,000 (none)
7/1/2011 6/30/2012 2011-2012 500,000 (none)
7/1/2012 6/30/2013 2012-2013 500,000 (none)
7/1/2013 6/30/2014 2013-2014 500,000 (none)
7/1/2014 6/30/2015 2014-2015 500,000 (none)
7/1/2015 6/30/2016 2015-2016 500,000 (none)
7/1/2016 6/30/2017 2016-2017 500,000 (none)
7/1/2017 6/30/2018 2017-2018 500,000 (none)
7/1/2018 6/30/2019 2018-2019 500,000 (none)
7/1/2019 6/30/2020 2019-2020 500,000 (none)
Third Party
Claims Begin End
Administrator Date Date
Carl Warren 7/1/1999 Current
This exhibit summarizes some of the key facts about the history of the program.
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DRAFT
Appendix WC - L
City of Newport Beach - Workers' Compensation
Estimated Total Assets as of 6/30/19
(A) Total Assets as of 6/30/18:$15,547,000
(B) Total Income to Fund during 2018-2019
Contributions: $3,754,000
Interest: 97,000
Other: 0
Total Income: $3,851,000
(C) Total Payments from Fund during 2018-2019
Loss and ALAE: $3,589,000
Additional Allocated Loss Adjustment Expense: 0
In-House Unallocated Loss Adjustment Expense: 0
Fees to Outside Administrator (TPA): 310,000
Excess Insurance: 530,000
Other: 15,000
Total Payments: $4,444,000
(D) Estimated Total Assets as of 6/30/19:$14,954,000
Notes:
(A) Provided by the City.
(B) Provided by the City.
(C)Provided by the City. Loss and ALAE paid is estimated in Appendix WC - G.
(D) (A) + (B) - (C).
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DRAFT
Appendix WC - M
Page 1
City of Newport Beach - Workers' Compensation
Incurred Losses as of 6/30/18
Incurred
Additions Subtractions Incurred Incurred Incurred Incurred Capped at
Accident Unlimited to from Adjusted Incurred Over Capped at $100,000 Capped at SIR &
Year Incurred Losses Losses Incurred Over SIR $100,000 $100,000 to SIR Layer SIR Aggregate
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior $29,241,522 $0 $87,269 $29,154,253 $586,751 $9,413,302 $19,740,952 $8,826,551 $28,567,502 $28,567,502
1998-1999 2,687,772 0 0 2,687,772 501,110 1,156,614 1,531,158 655,504 2,186,662 2,186,662
1999-2000 2,840,447 0 21,358 2,819,089 465,776 1,156,914 1,662,176 691,138 2,353,313 2,353,313
2000-2001 2,205,837 0 39,042 2,166,795 170,149 593,631 1,573,164 423,483 1,996,646 1,996,646
2001-2002 3,338,863 0 49,147 3,289,717 82,501 1,041,017 2,248,700 958,515 3,207,215 3,207,215
2002-2003 2,879,276 0 18,700 2,860,576 0 652,938 2,207,638 652,938 2,860,576 2,860,576
2003-2004 3,072,358 0 5,333 3,067,025 0 899,715 2,167,310 899,715 3,067,025 3,067,025
2004-2005 2,410,311 0 100,729 2,309,582 0 825,891 1,483,691 825,891 2,309,582 2,309,582
2005-2006 2,438,410 0 179 2,438,230 0 471,884 1,966,347 471,884 2,438,230 2,438,230
2006-2007 1,987,447 0 599 1,986,849 0 283,038 1,703,811 283,038 1,986,849 1,986,849
2007-2008 1,791,163 0 26,350 1,764,813 0 417,296 1,347,516 417,296 1,764,813 1,764,813
2008-2009 2,872,287 0 261 2,872,026 0 1,089,901 1,782,126 1,089,901 2,872,026 2,872,026
2009-2010 3,962,137 0 72,572 3,889,565 0 1,362,883 2,526,682 1,362,883 3,889,565 3,889,565
2010-2011 2,282,944 0 63,901 2,219,042 0 377,793 1,841,249 377,793 2,219,042 2,219,042
2011-2012 1,846,985 0 9,425 1,837,560 0 292,656 1,544,905 292,656 1,837,560 1,837,560
2012-2013 2,846,947 0 11,805 2,835,142 0 1,188,178 1,646,964 1,188,178 2,835,142 2,835,142
2013-2014 2,468,694 0 10,260 2,458,435 0 626,909 1,831,526 626,909 2,458,435 2,458,435
2014-2015 2,170,755 0 8,123 2,162,632 0 666,367 1,496,265 666,367 2,162,632 2,162,632
2015-2016 4,469,929 0 3,286 4,466,643 0 1,500,655 2,965,988 1,500,655 4,466,643 4,466,643
2016-2017 1,514,437 0 0 1,514,437 0 99,107 1,415,330 99,107 1,514,437 1,514,437
2017-2018 1,065,839 0 512 1,065,327 0 0 1,065,327 0 1,065,327 1,065,327
2018-2019 0 0 0 0 0 0 0 0 0 0
Total $80,394,361 $0 $528,851 $79,865,510 $1,806,287 $24,116,688 $55,748,822 $22,310,401 $78,059,224 $78,059,224
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City.
(C) No adjustments were made.
(D) Subrogation recoveries.
(E) (B) + (C) - (D).
(F) Sum of incurred losses in excess of SIR.
(G) Sum of incurred losses in excess of $100,000.
(H) (E) - (G).
(I) (G) - (F).
(J) (E) - (F).
(K) Minimum of (J) and the aggregate stop loss. See Appendix WC - K.
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Appendix WC - M
Page 2
City of Newport Beach - Workers' Compensation
Paid Losses as of 6/30/18
Paid
Additions Subtractions Paid Paid Paid Paid Capped at
Accident Unlimited to from Adjusted Paid Over Capped at $100,000 Capped at SIR &
Year Paid Losses Losses Paid Over SIR $100,000 $100,000 to SIR Layer SIR Aggregate
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior $28,084,889 $0 $87,269 $27,997,620 $586,450 $8,639,346 $19,358,273 $8,052,896 $27,411,170 $27,411,170
1998-1999 2,526,472 0 0 2,526,472 452,383 1,082,569 1,443,903 630,186 2,074,089 2,074,089
1999-2000 2,627,775 0 21,358 2,606,417 387,601 1,064,251 1,542,166 676,650 2,218,816 2,218,816
2000-2001 2,099,316 0 39,042 2,060,274 118,279 541,761 1,518,513 423,483 1,941,995 1,941,995
2001-2002 3,063,048 0 49,147 3,013,902 47,670 964,176 2,049,726 916,506 2,966,231 2,966,231
2002-2003 2,548,758 0 18,700 2,530,058 0 551,144 1,978,914 551,144 2,530,058 2,530,058
2003-2004 2,703,205 0 5,333 2,697,872 0 861,569 1,836,303 861,569 2,697,872 2,697,872
2004-2005 2,162,563 0 100,729 2,061,834 0 634,019 1,427,815 634,019 2,061,834 2,061,834
2005-2006 2,199,928 0 179 2,199,748 0 365,063 1,834,685 365,063 2,199,748 2,199,748
2006-2007 1,795,754 0 599 1,795,155 0 220,101 1,575,053 220,101 1,795,155 1,795,155
2007-2008 1,693,002 0 26,350 1,666,652 0 417,296 1,249,355 417,296 1,666,652 1,666,652
2008-2009 2,276,481 0 261 2,276,220 0 653,387 1,622,833 653,387 2,276,220 2,276,220
2009-2010 3,498,954 0 72,572 3,426,382 0 1,023,218 2,403,164 1,023,218 3,426,382 3,426,382
2010-2011 2,111,219 0 63,901 2,047,318 0 356,448 1,690,870 356,448 2,047,318 2,047,318
2011-2012 1,555,429 0 9,425 1,546,005 0 193,330 1,352,675 193,330 1,546,005 1,546,005
2012-2013 2,175,586 0 11,805 2,163,781 0 602,656 1,561,125 602,656 2,163,781 2,163,781
2013-2014 1,711,706 0 10,260 1,701,446 0 207,653 1,493,793 207,653 1,701,446 1,701,446
2014-2015 1,467,452 0 8,123 1,459,329 0 335,451 1,123,879 335,451 1,459,329 1,459,329
2015-2016 2,512,739 0 3,286 2,509,453 0 528,219 1,981,233 528,219 2,509,453 2,509,453
2016-2017 726,637 0 0 726,637 0 0 726,637 0 726,637 726,637
2017-2018 347,226 0 512 346,714 0 0 346,714 0 346,714 346,714
2018-2019 0 0 0 0 0 0 0 0 0 0
Total $69,888,139 $0 $528,851 $69,359,288 $1,592,382 $19,241,658 $50,117,630 $17,649,276 $67,766,905 $67,766,905
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City.
(C) No adjustments were made.
(D) Subrogation recoveries.
(E) (B) + (C) - (D).
(F) Sum of paid losses in excess of SIR.
(G) Sum of paid losses in excess of $100,000.
(H) (E) - (G).
(I) (G) - (F).
(J) (E) - (F).
(K) Minimum of (J) and the aggregate stop loss. See Appendix WC - K.
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Appendix WC - M
Page 3
City of Newport Beach - Workers' Compensation
Case Reserves as of 6/30/18
Reserves
Additions Subtractions Reserves Reserves Reserves Reserves Capped at
Accident Unlimited to from Adjusted Reserves Over Capped at $100,000 Capped at SIR &
Year Reserves Losses Losses Reserves Over SIR $100,000 $100,000 to SIR Layer SIR Aggregate
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior $1,156,633 $0 $0 $1,156,633 $301 $773,955 $382,678 $773,654 $1,156,332 $1,156,332
1998-1999 161,300 0 0 161,300 48,727 74,045 87,255 25,317 112,572 112,572
1999-2000 212,673 0 0 212,673 78,175 92,663 120,010 14,487 134,497 134,497
2000-2001 106,521 0 0 106,521 51,870 51,870 54,651 0 54,651 54,651
2001-2002 275,815 0 0 275,815 34,831 76,841 198,974 42,010 240,984 240,984
2002-2003 330,519 0 0 330,519 0 101,795 228,724 101,795 330,519 330,519
2003-2004 369,152 0 0 369,152 0 38,146 331,007 38,146 369,152 369,152
2004-2005 247,748 0 0 247,748 0 191,872 55,875 191,872 247,748 247,748
2005-2006 238,482 0 0 238,482 0 106,820 131,662 106,820 238,482 238,482
2006-2007 191,694 0 0 191,694 0 62,936 128,758 62,936 191,694 191,694
2007-2008 98,161 0 0 98,161 0 0 98,161 0 98,161 98,161
2008-2009 595,806 0 0 595,806 0 436,514 159,292 436,514 595,806 595,806
2009-2010 463,183 0 0 463,183 0 339,664 123,519 339,664 463,183 463,183
2010-2011 171,724 0 0 171,724 0 21,346 150,379 21,346 171,724 171,724
2011-2012 291,556 0 0 291,556 0 99,326 192,230 99,326 291,556 291,556
2012-2013 671,361 0 0 671,361 0 585,522 85,838 585,522 671,361 671,361
2013-2014 756,989 0 0 756,989 0 419,256 337,733 419,256 756,989 756,989
2014-2015 703,303 0 0 703,303 0 330,917 372,386 330,917 703,303 703,303
2015-2016 1,957,191 0 0 1,957,191 0 972,436 984,754 972,436 1,957,191 1,957,191
2016-2017 787,800 0 0 787,800 0 99,107 688,693 99,107 787,800 787,800
2017-2018 718,613 0 0 718,613 0 0 718,613 0 718,613 718,613
2018-2019 0 0 0 0 0 0 0 0 0 0
Total $10,506,223 $0 $0 $10,506,223 $213,905 $4,875,030 $5,631,192 $4,661,126 $10,292,318 $10,292,318
Notes:
(A) Years are 7/1 to 6/30.
(B) Appendix WC - M, Page 1, Column (B) - Appendix WC - M, Page 2, Column (B).
(C) Appendix WC - M, Page 1, Column (C) - Appendix WC - M, Page 2, Column (C).
(D) Appendix WC - M, Page 1, Column (D) - Appendix WC - M, Page 2, Column (D).
(E) (B) + (C) - (D).
(F) Sum of case reserves in excess of SIR.
(G) Sum of case reserves in excess of $100,000.
(H) (E) - (G).
(I) (G) - (F).
(J) (E) - (F).
(K) Minimum of (J) and the aggregate stop loss. See Appendix WC - K.
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Appendix WC - M
Page 4
City of Newport Beach - Workers' Compensation
Claim Counts as of 6/30/18
Additions Subtractions Additions Subtractions
to from Adjusted to from Adjusted Adjusted
Accident Reported Reported Reported Reported Closed Closed Closed Closed Open Open
Year Claims Claims Claims Claims Claims Claims Claims Claims Claims Claims
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Prior 1,463 0 0 1,463 1,432 0 0 1,432 31 31
1998-1999 65 0 0 65 59 0 0 59 6 6
1999-2000 72 0 0 72 67 0 0 67 5 5
2000-2001 86 0 0 86 81 0 0 81 5 5
2001-2002 96 0 0 96 84 0 0 84 12 12
2002-2003 111 0 0 111 97 0 0 97 14 14
2003-2004 94 0 0 94 79 0 0 79 15 15
2004-2005 77 0 0 77 70 0 0 70 7 7
2005-2006 88 0 0 88 78 0 0 78 10 10
2006-2007 90 0 0 90 81 0 0 81 9 9
2007-2008 80 0 0 80 76 0 0 76 4 4
2008-2009 84 0 0 84 73 0 0 73 11 11
2009-2010 109 0 0 109 98 0 0 98 11 11
2010-2011 85 0 0 85 79 0 0 79 6 6
2011-2012 77 0 0 77 69 0 0 69 8 8
2012-2013 137 0 0 137 129 0 0 129 8 8
2013-2014 112 0 0 112 90 0 0 90 22 22
2014-2015 107 0 0 107 91 0 0 91 16 16
2015-2016 83 0 0 83 45 0 0 45 38 38
2016-2017 63 0 0 63 39 0 0 39 24 24
2017-2018 57 0 0 57 26 0 0 26 31 31
2018-2019 0 0 0 0 0 0 0 0 0 0
Total 3,236 0 0 3,236 2,943 0 0 2,943 293 293
Notes:
(A) Years are 7/1 to 6/30.
(B) Provided by the City.
(C) No adjustments were made.
(D) No adjustments were made.
(E) (B) + (C) - (D).
(F) Provided by the City.
(G) No adjustments were made.
(H) No adjustments were made.
(I) (F) + (G) - (H).
(J) (B) - (F).
(K) (E) - (I).
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DRAFT
Appendix WC - N
City of Newport Beach - Workers' Compensation
Exposure Measures
Total Inflation Trended
Accident Payroll Trend Payroll
Year ($00) Factor ($00)
(A) (B) (C)
Prior 419,437 1.679 704,235
1998-1999 439,604 1.638 720,071
1999-2000 454,015 1.598 725,516
2000-2001 510,296 1.559 795,551
2001-2002 549,504 1.521 835,796
2002-2003 584,816 1.484 867,867
2003-2004 607,537 1.448 879,714
2004-2005 620,623 1.413 876,940
2005-2006 684,270 1.379 943,608
2006-2007 703,907 1.345 946,755
2007-2008 751,830 1.312 986,401
2008-2009 795,852 1.280 1,018,691
2009-2010 841,591 1.249 1,051,147
2010-2011 775,521 1.219 945,360
2011-2012 752,752 1.189 895,022
2012-2013 784,219 1.160 909,694
2013-2014 792,402 1.132 896,999
2014-2015 814,987 1.104 899,746
2015-2016 909,961 1.077 980,028
2016-2017 887,556 1.051 932,821
2017-2018 907,620 1.025 930,311
2018-2019 933,104 1.000 933,104
2019-2020 965,762 1.000 965,762
2020-2021 999,564 1.000 999,564
Notes:
(A) Provided by the City.
(B) Based on WCIRB.
(C) (A) x (B).
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10/18/2018
1
Discussion of Actuarial Analyses as
of June 30, 2018
City of Newport Beach
October 18, 2018
Eric Small, Sr. Actuarial Analyst
Nina Gau, FCAS, MAAA, Director, P&C Actuarial Services
1
An Actuary? What is it?
A. An Actuary is a place where they bury
dead Actors
B. An Actuary is someone who wanted to
be an Accountant, but didn’t have a
personality for it
C. An Actuary is someone who tells you
about a problem you never thought
you had, in a way that you can’t
understand.
INTRODUCTION
22
WORKERS’ COMPENSATION PROGRAM
33
Item No. 5A1
Status of Insurance Reserve (General Liability and Workers' Compensation) Fund
Presentation
October 18, 2018
10/18/2018
2
Background Information
The City of Newport Beach has began its self‐
insured workers’ compensation program in 1980
Current SIR is $500,000
Current report is based on data evaluated as of
6/30/2018
Previous report was dated 8/31/2017 and based
on data evaluated as of 6/30/2017
44
Actual vs. Expected Analysis
Expectation Reality
55
Incurred Loss Development
Actual vs. Expected Comparison
Incurred losses have developed lower than expected.
Most accident years have developed favorably.
Accident Incurred
Year Expected Actual A-E
Prior $45,000 $67,000 $22,0001998-1999 6,000 17,000 11,000
1999-2000 9,000 (3,000) (12,000)2000-2001 10,000 1,000 (9,000)
2001-2002 26,000 (67,000) (93,000)2002-2003 28,000 (29,000) (57,000)
2003-2004 42,000 (68,000) (110,000)2004-2005 30,000 (114,000) (144,000)
2005-2006 31,000 (100,000) (131,000)2006-2007 32,000 (40,000) (72,000)2007-2008 40,000 11,000 (29,000)
2008-2009 45,000 (86,000) (131,000)2009-2010 96,000 (60,000) (156,000)
2010-2011 72,000 (120,000) (192,000)2011-2012 19,000 67,000 48,000
2012-2013 72,000 (12,000) (84,000)2013-2014 63,000 66,000 3,0002014-2015 127,000 102,000 (25,000)
2015-2016 334,000 596,000 262,0002016-2017 509,000 245,000 (264,000)
2017-2018 1,429,000 1,065,000 (364,000)
Total $3,065,000 $1,538,000 ($1,527,000)
66
10/18/2018
3
Actual payments were also lower than expected.
Paid Loss Development
Actual vs. Expected Comparison
Accident Paid
Year Expected Actual A-E
Prior $283,000 $632,000 $349,0001998-1999 16,000 23,000 7,000
1999-2000 25,000 21,000 (4,000)2000-2001 12,000 2,000 (10,000)
2001-2002 78,000 24,000 (54,000)2002-2003 85,000 15,000 (70,000)
2003-2004 111,000 17,000 (94,000)2004-2005 64,000 57,000 (7,000)
2005-2006 58,000 16,000 (42,000)
2006-2007 42,000 (6,000) (48,000)2007-2008 30,000 11,000 (19,000)
2008-2009 99,000 66,000 (33,000)2009-2010 135,000 78,000 (57,000)
2010-2011 96,000 28,000 (68,000)2011-2012 20,000 73,000 53,0002012-2013 177,000 174,000 (3,000)2013-2014 197,000 154,000 (43,000)2014-2015 265,000 117,000 (148,000)
2015-2016 684,000 831,000 147,0002016-2017 684,000 337,000 (347,000)
2017-2018 604,000 347,000 (257,000)
Total $3,765,000 $3,017,000 ($748,000)
77
How it Impacts Our Estimated
Ultimate Losses?
As a result, we have decreased our estimates of ultimate
losses.
Accident Prior Current
Year Ultimate Ultimate Change
Prior $28,704,000 $28,731,000 $27,0001998-1999 2,195,000 2,206,000 11,0001999-2000 2,394,000 2,382,000 (12,000)2000-2001 2,037,000 2,029,000 (8,000)2001-2002 3,369,000 3,278,000 (91,000)
2002-2003 3,003,000 2,949,000 (54,000)2003-2004 3,302,000 3,199,000 (103,000)
2004-2005 2,583,000 2,434,000 (149,000)2005-2006 2,738,000 2,602,000 (136,000)
2006-2007 2,213,000 2,148,000 (65,000)2007-2008 1,990,000 1,940,000 (50,000)2008-2009 3,248,000 3,040,000 (208,000)2009-2010 4,554,000 4,452,000 (102,000)2010-2011 2,828,000 2,645,000 (183,000)
2011-2012 2,128,000 2,159,000 31,0002012-2013 3,362,000 3,342,000 (20,000)
2013-2014 2,869,000 2,853,000 (16,000)2014-2015 2,840,000 2,826,000 (14,000)2015-2016 5,206,000 5,347,000 141,0002016-2017 2,842,000 2,707,000 (135,000)2017-2018 3,452,000 3,090,000 (362,000)
Total $87,857,000 $86,359,000 ($1,498,000)
88
Estimated Changes in O/S Liability
Compared to Prior Study
The lower than expected
incurred losses leads to the decrease in total liabilities.
Previous Current
Report Report
30-Jun-17 30-Jun-18 Change
Case $11,770,000 $10,292,000 ($1,478,000)
IBNR 7,884,000 8,300,000 416,000
ULAE 1,026,000 1,055,000 29,000
Total Reserves 20,680,000 $19,647,000 ($1,033,000)
Inv Inc (3,250,000) (3,158,000) 92,000
Total OS $17,430,000 $16,489,000 ($941,000)
99
10/18/2018
4
Program Trends –Loss Costs – Limited to
$100K
2.34
3.14
2.51
2.19 2.27 2.49
2.01
3.56
1.93 2.05
2.35
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
0
8
-
0
9
0
9
-
1
0
1
0
-
1
1
1
1
-
1
2
1
2
-
1
3
1
3
-
1
4
1
4
-
1
5
1
5
-
1
6
1
6
-
1
7
1
7
-
1
8
1
8
-
1
9
Program Year
1010
Program Trends – Claims Severity – Limited
to $100K
22,20024,20022,90021,500
13,000
17,600
15,200
38,600
26,300
29,10026,900
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
0
8
-
0
9
0
9
-
1
0
1
0
-
1
1
1
1
-
1
2
1
2
-
1
3
1
3
-
1
4
1
4
-
1
5
1
5
-
1
6
1
6
-
1
7
1
7
-
1
8
1
8
-
1
9
Program Year
1111
Program Trends – Claims Frequency
1.06
1.30
1.10 1.02
1.75
1.41 1.33
0.92
0.73 0.71
0.88
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
0
8
-
0
9
0
9
-
1
0
1
0
-
1
1
1
1
-
1
2
1
2
-
1
3
1
3
-
1
4
1
4
-
1
5
1
5
-
1
6
1
6
-
1
7
1
7
-
1
8
1
8
-
1
9
Program Year
1212
10/18/2018
5
Calculation of Projected Loss and LAE
Program Year: 2018-2019 2019-2020 2020-2021
Selected $100K Rate: $2.350 $2.350 $2.350
Factor to SIR: 1.561 1.576 1.591
Trend Factor: 1.000 1.005 1.010
Program Rate: $3.667 $3.721 $3.775
Payroll ($00's) 933,104 965,762 999,564
Projected Program Loss & ALAE: $3,422,000 $3,594,000 $3,773,000
Projected ULAE: 227,000 242,000 258,000
Projected Loss & LAE: $3,649,000 $3,836,000 $4,031,000
1313
Comparison of Funding Requirements
2018-2019 2019-2020
SIR $500,000 $500,000 Change
Loss and ALAE $3,625,000 $3,594,000 ($31,000)
ULAE 276,000 242,000 (34,000)
Total Claims $3,901,000 $3,836,000 ($65,000)
Inv Inc (517,000) (512,000) 5,000
Total Funding $3,384,000 $3,324,000 ($60,000)
Loss Rate $3.59 $3.44 ($0.15)
1414
Comments
Losses have developed favorably
Average case reserves per open claim have
decreased by 11%, while number of open claims
have decreased by 1.7%.
Overall, there is a 5.4% decrease in the
outstanding liabilities as of June 30, 2018 from
June 30, 2017 estimate.
Loss and LAE funding for 2019‐20 is 1.8% lower
than funding for 2018‐19 (calculated in prior
study).
1515
10/18/2018
6
No Falling Asleep!
This is fun stuff..
16
GENERAL LIABILITY PROGRAM
1717
Background Information
The City of Newport Beach has been self‐insuring
its liability program for many years
Until 1994‐95 the City had no reinsurance
protection
Current SIR is $500,000
Current report is based on data evaluated as of
6/30/2018
Previous report was dated 8/31/2017 and based
on data evaluated as of 6/30/2017
1818
10/18/2018
7
Actual vs. Expected Analysis
Expectation Reality
1919
Incurred Loss Development
Actual vs. Expected Comparison
Incurred losses have
developed higher than expected, primarily due
to adverse loss emergence on 2009-10 and 2017-18 accident years
Accident Incurred
Year Expected Actual A-E
Prior $0 $0 $0
2009-2010 3,000 295,000 292,000
2010-2011 0 0 0
2011-2012 12,000 0 (12,000)
2012-2013 20,000 50,000 30,000
2013-2014 41,000 0 (41,000)
2014-2015 100,000 138,000 38,000
2015-2016 296,000 351,000 55,000
2016-2017 540,000 351,000 (189,000)
2017-2018 998,000 1,193,000 195,000
Total $2,010,000 $2,378,000 $368,000
2020
Actual payments were lower than expected.
Paid Loss Development
Actual vs. Expected Comparison
Accident Paid
Year Expected Actual A-E
Prior $0 $0 $0
2009-2010 22,000 99,000 77,000
2010-2011 0 0 0
2011-2012 105,000 206,000 101,000
2012-2013 75,000 9,000 (66,000)
2013-2014 166,000 21,000 (145,000)
2014-2015 394,000 268,000 (126,000)
2015-2016 618,000 708,000 90,000
2016-2017 480,000 570,000 90,000
2017-2018 227,000 137,000 (90,000)
Total $2,087,000 $2,018,000 ($69,000)
2121
10/18/2018
8
How it Impacts Our Estimated
Ultimate Losses?
As a result, we have increased our estimates of ultimate
losses.
Accident Prior Current
Year Ultimate Ultimate Change
Prior $6,994,000 $6,994,000 $01998-1999 770,000 770,000 01999-2000 614,000 614,000 0
2000-2001 646,000 646,000 0
2001-2002 1,597,000 1,597,000 02002-2003 1,098,000 1,098,000 02003-2004 951,000 951,000 0
2004-2005 884,000 884,000 0
2005-2006 306,000 306,000 02006-2007 1,790,000 1,790,000 02007-2008 500,000 500,000 0
2008-2009 1,070,000 1,070,000 0
2009-2010 1,465,000 1,758,000 293,0002010-2011 2,487,000 2,487,000 02011-2012 2,006,000 1,988,000 (18,000)
2012-2013 1,912,000 1,934,000 22,000
2013-2014 1,785,000 1,730,000 (55,000)2014-2015 1,838,000 1,893,000 55,0002015-2016 2,261,000 2,403,000 142,000
2016-2017 2,424,000 2,308,000 (116,000)
2017-2018 2,184,000 2,440,000 256,000
Total $35,582,000 $36,161,000 $579,000
2222
Estimated Changes in O/S Liability
Compared to Prior Study
Higher than expected incurred losses, coupled with lower payments leads to an increase in outstanding liabilities.
Previous Current
Report Report
30-Jun-17 30-Jun-18 Change
Case $3,153,000 $3,509,000 $356,000
IBNR 1,957,000 2,344,000 387,000
ULAE 203,000 164,000 (39,000)
Total Reserves 5,313,000 $6,017,000 $704,000
Inv Inc (281,000) (310,000) (29,000)
Total OS $5,032,000 $5,707,000 $675,000
2323
Program Trends –Loss Costs – Limited to
$100K
0.84
1.20
1.30
0.97
1.38
1.11 1.05
1.19
1.33
1.14
1.23
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
0
8
-
0
9
0
9
-
1
0
1
0
-
1
1
1
1
-
1
2
1
2
-
1
3
1
3
-
1
4
1
4
-
1
5
1
5
-
1
6
1
6
-
1
7
1
7
-
1
8
1
8
-
1
9
Program Year
2424
10/18/2018
9
Program Trends – Claims Severity – Limited
to $100K
6,500
7,700
9,500
7,900
11,300
8,200 8,400
10,500
9,300
10,30010,700
0
2,000
4,000
6,000
8,000
10,000
12,000
0
8
-
0
9
0
9
-
1
0
1
0
-
1
1
1
1
-
1
2
1
2
-
1
3
1
3
-
1
4
1
4
-
1
5
1
5
-
1
6
1
6
-
1
7
1
7
-
1
8
1
8
-
1
9
Program Year
2525
Program Trends – Claims Frequency
1.29
1.56
1.37
1.22 1.22
1.35
1.25
1.13
1.43
1.10 1.16
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
0
8
-
0
9
0
9
-
1
0
1
0
-
1
1
1
1
-
1
2
1
2
-
1
3
1
3
-
1
4
1
4
-
1
5
1
5
-
1
6
1
6
-
1
7
1
7
-
1
8
1
8
-
1
9
Program Year
2626
Calculation of Projected Loss and LAE
Program Year: 2018-2019 2019-2020 2020-2021
Selected $100K Rate: $1.200 $1.200 $1.200
Factor to SIR: 2.008 2.038 2.070
Trend Factor: 1.000 1.010 1.020
Program Rate: $2.410 $2.470 $2.534
Composite Exposures: 959,905 977,387 995,400
Projected Program Loss & ALAE: $2,313,000 $2,414,000 $2,522,000
Projected ULAE: 225,000 240,000 257,000
Projected Loss & LAE: $2,538,000 $2,654,000 $2,779,000
Note:The selected rate shown above is per Composite Exposure, while
trend graphs show rate per $100 of payroll.
2727
10/18/2018
10
Comparison of Funding Requirements
2018-2019 2019-2020
SIR $500,000 $500,000 Change
Loss and ALAE $2,268,000 $2,414,000 $146,000
ULAE 277,000 240,000 (37,000)
Total Claims $2,545,000 $2,654,000 $109,000
Inv Inc (174,000) (182,000) (8,000)
Total Funding $2,371,000 $2,472,000 $101,000
Loss Rate $2.51 $2.56 $0.05
2828
Comments
Losses have developed adversely
Average case reserves per open claim have
increased by 53.4%.
Overall, there is a 13.4% increase in the
outstanding liabilities as of June 30, 2018 from
June 30, 2017 estimate.
Loss and LAE funding for 2019‐20 is 4.3%
higher than funding for 2018‐19 (calculated in
prior study).
2929
Questions???
30
Ask an Actuary !
Call 1-800-[(10x)2-2x+34]
30
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5B
October 18, 2018
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Dan Matusiewicz, Finance Director
949-644-3123 or danm@newportbeachca.gov
SUBJECT: FUNDING STATUS OF KEY RESERVES
ABSTRACT: Prudent financial management requires that some portion of available funds be reserved
for future use. Council Reserve Policy F-2 establishes reserve requirements and funding
policies associated with key reserves. Staff has prepared a summary of the funding status
of the City’s key reserves for the Committee’s review. For a more in depth look at each
reserve policy, please refer to Reserve Policy F-2 included as Attachment B.
RECOMMENDATION:
Receive and file. Staff welcomes input and discussion on the funding status of City
reserves.
DISCUSSION:
Background
Prudent long-term financial management compels the City to strategically reserve resources. Reserve accounts provide a mechanism for saving current resources for future
use. City Council has full discretion on appropriating funds from reserve accounts and
these funds may only be used for the specific purpose for which the reserve account was
established, unless alternate uses are specified in the annual budget or action is taken
by Council. Council Reserve Policy F-2 establishes the requirements and guidelines for the administration of such reserves. Only the reserves with the greatest strategic
significance to the City’s operations are discussed below.
Fund Categories Council Reserve Policy F-2 references two categories of funds in which the City’s
reserves reside. It is essential to understand the differences between the two categories
of funds in order to understand the nature of the reserves.
Funding Status of Key Reserves October 18, 2018
Page 2
Governmental Funds
The first fund category is Governmental Funds. Funds that fall into this category have a
short-term measurement focus and basis of accounting that exclude long-term assets and
long-term liabilities. The majority of the City’s funds, including the General Fund, fall into this category. Fund balance is the term used to describe the total assets that accumulate
in Governmental Funds net of related liabilities.
Proprietary Funds
The other fund category is Proprietary Funds, which differ from Governmental Funds in that they have a long-term measurement focus and basis of accounting that includes long-
term assets and long-term liabilities. This basis of accounting is more similar to private
sector accounting. Examples of proprietary funds are the City’s Water Enterprise Fund
and Wastewater Enterprise Fund, and Internal Service Funds, such as the Equipment
Fund and Insurance Reserve Fund. Net Assets, or equity, in a proprietary fund include long-term assets such as property, plant and equipment net of related long-term liabilities
as they do in private sector accounting. Net Assets, therefore, is not a good measure of
liquid resources available to satisfy near-term obligations and should not be compared to
fund balance in governmental funds. Net Working Capital, is the difference between
current (liquid) assets and current (near-term) liabilities and represents a closer approximation of fund balance in a governmental fund.
The table outlining the major differences between Governmental Funds and Proprietary
Funds appears below.
GOVERNMENTAL FUNDS PROPRIETARY FUNDS
Fund Examples
General Fund, Special
Revenue Funds, Capital
Projects Funds, Debt Service Funds
Water Enterprise Fund,
Sewer Enterprise Fund,
Equipment Fund, Insurance Reserve Fund
Measurement Focus Short-Term, excludes long-
term assets and long-term liabilities.
Long-Term, includes long-
term assets and long-term liabilities.
Measurement of
Resources for Comparative Purposes Fund Balance Net Working Capital
Funding Status of Key Reserves October 18, 2018
Page 3
GOVERNMENTAL FUND RESERVES (FUND BALANCE)
Governmental Funds make five further distinctions of fund balance that identify the levels
of restrictions, if any, on fund balance. The five classifications of fund balance/reserves in order from most restricted to least restricted are listed below:
CLASSIFICATIONS NATURE OF RESTRICTION RESERVE EXAMPLES
Non-spendable Cannot be readily converted to cash. Inventories, Prepaid Assets, Permanent Endowment
Restricted Externally imposed restrictions. Debt Service, Affordable
Housing, Park In Lieu, Oceanfront Encroachment
Committed City Council imposed
commitment.
Facilities Financial Planning,
Parking
Assigned City Manager assigned purpose/intent. Funds set aside for a specific purpose that can be
allocated during the year.
Unassigned Residual balance not otherwise
restricted.
Contingency, Residual Fund
Balance
*Not all governmental fund reserves are listed in the above table.
Externally, creditors and rating agencies often take a blunt approach simply categorizing
fund balance as “Reserved” or “Unreserved Fund Balance.” Unassigned fund balance
is deemed to be unrestricted while all other categories are deemed to be restricted in some fashion and, therefore, potentially not available to management to pay creditors.
For this reason, we have avoided overly restrictive parameters so that it is clear the
contingency reserve is readily available to meet the needs of the City without
extraordinary conditions.
General Fund Contingency (Rainy Day) Reserve
The General Fund Contingency Reserve is viewed as the most important reserve of the
City especially to creditors. The basic purpose of the contingency reserve, also known as
a rainy day reserve, is to protect the budget from unexpected or unforeseen fiscal
disruptions such as catastrophic loss of critical infrastructure, unanticipated revenue
Funding Status of Key Reserves October 18, 2018
Page 4
shortfalls, and actions by another government that eliminates or shifts revenues from the
City.
The contingency reserve balance at the end of Fiscal Year 2017-2018 was $48 million.
“2018 Est” is meant to indicate unaudited actual at the time of this report.
Facilities Financial Planning (FFP) Reserve
The FFP Reserve is also an important reserve. This reserve is used to earmark funds for
the replacement or upgrade of critical City facilities in conjunction with the Facilities
Financial Plan. The FFP Reserve is funded by an annual contribution from the General
Fund, which is approved as part of the budget adoption process, and developer contributions. The funds accumulated in the FFP Reserve can only be used for specific projects authorized by the City Council. The minimum target balance of the FFP Reserve
is equal to the maximum annual debt service payment for existing obligations (Currently
$8.2 million). Target fund balance is determined, and does vary, based on cash
requirement of prioritized projects.
PROPRIETARY FUND RESERVES (NET WORKING CAPITAL)
As previously mentioned, the most comparable measure of liquid financial resources in
proprietary funds is net working capital. From this point forward, when referring to
reserves, net working capital is the intended meaning (the net difference between liquid
assets and near term liabilities).
Water and Wastewater Enterprise Fund Reserves
The Water Fund and Wastewater Fund operations are very similar in that they are both
used to account for operations of a self-supporting activity that is entirely financed through
user charges. As such, they both have two similar reserves.
First, each fund has a Stabilization and Contingency Reserve that is used as a safeguard against seasonal variations in cash flows and short-lived cost increases that create
General Fund Contingency Reserve 2017 2018 Est
Contingency Reserve Cash Balance 47,523,255 49,095,713
Target Reserve Level (25% of General Fund Operating Budget)47,523,255 49,095,713
Percentage of Target Funded 100%100%
Funding Status of Key Reserves October 18, 2018
Page 5
annual rate volatility. In extreme conditions, having such a reserve allows the City to
maintain operations for a reasonable period before instituting a rate increase to offset
cost increases. This reserve provides a reorganization period of six months with zero
income or 24 months at a 25% loss rate. The target funding level of this reserve is 50% of the annual operating budget.
The Water Operating Reserve was at 102% of its reserve target of $11.6 million in 2018.
The Wastewater system was at 93% of its reserve target of $1.8 million. In Fiscal Year
2016-2017, Council approved a one-time $3.5 million transfer of cash to mitigate the
troubled wastewater fund and rates were increased shortly after resulting in an improved funded status.
Effective water operations and wastewater operations require the use of an operable
infrastructure system. Therefore, each service also has an Infrastructure Replacement Funding Reserve that is used as a temporary repository for cash flows associated with
the funding of infrastructure improvement projects as outlined in the Water Master Plan
and Wastewater Master Plan. The funding of this reserve is based on an annual
contribution rate that when combined with prior or future year contributions would allow
for updates to infrastructure as scheduled in their respective master plans. Currently, there are no minimum or maximum reserve levels, but the contribution level and reserve
balance should be reviewed periodically to ensure that major infrastructure updates as
outlined in the master plans can occur as planned. The Fiscal Year 2017-2018 annual
infrastructure reserve amounts to $8.6 million for Water and $334,215 for Wastewater.
Staff recommends the City consider a minimum reserve level or discrete reserve in the event emergency repairs to infrastructure are needed. Rates sufficient to sustain
operations and appropriate reserve levels should be studied at least every five years and
as major updates to the Master Plan occur.
The tables below shows the historical cost an accumulated depreciation of the Water and
Wastewater infrastructure as of fiscal year ended June 30, 2018. It is intended to provide
Funding Status of Key Reserves October 18, 2018
Page 6
insight to the historical cost, future replacement needs and the magnitude of loss that
might occur in the event of a major earthquake.
Internal Service Fund Reserves
Internal Service Funds (ISF) are used to manage and account for specific program activity
in a centralized cost center while acting as a strategic savings plan for long-term assets
and liabilities. The revenue comes from internal charges to departmental operating
budgets rather than external revenue sources. Setting aside resources in these funds lessens the burden placed on the budget when liabilities become payable. The net
working capital of these funds represents a strategic savings plan to replace aging assets
or prefund expected liabilities.
We group our Internal Service Funds into the following four categories: Equipment,
Insurance (Risk Management), Compensated Absences and Other Post-Employment Benefits (Retiree Insurance). The target balance and cash flow patterns are unique to
each category and are described below.
Equipment
The main purpose of the Equipment ISF is to accumulate funds for the maintenance and
regular replacement of vehicles and other major pieces of equipment. This fund receives
operating money from each Department by way of charges determined by equipment
usage and a replacement charge based on an annual assessment of the equipment’s
age, condition, and anticipated future replacement date and cost. Any rate adjustments are included in the budget preparation process. The target funding level is determined by
the Finance Director based on anticipated cash flow needs. If the target funding level is
Funding Status of Key Reserves October 18, 2018
Page 7
excessive or insufficient, rates are adjusted as part of the next budget cycle. Below is a
table outlining the estimated Fiscal Year 2018 Funding Status.
Insurance Reserve (Risk Management)
Please see the detailed Insurance Reserve discussion included in the “General Liability
and Workers Compensation Funding Status” staff report in this same (October 18, 2018,
Item 5A) agenda packet.
Compensated Absences
The Compensated Absences ISF is used as a budget smoothing technique for cash-out
payments to employees for flex leave, vacation leave, and sick leave upon separation
from the City. Each department makes contributions to this fund based on a specified
percentage of salary. The minimum target balance of this fund is three-year average of
previous cash flows. The Finance Director recommends any funding adjustments to occur during the annual budget development process or during the mid-year budget
adjustments. By policy, the maximum reserve balance is set at 50% of the projected
liability. Staff suggests the City consider lifting the maximum level to 100% of the accrued
liability instead of 50% of the accrued liability. At the 50% maximum level, the table below
illustrates that the projected balance is 109% of the maximum reserve level. This change simply aligns the current status with policy.
Funding Status of Key Reserves October 18, 2018
Page 8
Pension and OPEB Funding Policies
Assets set-aside to prefund pension and retiree benefits are held in employee benefit
trusts managed by CalPERS.
Assets held in benefit trusts are not readily available to the City to pay claims and creditors. It is staff’s recommendation that the City remove Pension and OPEB from the
current reserve policy and develop a separate funding policy for these benefit plans based
on best practices identified by the Government Finance Officers’ Association (GFOA), the
California Actuarial Advisory Panel (CAAP) and other resources. Prepared by: Submitted by:
/s/ Steve Montano
/s/ Dan Matusiewicz
Steve Montano Dan Matusiewicz
Deputy Finance Director Finance Director
Attachments:
A. Funding Status of Key Reserves
B. Reserve Policy F-2
ATTACHMENT A
FUNDING STATUS OF KEY RESERVES
General Fund Contingency Reserve 2017 2018 Est
Contingency Reserve Cash Balance 47,523,255 49,095,713
Target Reserve Level (25% of General Fund Operating Budget)47,523,255 49,095,713
Percentage of Target Funded 100%100%
Facilities Financial Planning (FFP) Reserve 2017 2018 Est
Unrestricted Fund Balance 23,900,797 22,057,497
Maximum Annual Debt Service 8,162,614 8,157,222
Percentage of Target Funded 293%270%
Bonded Debt Management (F-6)2017 2018 Est
Debt Service as % of General Fund Revenues 4.0%3.8%
Target Debt Service % of General Fund Revenues < 8%< 8%
Water Stabilization and Contingency Reserve 2017 2018 Est
Stabilization and Contingency Reserve 10,902,221 11,552,758
Target Funding Level (50% Operating Budget)10,902,221 11,303,275
Percentage of Target Funded 100%102%
Water Infrastructure Reserves 2017 2018 Est
Water Infrastructure Reserve 7,890,808 8,621,910
Historical Cost of Infrastructure 132,961,901 134,748,523
Accumulated Depreciation 49,453,704 51,762,193
Percentage of Depreciation Funded 16.0%16.7%
Wastewater Stabilization and Contingency Reserve 2017 2018 Est
Stabilization and Contingency Reserve 1,806,505 1,668,050
Target Funding Level (50% Operating Budget)1,806,505 1,796,488
Percentage of Target Funded 100%93%
Wastewater Infrastructure Reserves 2017 2018 Est
Wastewater Infrastructure Reserve 444,351 334,215
Historical Cost of Infrastructure 47,211,325 48,426,318
Accumulated Depreciation 17,596,915 17,949,852
Percentage of Depreciation Funded 3%2%
Equipment Replacement Funding Status 2017 2018 Est
Reserve 14,545,465 14,725,427
Accumulated Depreciation 19,862,974 20,935,824
Percentage of Depreciation Funded 73%70%
General Liability (Claims & Judgments) Funding Status 2017 2018 Est
Cash Reserve 7,119,061 8,114,650
Actuarial Target Funding Level (75% Confidence Level)12,932,306 13,886,391
Percentage of Actuarial Target Funded 55%58%
Workers' Compensation Funding Status 2017 2018 Est
Cash Reserve 16,135,932 16,056,886
Maximum (Actuarial Target Funding Level (75% Confidence Level))19,629,000 18,583,000
Percentage of Actuarial Target Funded 82%86%
Compensated Absences Funding Status 2017 2018 Est
Cash Reserve 4,477,068 4,443,309
Long Term Liability 9,386,089 8,118,328
Minimum Target Funding Level (3 yr Avg of Cash Flows)2,165,131 2,123,186
Maximum Target Funding Level (50% of Liabilities)4,693,045 4,059,164 Percentage of Max Target Funded 95%109%
Pension 2016 2017
Trust Assets - Market Value 566,016,065 619,834,899
Long Term Liability 887,481,877 939,503,861
Unfunded Liability 321,465,812 319,668,962 *
Percentage of Liability Funded 64%66%
OPEB 2017 2018
Trust Assets - Market Value 19,094,690 21,086,054
Long Term Liability 44,614,266 44,500,823
Unfunded Liability 25,519,576 23,414,769
Percentage of Liability Funded 43%47%
* Actuarial Rollforward Estimate for 06/30/2018 is $305,944,956
Funding Status of Key Reserves
ATTACHMENT B
RESERVE POLICY F-2
1
F-2
RESERVE POLICY
Purpose
To establish City Council policy for the administration of Reserves defined as
fund balances in governmental funds and net working capital in proprietary
funds.
Background
Prudent financial management dictates that some portion of the funds available
to the City be reserved for future use.
As a general budget principle concerning the use of reserves, the City Council
decides whether to appropriate funds from Reserve accounts. Even though a
project or other expenditure qualifies as a proper use of Reserves, the Council
may decide that it is more beneficial to use current year operating revenues or
bond proceeds instead, thereby retaining the Reserve funds for future use.
Reserve funds will not be spent for any function other than the specific purpose
of the Reserve account from which they are drawn without specific direction in
the annual budget; or by a separate City Council action. Information regarding
Annual Budget Adoption and Administration is contained in City Council Policy
F-3.
Governmental Funds and Fund Balance Defined
Governmental Funds including the General Fund, Special Revenue Funds,
Capital Projects Funds, Debt Service Funds and Permanent Funds have a short-
term or current flow of financial resources, measurement focus and basis of
accounting and therefore, exclude long-term assets and long-term liabilities. The
term Fund Balance, used to describe the resources that accumulate in these funds,
is the difference between the fund assets and fund liabilities of these funds. Fund
Balance is similar to the measure of net working capital that is used in private
sector accounting. By definition, both Fund Balance and Net Working Capital
exclude long-term assets and long-term liabilities.
Proprietary Funds and Net Working Capital Defined
Proprietary Funds including Enterprise Funds and Internal Service Funds have
a long- term or economic resources measurement focus and basis of accounting
2
F-2
and therefore, include long-term assets and liabilities. This basis of accounting is
very similar to that used in private sector. However, instead of Retained
Earnings, the term Net Assets is used to describe the difference between fund
assets and fund liabilities. Since Net Assets include both long-term assets and
liabilities, the most comparable measure of proprietary fund financial resources
to governmental Fund Balance is Net Working Capital, which is the difference
between current assets and current liabilities. Net Working Capital, like Fund
Balance, excludes long-term assets and long-term liabilities.
Governmental Fund Reserves (Fund Balance)
For Governmental Funds, the Governmental Accounting Standards Board
("GASB") Statement No. 54 defines five specific classifications of fund balance.
The five classifications are intended to identify whether the specific components
of fund balance are available for appropriation and are therefore "Spendable."
The classifications also are intended to identify the extent to which fund balance
is constrained by special restrictions, if any. Applicable only to governmental
funds, the five classifications of fund balance are as follows:
CLASSIFICATIONS
Non-spendable
Restricted
Committed
Assigned
Unassigned
NATURE OF RESTRICTION
Cannot be readily converted to cash
Externally imposed restrictions
City Council imposed commitment
City Manager assigned
purpose/intent
Residual balance not otherwise
restricted
A. Non-spendable fund balance: That portion of fund balance that includes
amounts that are either (a) not in a spendable form, or (b) legally or
contractually required to be maintained intact. Examples of Non-spendable
fund balance include:
1. Reserve for Inventories: The value of inventories purchased by the
City but not yet issued to the operating Departments is reflected in
this account.
3
F-2
2. Reserve for Long Term Receivables and Advances: This Reserve is
used to identify and segregate that portion of the City's financial assets
which are not due to be received for an extended period, so are not
available for appropriation during the budget year.
3. Reserve for Prepaid Assets: This reserve represents resources that
have been paid to another entity in advance of the accounting period
in which the resource is deducted from fund balance. A common
example is an insurance premium, which is typically payable in
advance of the coverage period.
Although prepaid assets have yet to be deducted from fund
balance, they are no longer available for appropriation.
4. Reserve for Permanent Endowment - Bay Dredging: The endowment
specifies that the principal amount will not be depleted and represents
the asset amounts to be held in the Bay Dredging Fund.
5. Reserve for Permanent Endowment - Ackerman Fund: The endowment
specifies that the principal amount will not be depleted and
represents the asset amount to be held in the Ackerman Fund.
B. Restricted fund balance: The portion of fund balance that reflects constraints
placed on the use of resources (other than non-spendable items) that are
either (a) externally imposed by creditors, grantors, contributors, or laws
or regulations of other governments; or (b) imposed by law through
constitutional provisions or enabling legislation. Examples of restricted
fund balance are:
1. Reserve for Debt Service: Funds are placed in this Reserve at the time
debt is issued. The provisions governing the Reserve, if established,
are in the Bond Indenture and the Reserve itself is typically controlled
by the Trustee.
2. Affordable Housing: A principal provision of the Newport Beach
Housing Element requires developers to provide housing units for
lower income households, the number of which is to be negotiated
for each development project. In lieu of constructing affordable
housing, developers have paid into this reserve which is used at the
City Council's discretion to provide alternate methods for the
delivery of affordable housing for lower income households.
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3. Park In Lieu: Per NBMC 19.52 and California Government Code
Section 664777 (The 1975 "Quimby Act"), a dedication of land or
payment of fees for park or recreational purposes in conjunction with
residential development is required. The fees collected can only be
used for specific park or recreation purposes as outlined in NBMC
19.52.030 and 19.52.070.
4. Upper Newport Bay Restoration Reserve: This reserve is the
repository for funds mandated by SB573, as well as special fees
charged to permit holders as an alternative to meeting certain
specified mitigation criteria. In addition to the mitigation fees, ten
percent (10%) of Beacon Bay lease revenue is placed in this Reserve.
Funds in the Reserve are restricted for Upper Newport Bay
restoration projects.
5. Permanent Endowment for Bay Dredging: The endowment also
specifies that the interest earnings on the principal amount can only
be used for dredging projects in the Newport Bay.
6. Permanent Endowment for Ackerman Fund: The endowment also
specifies that the interest earnings on the principal amount can only be
used for scholarships provided by the City and high-tech library
equipment.
7. Oceanfront Encroachment Reserve: In the early 1990's, it was
discovered by survey that improvements to several ocean front
parcels were encroaching onto the public beach. The encroachment
was relatively minor. The negotiated solution was for the property
owners to pay a permit fee each year to the City. Revenue thus
generated may only be used for ocean front restoration projects and
incidental costs of improvements and maintenance to enhance public
access and use of ocean beaches as approved by the City Council. This
Reserve is the repository for those funds. City Council Policy L- 12
contains additional background and details about the encroachment
issue The external restriction on this balance is imposed by the Local
Coastal Plan (LCP).
C. Committed fund balance: That portion of a fund balance that includes
amounts that can only be used for specific purposes pursuant to constraints
imposed by formal action by the government's highest level of decision
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making authority, and remain binding unless removed in the same manner.
The City considers a resolution to constitute a formal action for the purposes
of establishing committed fund balance. The action to constrain resources
must occur within the fiscal reporting period; however the amount can be
determined subsequently. City Council imposed Commitments are as
follows:
1. Facilities Financial Planning (FFP) Fund: In conjunction with the City's
Facilities Financial Plan, a sinking fund has been established to
amortize the cost of critical City facilities such as, but not limited to,
the Civic Center, Police Department buildings, Fire Stations, Library
Branches and other Facility Improvement Projects.
The Facilities Financial Planning Program establishes a level charge
to the General Fund that will perpetually replenish the cash flows
necessary to finance the construction of critical City facilities. This
plan will be updated annually as part of the budget process, or as
conditions change. The City shall strive to maintain fund balance in
the Facilities Financial Planning Reserve at a level equal to or greater
than the maximum annual debt service on existing obligations.
The eligible uses of this reserve include the cash funding of public
facility improvements or the servicing of related debt.
2. Off Street Parking: Per NBMC 12.44.025 the City Council may direct
revenues into the off-street parking facilities fund for purposes of the
acquisition, development and improvement of off street parking
facilities, and for any expenditures necessary or convenient to
accomplish such purposes.
3. In Lieu Parking: Per NBMC 12.44.125 the City requires commercial
businesses to provide adequate off-street parking or where this is not
possible, businesses are afforded the opportunity to pay an annual
fee and use parking spaces in a municipal lot, providing such a lot is
located within specified proximity to the business. These funds can
only be used to provide additional parking.
4. Neighborhood Enhancement - A: Funds previously accumulated to
Neighborhood Enhancement Area "A" pursuant to a prior version
of NBMC 12.44.027 shall continue to be used only for the purpose of
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enhancing and supplementing services to the West Newport area.
Both the nature of the supplemental services and the definition of the
area served are set forth in NBMC 12.44.027.
5. Neighborhood Enhancement - B: Funds previously accumulated to
Neighborhood Enhancement Area "B" pursuant to a prior version of
NBMC 12.44.027 shall continue to be used only for the purpose of
enhancing and supplementing services in the Balboa Peninsula. Both
the nature of the supplemental services and the definition of the area
served are set forth in NBMC 12.44.027.
6. Cable Franchise: Pursuant to the provisions of the Newport Beach
Municipal Code, Title 5, Business Licenses & Regulations, Chapter
5.44, in return for the use of the City's streets and public ways for the
purpose of installing, operating, maintaining, or reconstructing a
cable system to provide cable service, fees are collected by the City
from cable providers. Those fees are to be used by the City for support
of Public, Education, and Government access programming only.
7. Oil and Gas Reserve: The annual $40,000 which is being set aside from
the oil and gas field production revenues is to be used to fund
abandoned wells and facilities as they go out of service.
8. Capital Reappropriation: This reserve represents an administrative
procedure that recognizes a portion of fund balance is not readily
available to fund new endeavors because it has been reappropriated
through the budget adoption process or amendment process.
D. Assigned fund balance: That portion of a fund balance that includes
amounts that are constrained by the City's intent to be used for specific
purposes but that are not restricted or committed. This policy hereby
delegates the authority to the City Manager or designee to modify or
create new assignments of fund balance. Constraints imposed on the use
of assigned amounts may be changed by the City Manager or his
designee. Appropriations of balances are subject to Council Policy F-3
concerning budget adoption and administration.
E. Unassigned fund balance:
1. Contingency Reserve: The Contingency Reserve shall have a target
balance of twenty five percent (25%) of General Fund "Operating
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Budget" as originally adopted. Operating Budget for this purpose
shall include current expenditure appropriations and shall exclude
Capital Improvement Projects, Transfers Out, and additional
discretionary payments to the City’s unfunded pension liability.
Appropriation and/ or access to these funds are generally reserved
for emergency or unforeseen situations but may be accessed by
Council by simple budget appropriation. Examples may include but
are not limited to the following:
a. A catastrophic loss of critical infrastructure.
b. A State or Federally declared state of emergency.
c. Any settlement arising from a claim or judgment.
d. Deviation from budgeted revenue projections.
e. Any action by another government that eliminates or shifts
revenues from the City.
f. Inability of the City to meet its debt service obligations in any
given year.
g. Other circumstances deemed necessary by City Council to meet
the claims and obligations of the City.
Should the Contingency Reserve be used, the City Manager shall
present a plan to City Council to replenish the reserve within five
years.
2. Residual Fund Balance: The residual portion of available fund
balance that is not otherwise restricted, committed or assigned and is
above and beyond the Contingency Reserve target reserve balance.
Proprietary Fund Reserves (Net Working Capital)
In the case of Proprietary Funds (Enterprise and Internal Service Funds),
Generally Accepted Accounting Principles ("GAAP") does not permit the
reporting of reserves on the face of City financial statements. However, this does
not preclude the City from setting policies to accumulate financial resources for
prudent financial management of its proprietary fund operations. Since
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proprietary funds may include both long-term capital assets and long-term
liabilities, the most comparable measure of liquid financial resources that is
similar to fund balance in proprietary funds is net working capital which is the
difference between current assets and current liabilities. For all further references
to reserves in Proprietary Funds, Net Working Capital is the intended meaning.
A. Water Enterprise Fund
1. Stabilization and Contingency Reserve: This Reserve is used to
provide sufficient funds to support seasonal variations in cash flows
and in more extreme conditions, to maintain operations for a
reasonable period of time so the City may reorganize in an orderly
manner or effectuate a rate increase to offset sustained cost increases.
The intent of the Reserve is to provide funds to offset cost increases
that are projected to be short-lived, thereby partially eliminating the
volatility in annual rate adjustments. It is not intended to offset
ongoing, long-term pricing structure changes. The target level of this
reserve is fifty percent (50%) of the annual operating budget. This
reserve level is intended to provide a reorganization period of 6
months with zero income or 24 months at a twenty-five percent (25%)
loss rate. The City Council must approve the use of these funds, based
on City Manager recommendation. Funds collected in excess of the
Stabilization reserve target would be available to offset future rate
adjustments, while extended reserve shortfalls would be recovered
from future rate increases. Should catastrophic losses to the
infrastructure system occur, the Stabilization and Contingency
Reserve may be called upon to avoid disruption to water
distribution.
2. Infrastructure Replacement Funding Policy: This funding policy
is intended to be a temporary repository for cash flows
associated with the funding of infrastructure replacement projects
provided by the Water Master Plan. The contribution rate is
intended to level-amortize the cost of infrastructure replacement
projects over a long period. The annual funding rate of the Water
Master Plan is targeted at an amount that, when combined with prior
or future year contributions, is sufficient to provide for the eventual
replacement of assets as scheduled in the plan. This contribution
policy is based on the funding requirements of the most current
Water Master Plan. There are no minimum or maximum balances
contemplated by this funding policy. However, the contributions
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level should be reviewed periodically or as major updates to the
Water Master Plan occur. Annual funding is contingent on many
factors and may ultimately involve a combined strategy of cash
funding and debt issuance with the intent to normalize the burden on
Water customer rates.
B. Wastewater Enterprise Fund
1. Stabilization and Contingency Reserve: This Reserve is used to
provide sufficient funds to support seasonal variations in cash flows
and in more extreme conditions, to maintain operations for a
reasonable period of time so the City may reorganize in an orderly
manner or effectuate a rate increase to offset sustained cost increases.
The intent of the Reserve is to provide funds to offset cost increases
that are projected to be short-lived, thereby partially eliminating the
volatility in annual rate adjustments. It is not intended to offset
ongoing, long-term pricing structure changes. The target level of this
reserve is fifty percent (50%) of the annual operating budget. This
reserve level is intended to provide a reorganization period of 6
months with zero income or 24 months at a twenty-five percent (25%)
loss rate. The City Council must approve use of these funds, based on
City Manager recommendation. Funds collected in excess of the
Stabilization reserve target would be available to offset future rate
adjustments, while extended reserve shortfalls would be recovered
from future rate increases. Should catastrophic losses to the
infrastructure system occur, the Stabilization and Contingency
Reserve may be called upon to avoid disruption to wastewater
service.
2. Infrastructure Replacement Funding Policy: This funding policy
is intended to be a temporary repository for cash flows
associated with the funding of infrastructure replacement projects
provided by the Wastewater Master Plan. The contribution rate is
intended to level-amortize the cost of infrastructure replacement
projects over a long period of time. The annual funding rate of the
Wastewater Master Plan is targeted at an amount that, when
combined with prior or future year contributions, is sufficient to
provide for the eventual replacement of assets as scheduled in the
plan. This contribution policy should be updated periodically based
on the most current Wastewater Master Plan. There are no minimum
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or maximum balances contemplated by this funding policy.
However, the contributions level should be reviewed periodically or
as major updates to the Wastewater Master Plan occur. Annual
funding is contingent on many factors and may ultimately involve a
combined strategy of cash funding and debt issuance with the intent
to normalize the burden on Wastewater customer rates.
C. Internal Service Funds Background.
Internal Service Funds are used to centrally manage and account for specific
program activity in a centralized cost center. Their revenue generally comes
from internal charges to departmental operating budgets rather than
external revenue sources. They have several functions.
--They work well in normalizing departmental budgeting for programs that
have life-cycles greater than one year; thereby facilitating level budgeting
for expenditures that will, by their nature, be erratic from year to year. This
also facilitates easier identification of long term trends.
--They act as a strategic savings plan for long-term assets and liabilities.
--From an analytical standpoint, they enable appropriate distribution of
city-wide costs to individual departments, thereby more readily
establishing true costs of various operations.
Since departmental charges to the internal service fund duplicate the
ultimate expenditure from the internal service fund, they are eliminated
when consolidating entity-wide totals.
The measurement criteria, cash flow patterns, funding horizon and
acceptable funding levels are unique to each program being funded.
Policy regarding target balance and/ or contribution policy, gain/loss
amortization assumption, source data, and governance for each of the
City's Internal Service Funds is set forth as follows:
1. For all Internal Service Funds: The Finance Director may transfer part
or all of any unencumbered fund balance between the Internal Service
Funds provided that the withdrawal of funds from the transferred
fund would not cause insufficient reserve levels or insufficient
resources to carry out its intended purpose. This action is appropriate
when the decline in cash balance in any fund is precipitated by an off-
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trend non-recurring event. The Finance Director will make such
recommendations as part of the annual budget adoption or through
separate Council action.
2. Equipment Maintenance Fund and Equipment Replacement Fund:
The Equipment Maintenance and Replacement Funds receive
operating money from the Departments to provide equipment
maintenance and to fund the regular replacement of major pieces of
equipment (mostly vehicles) at their economic obsolescence.
a. Equipment Maintenance Fund: The Equipment Maintenance
Fund acts solely as a cost allocation center (vs. a pre-funding
center) and is funded on a pay- as-you-go basis by
departmental maintenance charges by vehicle type and usage
requirement. Because of this limited function, the target year-
end balance is zero.
Contribution rates (departmental charges) are set to include the
direct costs associated with maintaining the City vehicle fleet,
including fleet maintenance employee salary and benefits,
operating expenses and maintenance related capital outlay.
Administrative overhead and maintenance facility
improvements and replacement costs are to be provided
outside of this cost unit. Governance is achieved through
annual management adjustment of contribution rates on the
basis of maintenance cost by vehicle and distribution of costs
based on fleet use by department.
b. Equipment Replacement Fund: Operating Departments are
charged annual amounts sufficient to accumulate funds for the
replacement of vehicles, communications equipment, parking
equipment and other equipment replacement determined
appropriate by the Finance Director. The City Manager
recommends annual rate adjustments as part of the
budget preparation process. These adjustments are based
on pricing, future replacement schedules and other variables.
The age and needs of the equipment inventory vary from year
to year. Therefore the year-end fund balance will fluctuate in
direct correlation to accumulated depreciation. In general, it
will increase in the years preceding the scheduled replacement
of relatively large percentage of the equipment, on a dollar
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value basis. However, rising equipment costs, dissimilar
future needs, replacing equipment faster than their expected
life or maintaining equipment longer than their expected life all
contribute to variation from the projected schedule.
Target funding levels shall be determined by the Finance
Director after considering the age, expected life and cash flow
anticipated by the replacement equipment being funded. If
departmental replacement charges for equipment prove to be
excessive or insufficient with regard to this target funding
level, new rates established during the next budget cycle will
be adjusted with a view toward bringing the balance back to
the target level over a three-year period.
3. Insurance Reserve Funds: The Insurance Reserve funds account for
the activities of general liability and workers' compensation claims.
Background.
The City employs an actuary to estimate the liabilities associated
with the general liability and workers compensation activities. The
costs typically associated with these programs include: claims
administration, legal defense, insurance premiums, self insured
retention and the establishment of appropriate loss reserves
including "incurred-but-not reported" (IBNR) claims. In a
prescribed measurement methodology, the Actuary estimates the
liabilities in conformity with Generally Accepted Accounting
Principles (GAAP).
The Actuary refers to this measurement level in his report as the
"Expected Level." However, because actuarial estimates are subject to
significant uncertainties, actuaries typically recommend that a target
funding level be set at an amount in excess of expected liability as a
margin to cover contingencies. A typical target funding level would
be set to obtain a specified confidence level (the percent chance that
resources set-aside will be sufficient to cover existing claims).
Full funding of the Actuary's "Target Funding Level" establishes a
seventy-five percent (75%) confidence there will be sufficient
resources (including projected interest) to pay the full amount of
existing claims without future contributions. Funding at the
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"Expected Level" produces a confidence level of only fifty percent to
sixty-five percent (50%-65% ). Therefore, the target funding of
insurance reserves should exceed the "Expected Level" to account for
adverse estimate deviation.
Policy & Practice.
The City should target funding of its risk management obligations at
not less than the Expected Level, described above; and not more than
an amount sufficient to establish a seventy-five percent (75%)
Confidence Level. Actuarial losses should be recovered over a rolling
3-year basis while actuarial gains should be amortized over a rolling
5-year basis. As part of the operating budget, each department will
be charged a rate equal to its proportionate share of the total
"revenue" required to fund the Insurance Reserve Fund at this level.
To lessen the impact of short-term annual rate change fluctuation,
City management may implement one-time fund transfers (rather
than department rate increases) when funding shortfalls appear to
be due to unusually sharp and non-recurring factors. Excess reserves
in other areas may be transferred to the internal service fund in these
instances but such transfers should not exceed the funding necessary
to reach a seventy-five (75%) confidence level interval.
4. Compensated
Absences Fund:
Background.
The primary purpose of flex leave, vacation leave and sick leave is to
provide compensated time off as appropriate and approved.
However, under certain circumstances, typically at separation from
service, some employees have the option of receiving cash-out
payments for some accumulated leave balances. The Compensated
Absences Fund is utilized primarily as a budget smoothing technique
for any such leave bank liquidations. The primary purpose of the
Compensated Absences Fund is to maintain a balance sufficient to
facilitate this smoothing.
Policy and Practice.
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The contribution rate will be set to cover estimated annual cash flows
based on a three-year trailing average.
The minimum cash reserve should not fall below that three-year
average. The maximum cash reserve should not exceed fifty percent
(50%) of the long term liability. The target cash reserve shall be the
median difference between the minimum and maximum figures.
Each department will make contributions to the Compensated
Absences Fund through its operating budget as a specified
percentage of salary. The Finance Director will review and
recommend adjustments to the percentage of salary required during
the annual budget development process. This percentage will be
set so as to maintain the reserve within the parameters established
above.
5. Post Retirement Funding Policies:
a. Pension Funding:
(i) California Public Employees Retirement System
(CalPERS): The City's principal Defined Benefit Pension
program is provided through contract with CalPERS.
The City's contributions to the plan include an actuarially
determined employer contribution that fluctuates each
year based on an annual actuarial plan valuation. This
variable rate employer contribution includes the normal
cost of providing the contracted benefits plus or minus
an amortization of plan changes and net actuarial gains
and losses since the last valuation period.
It is the City's policy to make contributions to the plan
equaling at least one hundred percent (100%) of the
actuarially required contribution (annual pension cost).
Because the City pays the entire actuarially required
contribution each year, by definition, its net pension
obligation at the end of each year is $0. Any unfunded
actuarial liability (UAL) is amortized and paid in
accordance with the actuary's funding
recommendations. The City will strive to maintain its
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UAL within a range that is considered acceptable to
actuarial standards. The City Council shall consider
increasing the annual CalPERS contribution should the
UAL status fall below acceptable actuarial standards.
(ii) Laborer's International Union of North America
(LIUNA): The City provides funds to support a
supplemental pension plan for some employee
associations through contract with LIUNA. This is
funded at a fixed percentage of total compensation on a
pay-as-you-go basis. The City is not contractually
required to guarantee the level of the ultimate LIUNA
benefit to retirees, nor does it do so. Therefore the City's
liability for this program is full funded each year.
b. Other Post Employment Benefits
(OPEB Funding): Background.
The City's OPEB funding obligations consists of two retiree
medical plans.
New Plan. Effective January 2006, the City and its employee
associations agreed to major changes to the Post Employment
Healthcare Plan. New employees and all current employees
participate in a program that requires certain defined employee
and employer contributions while the employee is in active
service. However, once the contributions have been made to the
employee's account, the City has transferred a substantial
portion of the funding risk to the employee.
Old Plan. Eligible employees who retired prior to the "New
Plan" and certain active employees were eligible to continue to
receive post-retirement medical benefits (a defined benefit
plan). The cost was divided among the City, current employees
and retirees. In the past, this program was largely funded on a
pay-as-you-go basis, so there was a significant unfunded
liability. Recognizing this problem, the City began contributing
to this obligation in 2001. In 2008, these assets were placed in a
pre-funding trust. The City's intention is to amortize the
remaining unfunded liability within 20 years.
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Policy & Practice.
New Plan. Consistent with agreements between the City and
Employee Associations, the new defined contribution plan will
be one hundred percent (100%) funded, on an ongoing basis, as
part of the annual budget process. Funds to cover this
expenditure will be contained within the salary section of each
department's annual operating budget.
Old Plan. The City's policy is to pre fund the explicit (cash
subsidy) portion of the Actuarial Accrued Liability (AAL) of
the remnants of the old plan over a 20-year amortization
period, or less. This amount will be based on the Annual
Required Contribution (ARC) determined by a biennial
actuarial review; subject to review and analysis by the City. The
City will strive to maintain a funded status that will be within
a range that is considered acceptable to actuarial standards. The
City Council shall consider increasing the annual OPEB
contribution should the funded status fall below acceptable
actuarial standards.
History
Adopted F-3 – 10-01-1963 (Sewer System Funding)
Adopted F-8 – 10-01-1963 (Capital Improvement Fund and Property Sale Revenues)
Amended F-8 – 08-15-1966
Amended F-8 – 05-21-1968
Amended F-8 – 11-12-1968
Amended F-8 03-09-1970
Amended F-3 – 05-25-1970
Reaffirmed F-8 - 02-14-1972
Amended F-8 - 12-10-1973
Amended F-8 – 11-11-1974
Amended F-3 – 07-11-1978
Adopted F-5 06-25-1979 (Stabilization Fund)
Amended F-8 10-22-1984
Amended F-3 - 10-22-1990
Adopted F-2 – 01-24-1994 (Reserve Policy) - combining F-3, F-5, and F-8 (part of F-4)
Amended F-2 – 04-10-1995
Amended F-2 – 02-26-1996
Amended F-2 – 04-27-1998
Amended F-2 – 03-14-2000
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Amended F-2 - 05-08-2001
Amended F-2 – 04-23-2002
Amended F-2 – 06-10-2003
Amended F-2 – 04-13-2004
Amended F-2 – 09-13-2005
Amended F-2 – 09-15-2008
Amended F-2- 11-12-2008
Amended F-2 – 05-24-2011
Amended F-2 – 09-27-2011
Amended F-2 – 05-14- 2013
Amended F-2 - 06-10-2014
Amended F-2 – 05-12-2015
Amended F-2 – 09-25-2018
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5C October 18, 2018
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Dan Matusiewicz, Finance Director and City Treasurer 949-644-3123, danm@newportbeachca.gov
SUBJECT: FISCAL SUSTAINABILITY PLAN REVIEW
SUMMARY:
The City of Newport Beach has a long history of producing balanced budgets throughout
economic cycles and has maintained its AAA credit rating throughout and since the Great
Recession by making difficult choices at appropriate times. The Great Recession,
which began in December 2007, impacted the City’s General Fund operations in a
significant manner, causing reductions in sales tax and hotel bed tax revenue, among other sources of revenue.
On January 12, 2010, the City Council adopted fifteen (15) elements of a Fiscal
Sustainability Plan. Per the Finance Committee’s recommendation, the City Council
augmented the Fiscal Sustainability Plan in 2015 to ensure that infrastructure funding is
made an explicit priority.
While the City and the region have returned to a period of economic growth, the City is cognizant of its responsibility to continuously improve the organization and its services to
maximize efficiency and cost-effectiveness.
The Finance Committee periodically reviews the Fiscal Sustainability Plan to align its ongoing work with the Plan and to consider any changes deemed necessary. Many of the elements contained in the plan are incorporated in Council policies that are reviewed
by the Finance Committee on an ongoing basis as indicated in Attachment A.
Fiscal Sustainability Plan Review October 18, 2018
Page 2 RECOMMENDED ACTION:
Review the Fiscal Sustainability Plan, suggest and recommend changes as needed for
submittal to the City Council for final approval.
Prepared by: Submitted by:
/s/ Steve Montano
/s/ Dan Matusiewicz
Steve Montano Dan Matusiewicz
Deputy Finance Director Finance Director
Attachment: A. Fiscal Sustainability Plan
ATTACHMENT A
FISCAL SUSTAINABILITY PLAN
FISCAL SUSTAINABILITY PLAN
for Newport Beach City Government
Resolution 2015-47, adopted on June 10, 2015, by the Newport Beach City Council set forth the below:
ELEMENTS OF THE CITY’S FISCAL SUSTAINABILITY PLAN
Element Incorporated into the Following Policies:
1. The City will proactively seek to protect and expand
its tax base by encouraging a healthy underlying
local economy.
F-4/F-7 Revenue Measures and Income
Property
2. The City will work to enhance and protect the property values of all Newport Beach residents and property owners.
F-4/F-7 Revenue Measures and Income Property
3. The City will work to enhance and protect the City’s
quality of life through strategic and sustained
investment in quality capital infrastructure improvements that are both long lasting and fiscally
responsible.
F-2/F-28 Surplus Utilization and FFP
4. The City will encourage shopping, dining, and
visiting at Newport Beach stores, restaurants, and hotels.
F-4/F-7 Revenue Measures and Income
Property
5. The City will establish and maintain appropriate
cash reserves.
F-2/F-28 Reserves and FFP
6. The City will manage its Facilities Financial
Planning Reserve so that General Fund
contributions to the reserve shall not be less than three percent (3%) of the total General Fund
Revenue Budget.
F-28 FFP
7. City revenue performance will be reviewed no less
than quarterly and appropriate budget adjustments will be made in advance of the end of a budget year
if revenue performance is not meeting projections.
Quarterly Financial Monitoring
8. The City will initiate a "results-based budgeting"
approach that allows the public and the City Council to prioritize City expenditures strategically rather
than simply adjusting legacy expenditures to reflect
inflation.
F-3 Budget Administration
9. The City will implement a Performance Measurement/Management Strategy as part of an ongoing effort to ensure high-quality and efficient
performance.
F-3 Budget Administration
10. The City will consider competitive contracting of
services and equipment when appropriate and where clear, cost-effective alternatives exist.
F-14 Contracting/Purchasing
11. The City will make it a priority to be energy efficient
in its provision of public services.
12. The City will establish appropriate cost-recovery
targets for its fee structure and will annually adjust its fee structure to ensure that the fees continue to
meet cost recovery targets.
F-4/F-7 Revenue Measures and Income
Property
13. The City will oppose efforts of the State and County
governments to divert revenues from the City or to
F-4/F-7 Revenue Measures and Income
Property
increase the unfunded service mandate of City taxpayers.
14. The City will work in partnership with its employees to ensure fair compensation and that costs related
to pension and other benefits are appropriately allocated between employer and employees.
F-2/F-3 Reserves and Budget Administration
15. The City will vigorously defend itself and its taxpayers against frivolous lawsuits.
16. The City will seek additional intergovernmental
funding and grants, with a priority on funding one-
time capital projects. Grant-funded projects that require multi-year support will be reviewed by the
Finance Committee.
F-25/F-28 Grant Management and FFP
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5D
October 18, 2018
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director and City Treasurer
949-644-3123, danm@newportbeachca.gov
SUBJECT: FISCAL YEAR 2017-2018 YEAR END SURPLUS
SUMMARY:
The Finance Department has prepared a preliminary 2017-2018 fiscal year-end General
Fund surplus estimate. The City’s major General Fund revenue categories performed
favorably above their projected levels and expenditures ended the year with an
unexpended balance. After eliminating capital project carryovers, deferrals,
encumbrances, receipt and or use of restricted revenues sources, the General Fund
annual operating surplus amounted to approximately $13 million at the end of Fiscal Year
2017-2018.
General Fund revenues overall finished the year $7.3 million higher than budgeted.
Consistent and vigorous demand for coastal property has allowed the City to enjoy long-
term growth trends with its number one revenue source – property tax. Assessed values
change during the year when properties turnover or are significantly remodeled or
redeveloped. The City also receives additional tax proceeds from Santa Ana Heights
redevelopment agency (RDA). As the RDA obligations wind down, the City will continue
to receive more tax proceeds that were once diverted to the RDA. This translated to $1.4
million positive property tax revenue variance from the budget.
Sales tax receipts were slightly higher than originally estimated coming in at just over $0.5
million over budget. The City experienced positive changes in the automobile sales group
and new dining concepts continued to improve interest in eating out; therefore, positively
impacting restaurant receipts.
Transient occupancy tax (TOT) receipts were $1.7 million higher than estimated due to
higher than expected occupancy and room rates and new room inventory – in spite of
simultaneous renovations at major hotels. Other positive revenue variances were
Fiscal Year 2017-18 Year End Surplus
October 18, 2018
Page 2
realized in licenses, permits and fees; intergovernmental grant and other reimbursements
related to fire strike team deployments in other counties; and the popularity of recreational
fee based classes.
General Fund expenditures overall finished the year approximately $8 million lower than
budgeted. Lower than budgeted expenditures in Fiscal Year 2017-2018 were largely due
to salary savings, savings in professional contractual services, outside counsel, and
maintenance and repair.
The net change, in non-spendable, restricted or committed fund balance also impacts
surplus fund balance. Examples include revenue budget variances that are legally
restricted for a specific purpose, expenditure of restricted funds or changes in non-
spendable fund balance. All-in these changes totaled $2.3 million reduced the amount of
available fund balance by $2.3 million.
In summary, the $13 million surplus was generated as follows:
Favorable Revenue variances $7.3 million
Favorable Expenditure variance $8.0 million
Net change in restricted/committed funds <$2.3>
Total $13.0
Pursuant to Council General Fund Surplus Utilization Policy F-5, the City Manager will
develop Fiscal Year 2019-2020 budget recommendations for the use of the surplus funds.
The policy states that roughly fifty percent of the budget surplus shall be used to address
long-term obligations such as pension liabilities, other post-employment benefits, bonded
debt, lease obligations and other long-term needs. The remaining surplus shall be used
to address infrastructure or neighborhood capital improvements, guided by a philosophy
that these expenditures improve the community’s safety, aesthetics, transportation, or
quality of life.
The stated surplus amount is subject to change pending the finalization of our year-end
closing entries.
RECOMMENDED ACTION:
Receive and file.
Prepared by: Submitted by:
/s/ Steve Montano
/s/ Dan Matusiewicz
Steve Montano Dan Matusiewicz
Deputy Finance Director Finance Director
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5E
October 18, 2018
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director
949-644-3123 or danm@newportbeachca.gov
SUBJECT: BUDGET AMENDMENTS (QUARTER ENDED SEPTEMBER 30, 2018)
EXECUTIVE SUMMARY
The purpose of this memorandum is to report on the budget amendments for the first
quarter of Fiscal Year 2018-2019. All budget amendments are in compliance with City
Council Policy F-3, Budget Adoption and Administration.
DISCUSSION
City Council Policy F-3, Budget Adoption and Administration, identifies how
appropriations can be transferred, increased or reduced. The Finance Committee
reviews a quarterly report of City Council and City Manager budget amendments including their effect on fund balance. Please find the list of budget amendments for the quarter
ending September 30, 2018, as Attachment A.
Prepared by: Submitted by:
/s/ Susan Giangrande
/s/ Dan Matusiewicz
Susan Giangrande Dan Matusiewicz
Budget Manager Finance Director
Attachment:
A. Budget Amendments Fiscal Year 2018-2019 Quarter Ending
September 30, 2018
ATTACHMENT A
BUDGET AMENDMENTS FISCAL YEAR 2018-2019 QUARTER ENDING SEPTEMBER 30, 2018
Date Amount
Amendment
Type Fund
Net Effect on Fund
Balance
Increase/(Decrease) Department Explanation
07/10/18 574,282.00 City Council General Fund 301,265.00 Fire To increase revenue estimates and expenditure appropriations
in the General Fund related to the Intergovernmental Transfer
(IGT) program with County Organized Health System
CalOptima.
07/10/18 145,300.00 City Council General Fund CIP - Public Works To transfer expenditure appropriations from the Balboa Island
Drainage Master Plan Project to the Marine Avenue Drainage
System Improvement Project.
07/16/18 64,204.61 City Manager General Fund - CDD To transfer salary and benefit appropriations from the CDD
Building Division to the CDD Admin Division to fund a part-time
Administrative Analyst instead of a part-time Building Inspector.
07/24/18 120,000.00 City Council Gas Tax (120,000.00) Public Works To increase expenditure appropriations in the Gas Tax Fund for
the Marguerite Avenue and Hospital Road Pavement
Rehabiliation Project.
08/14/18 175,000.00 City Council General Fund - Library To increase revenue estimates and expenditure appropriations
to record a contribution from Newport Beach Public Library
Foundation.
08/14/18 225,000.00 City Council OTS Grant Fund - Police To increase revenue estimates and expenditure appropriations
to accept the 2019 State of California, Office of Traffic Safety
(OTS) Selective Traffic Enforcement Program (STEP) Grant.
09/11/18 153,125.00 City Council General Fund - Library To increase revenue estimates and expenditure appropriations
to record a contribution from Newport Beach Public Library
Foundation.
09/11/18 90,000.00 City Council Parks & Community
Centers
(90,000.00) Public Works To increase expenditure appropriations from the Parks and
Community Centers unappropriated fund balance to be used for
Grant Howald Park Rehabilitation.
09/25/18 1,680,000.00 City Council Environmental
Contributions
- Public Works To increase revenue estimates and expenditure appropriations
for the Newport Bay Water Wheel project based on grant
awarded by the Ocean Protection Council.
09/25/18 30,000.00 City Council Assessment District
#113
(30,000.00) Public Works To increase expenditure appropriations for AD Assessment
Engineering to ballot and tabulate voting.
09/25/18 20,034.00 City Council General Fund (20,034.00) Police To increase expenditure appropriations from General Fund
unappropriated balance to fund two new crossing guards for the
remainder of FY 2018-2019.
09/25/18 10,017.00 City Council General Fund (10,017.00) Police To increase expenditure appropriations from General Fund
unappropriated fund balance to fund one new crossing guard for
the remainder of FY 2018-2019.
07/17/18 10,000.00 City Manager General Fund (10,000.00) Human
Resources
To increase expenditure appropriations from General Fund
unappropriated fund balance to cover increased costs for pre-
employment physicals.
08/09/18 1,200.00 City Manager General Fund (1,200.00) City Manager To increase expenditure appropriations from General Fund
unnappropriated fund balance to provide an increase to the
Deputy City Manager's car allowance.
08/09/18 23,774.00 City Manager General Fund - Recreation &
Senior Services
To transfer expenditure appropriations for two part-time
positions moving from Recreation Facilities & Maintenance to
Recreation Marina Park.
09/11/18 4,465.00 City Manager General Fund - Library To increase revenue estimates and expenditure appropriations
to record a contribution from the Santiago Library System for
eBook reimbursement.
09/11/18 35,000.00 City Manager General Fund - Misc. Non
Operating
To transfer expenditure appropriations within General Fund Non
Departmental from Rideshare Incentives to Publications &
Dues. FY 2018-2019 budget developed prior to determination of
AQMD participation method.
09/25/18 6,000.00 City Manager General Fund (6,000.00) CDD To incease expenditure appropriations from the General Fund
Affordable Housing reserve to cover contract expenditures in
excess of the CDBG grant for the Afforable Housing Monitoring
Project.
City of Newport Beach
Budget Amendments
Fiscal Year 2018-19
Quarter Ending September 30, 2018
10/12/18
Thursday, October 18, 2018 Status of Insurance Reerve (General
Libaiblity and Workers' Compensation)
Fund
Review Workers' Compensation and General
Liability Valuation with Actuary.
Funding Status of Key Reserves Review Key City Reserves as of June 30, 2018.
Fiscal Sustainability Plan Review Review and discuss City Council Resolution 2015-
47, Fiscal Sustainability Plan.
Fiscal Year 2017-2018 Year End Surplus The Finance Department has prepared a preliminary
2017-2018 fiscal year-end General Fund surplus
estimate.
Budget Amendments (Quarter Ended
September 30, 2018)
Receive and file a staff report on the budget
amendments for the prior quarter.
Discuss Items for Future Agendas
Thursday, November 29, 2018 Review CalPERS Payment Options Staff will discuss CalPERS Fresh Start,
discretionary and other payment options under
consideration.
Contracting Policy Limits Review allowable approval thresholds in the
Authority to Contract Policy F-14
Discuss Items for Future Agendas
Thursday, December 13, 2018 Reserve Policy (F-2) Discussion Finance Committee recommended revisions to
Council Reserve Policy F-2.
Subcommittee Policy Recommendations Reserve for Subcommittee recommendations on
Council finance policies.
Discuss Items for Future Agendas
City of Newport Beach Finance Committee Work Plan 2018-19
October
November
December