PRM Health Trust FY 11-12 -KAREN FONTEN{)T
('ertirktI public Accountant
1 105 Black 'frail
Altannnitc'Springs, H It
Phone- (40-) I(iI :ri-I i
ma i 1: Ica r('u-l:)!)w)li l Isom Ii.ut't
May 25, 2012
Board of Directors
Public Risk Management of Florida Group Health Trust
I have audited the financial statements of Public Risk Management of Florida Group Health Trust for the year
ended September 30, 2011. Professional standards require that I provide you with information about my
responsibilities under generally accepted auditing standards, as well as certain information related to the planned
scope and timing of my audit. I have communicated such information in my letter to you dated January 3, 2012.
Professional standards also require that I communicate to you the following information related to my audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by Public Risk Management of Florida Group Health Trust are described in Note 1 to the
financial statements. No new accounting policies were adopted and the application of existing policies was not
changed during 2011. I noted no transactions entered into by the governmental unit during the year for which
there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the
financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based on
management's knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and
because of the possibility that future events affecting them may differ significantly from those expected. The most
sensitive estimate affecting Public Risk Management of Florida Group Health Trust's financial statements was:
Management's estimate of claims payable is based on the actuarial report prepared by Merlinos &
Associates, Inc I evaluated the key factors and assumptions used to develop claims payable in
determining that it is reasonable in relation to the financial statements taken as a whole.
Difficulties Encountered in Performing the Audit
I encountered no significant difficulties in dealing with management in performing and completing my audit.
Member of
American Institute of Certified Public Accountants
Florida Institute of Certified Public Accountants
• Board of Directors
Public Risk Management of Florida Group Health Trust
May 25, 2012
Page Two
Corrected Misstatements
Professional standards require me to accumulate all known and likely misstatements identified during the
audit, other than those that are trivial, and communicate them to the appropriate level of management.
Management has corrected all such misstatements. The following material misstatements detected as a
result of audit procedures were corrected by management:
1. Adjust Reinsurance Receivable:
Reinsurance Receivable 486,045.11
Claims Expense 486,045.11
2. Adjust Claims Payable to Actuary's Report:
Claims Expense 293,814.00
Claims Payable 293,814.00
3. Record Additional Payable for Claims Due to Blue Cross Blue Shield:
Claims Expense 552,607.00
Reinsurance Receivable 552,607.00
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a financial
accounting, reporting, or auditing matter, whether or not resolved to my satisfaction, that could be significant to
the financial statements or the auditor's report. I am pleased to report that no such disagreements arose during the
course of my audit.
Management Representations
I have requested certain representations from management that are included in the management representation
letter dated May 25, 2012.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters,
similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an
accounting principle to the governmental unit's financial statements or a determination of the type of auditor's
opinion that may be expressed on those statements, our professional standards require the consulting accountant
to check with me to determine that the consultant has all the relevant facts. To my knowledge, there were no such
consultations with other accountants.
• Board of Directors
Public Risk Management of Florida Group Health Trust
May 25, 2012
Page Three
Other Audit Findings or Issues
I generally discuss a variety of matters, including the application of accounting principles and auditing standards,
with management each year prior to retention as the governmental unit's auditors. However, these discussions
occurred in the normal course of our professional relationship and my responses were not a condition to my
retention.
Fraud and Illegal Acts
I am not aware of any matters that require communication involving fraud and illegal acts.
Significant Deficiencies and Material Weaknesses in Internal Control
I am required to communicate all significant deficiencies and weaknesses in internal control that were identified
during the course of my audit. No such significant deficiencies or weaknesses were identified.
AICPA Ethics Ruling Regarding Third-Party Service Providers
From time to time and depending on the circumstances, third-party service providers, independent contractors,
and consultants to me may participate in providing professional services. AICPA Ethics ruling No. 112 under
Rule 102, Integrity and Objectivity, requires that I inform clients whenever I use a third-party service provider in
providing professional services to a client. The rule broadly defined "third-party service provider" to include an
individual who is not employed by my firm. Albert E. Sampey, Certified Public Accountant, participates in the
audit as a technical reviewer to meet my obligations under the quality control standards of my firm.
This information is intended solely for the use of the Board of Directors and management of Public Risk
Management of Florida Group Health Trust and is not intended to be and should not be used by anyone other than
these specified parties.
Sincerely,
k=a�-t-�.�,✓ �. -� Wit A
Karen Fontenot
Certified Public Accountant
PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
FINANCIAL STATEMENTS, SUPPLEMENTAL
INFORMATION AND REPORT OF
INDEPENDENT ACCOUNTANT
Years Ended September 30, 2011 and 2010
PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
TABLE OF CONTENTS
Years Ended September 30,2011 and 2010
Page
REPORT OF INDEPENDENT ACCOUNTANT 1
MANAGEMENT DISCUSSION AND ANALYSIS 3
FINANCIAL STATEMENTS
Balance Sheets 7
Statements of Revenues, Expenses and Changes In
Accumulated Members'Equity 8
Statements of Cash Flows 9
Notes to Financial Statements 10
REQUIRED SUPPLEMENTARY INFORMATION:
Claims Development Information 17
KAREN FONTENOT
certified 1'11)1 it Accountant
1405 Black \Villa\t 'frail
Altamonte Springs, Fl 3•2,i 14
Phone - (40;) I-r,;-li
1E:m aiI: Iv►ren-l.;Sl(n)1►el Isom
Ii.ime
REPORT OF INDEPENDENT ACCOUNTANT
The Board of Directors
Public Risk Management of Florida Group Health Trust
I have audited the accompanying financial statements of Public Risk Management of Florida
Group Health Trust as of September 30, 2011 and 2010 and for the years then ended. These
financial statements are the responsibility of Public Risk Management of Florida Group Health
Trust's management. My responsibility is to express an opinion on these financial statements
based on my audits.
I conducted my audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that I plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of Public Risk Management of Florida Group Health Trust, as of
September 30, 2011 and 2010 and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 1 to the financial statements, management of Public Risk Management of
Florida Group Health Trust and their independent actuarial firm have estimated the reserves for
claims payable at amounts which they believe are adequate to satisfy the ultimate obligations.
While management and their independent actuarial firm believe that the amounts are adequate,
assumptions and projections as to future events are necessary and the ultimate liabilities may be
in excess of or less than the amounts provided.
- 1 -
Member of
American Institute of Certified Public Accountants'
Florida Institute of Certified Public Accountants
The management's discussion and analysis and required supplementary information on pages 3
through 6 and 17, respectively, are not a required part of the basic financial statements but are
supplementary information required by accounting principles generally accepted in the United
States of America. I have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the required
supplementary information. However, I did not audit the information and express no opinion on
them.
Certified Public Accountant
Altamonte Springs, Florida
May 25, 2012
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
Years Ended September 30, 2011 and 2010
As management of Public Risk Management of Florida Group Health Trust (the "Trust"), we
offer readers of the Trust's financial statements this narrative overview and analysis of the
financial activities of the Trust for the fiscal years ended September 30, 2011 and 2010 with
selected comparative information for the fiscal year ended September 30, 2009.
Financial Highlights
• Total assets decreased by$947,364 in 2011 to$15,494,736.
• For the year ended September 30, 2011, the Trust had an operating loss of $1,849,349
compared to an operating loss in 2010 of$1,904,077.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the Trust's basic financial
statements. The Trust's basic financial statements are comprised of the financial statements,
notes to the financial statements and required supplementary information. The financial
statements are designed to provide readers with a broad overview of the Trust's finances, in a
manner similar to a private-sector business.
The balance sheets present information on all of the Trust's assets and liabilities, with the
difference reported as accumulated members' equity.
The statements of revenues, expenses and changes in accumulated members' equity present
information on all of the Trust's revenues and expenses. Any excess or deficiency of revenues
over expenses is reported as an increase or decrease to members' accumulated equity.
The statements of cash flows present information on cash flows provided by and used in
activities. The activities are classified into one of three categories: operating activities, capital
and related financing activities,and investing activities, as appropriate.
Notes to the financial statement provide additional information that is essential to full
understanding of the data provided in the financial statements.
In addition to the financial statements and accompanying notes, this report also presents certain
required supplementary information concerning claim development.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
Years Ended September 30, 2011 and 2010
Financial Analysis
The balance sheet presents the financial position of the Trust at the end of the fiscal year. The
statement includes all assets and liabilities of the Trust. Accumulated members' equity (net
assets) is the difference between total assets and total liabilities and is an indicator of the current
fiscal health of the Trust. The following is a summarized comparison of the Trust's assets,
liabilities and accumulated members' equity at September 30.
2011 2010 2009
Assets
Current assets $15,494,736 $16,442,100 $18,216,296
Total Assets 15,494,736 16,442,100 18,216,296
Liabilities
Current Liabilities 3,405,351 2,551,089 2,489,353
Total Liabilities 3,405,351 2,551,089 2,489,353
Accumulated Members' Equity
Unrestricted 12,089,385 13,891,011 15,726,943
Total Accumulated Members' Equity $12,089,385 $13.891,011 $15.726,943
By far, the largest portion of the Trust's assets is its cash and cash equivalents (73.8%, 88.1%,
and 63.8% at September 30, 2011, 2010 and 2009, respectively). In addition, in 2009 the Trust
invested in a certificate of deposit and the portion of the Trust's assets in cash and investments
for that year is 91.3%. The Trust uses these assets to pay claim liabilities, reinsurance fees and
service and administrative costs.
Cash and cash equivalents decreased by $3,039,044 during fiscal year 2011 due to increased
claims payments. Claims payments per member increased 11%. Current assets at September 30,
2011 also include a receivable of$2,269,664 due from the claims service provider for duplicate
payments of pharmacy claims, which has been collected in 2011. Reinsurance receivable
decreased $251,598 due to an increase in the specific retention. Subsequent to September 30,
2011, 99% of reinsurance receivables were collected.
At September 30, 2010, there was a decrease in reinsurance receivables of $236,222 due to an
increase in the specific retention and collection of prior year reinsurance receivables. Large
claims over retention decreased 8% from $1,340,890 in 2009 to $1,229,427 in 2010. Cash and
investments decreased $2,147,398 in 2010. There were no aggregate reinsurance
reimbursements projected.
At September 30, 2009, there was a decrease in reinsurance receivables of$1,791,988 due to an
increase in the specific retention and collection of prior year reinsurance receivables. Large
claims over retention decreased 68% from $4,195,995 in 2008 to $1,340,890 in 2009. Cash and
investments increased $1,858,994 in 2009. There were no aggregate reinsurance reimbursements
projected.
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PUBLIC RISK MANAGEMENT OF FLORIDA
' GROUP HEALTH TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
Years Ended September 30, 2011 and 2010
Financial Analysis—Continued
Claims payable increased $846,421 in 2011. The increase is a result of loss development of
$293,914 and claims payable to the claims service provider of $552,607. Claims payable
increased $50,185 in 2010. Claims payable decreased $429 at September 30, 2009. Membership
in the Trust increased to 41 members from 36 members in 2010 and 30 members in 2009.
Enrollment increased approximately 15.9% in 2011 and 10% in 2010, mainly due to new
members. Average claim cost per employee per month increased .2% in 2011, 5% in 2010, and
4.9% in 2009. In addition, the specific deductible was increased to $300,000 in 2011, $200,000
in 2010, and $175,000 in 2009.
Member contributions fully fund all costs of the pool, inclusive of reinsurance fees, service fees,
and administrative fees.
The statement of operations presents the operating results of the Trust for the fiscal year. The
statement includes all revenues and expenses of the Trust. The following is a summarized
comparison of the Trust's revenues and expenses:
2011 2010 2009
Operating Revenues $46,939,268 $39,044,162 $35,682,865
Operating Expenses 48,788,617 40,948,239 35,189,695
Operating Income(Loss) (1,849,349) (1,904,077) 493,170
Non-Operating Revenues 47,723 68,145 92,711
Net Income(Loss) $ (1.801.626) $(1.835.932) $ 585.881
As a result of increased membership and enrollment there was a corresponding increase in
member contributions/premiums, claims expense, and service fees in 2011 and 2010. Claims
expense increased 22% in 2011 and 17% in 2010 as a result of an increase in average claim cost
per employee and an increase in enrollmment. The average premium per enrollment increased
4% in 2011, remained approximately the same in 2010, and increased 6% in 2009. Average
claim cost per employee increased .2% in 2011 and 5% increase in medical costs in 2011.
Economic Factors
The primary reasons for the decrease in operating income is an upward trending enrollment, loss
experience, and coverage options.
Nationwide, medical cost growth is projected to increase 10% to 15% per year. The primary
factors in the escalating cost growth are increased utilization and the rising costs of prescription
drugs. As a result of these escalating costs, the Trust has experienced increased premiums.
The Trust will continue to focus on operational enhancements that will improve efficiency and
reduce costs without sacrificing the quality of member services. Administrative expenses and
contract service fees should see about the same percentage increase as in 2011.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
Years Ended September 30, 2011 and 2010
Request for Information
This financial report is designed to provide a general overview of The Trust's finances for all
those with an interest. Questions concerning any of the information in this report or requests for
additional information should be addressed to Ross Furry, Executive Director.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
BALANCE SHEETS
September 30, 2011 and 2010
2011 2010
ASSETS
Current Assets
Cash And Cash Equivalents $11,439,182 $14,478,226
Premiums Receivable 804,434 730,820
Other Receivables 2,269,664 --
Reinsurance Receivable 981,456 1,233,054
Total Assets $15,494,736 $16,442,100
LIABILITIES AND ACCUMULATED MEMBERS' EQUITY
•
Liabilities
Current Liabilities
Accounts Payable $ 27,516 $ 19,675
Claims Payable 3,377,835 2,531,414
Total Current Liabilities 3,405,351 2,551,089
Accumulated Members' Equity
Unrestricted
12,089,385 13,891,011
Total Liabilities and Accumulated Members' Equity $15,494,736 $16,442.100
The accompanying notes are an integral part of the financial statements.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN ACCUMULATED MEMBERS' EQUITY
Years Ended September 30, 2011 and 2010
2011 2010
OPERATING REVENUES
Member Premiums $46,939,268 $39,044,162
OPERATING EXPENSES
Claims Expense 43,234,641 35,507,948
Reinsurance Fees 1,767,400 2,074,435
Service Fees 3,172,452 3,062,465
General And Administrative 614,124 303,391
Total Operating Expenses 48,788,617 40,948,239
OPERATING LOSS (1,849,349) (1,904,077)
NON-OPERATING REVENUES
Interest Income 47,723 68,145
NET LOSS (1,801,626) (1,835,932)
Accumulated Members' Equity at Beginning of Year 13,891,011 15,726,943
Accumulated Members' Equity at End of Year $12,089,385 $13,891,011
The accompanying notes are an integral part of the financial statements.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
STATEMENTS OF CASH FLOWS
Years Ended September 30, 2011 and 2010
2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received From Members $46,865,654 $ 38,434,738
Cash Paid To Related Party (206,499) (198,918)
Cash Paid For Claims,Net Of Recoveries (44,406,286) (35,221,541)
Cash Paid For Suppliers For Goods And Services (5,339,636) (5,229,822)
Net Cash Used By Operating Activities (3,086,767) (2,215,543)
CASH FLOWS FROM INVESTING ACTIVITES
Investments Matured -- 5,000,000
Interest Received On Investments 47,723 68,145
Net Cash Provided By Investing Activities 47,723 5,068,145
Net Increase (Decrease) In Cash And Cash Equivalents (3,039,044) 2,852,602
Cash And Cash Equivalents At Beginning Of Year 14,478,226 - 11,625,624
Cash And Cash Equivalents At End Of Year $11,439.182 $14,478.226
RECONCILIATION OF OPERATING INCOME
TO NET CASH FROM OPERATING ACTIVITIES
Operating Loss $(1,849,349) $(1,904,077)
Adjustments To Reconcile Operating Income To Net
Cash From Operating Activities:
Changes In Assets And Liabilities:
(Increase) Decrease In—
Premium Receivable (73,614) (609,424)
Other Receivables (2,269,664) --
Reinsurance Receivable 251,598 236,222
Increase In—
Accounts Payable 7,841 11,551
Claims Payable 846,421 50,185
Total Adjustments (1,237,418) (311,466)
Net Cash Provided (Used) By Operating Activities $(3 086,767) $(2,215,543)
The accompanying notes are an integral part of the financial statements.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS
Years Ended September 30, 2011 and 2010
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Public Risk Management of Florida Group Health Trust (the "Trust") is a cooperative agency
voluntarily established by contracting political subdivisions to act as a local government risk
management pool as defined by Florida Statute 163.01(3)(h).
The Trust was organized in October 1989, to provide a program of medical and dental coverage
for its member organizations, which include cities and counties. The program's general
objectives are to formulate, develop and administer, on behalf of the member political
subdivisions, a program of insurance; to obtain lower costs for that coverage; and to develop a
comprehensive loss control program. Political subdivisions joining the Trust must remain
members for a minimum of 2 years from the date coverage begins; a member may withdraw from
the Trust at the end of the fiscal year upon serving on the Trust at least sixty days prior written
notice. The Trust does not create between members any relationship of surety, indemnification
or responsibility for the debts of or claims against any other member. Should losses in any one
fiscal year extinguish all available funds provided by the Trust, each individual member shall be
responsible for all valid claims of its employees. However, should the Trust discontinue
operations in a deficit position, the participating members at termination will be assessed an
amount equal to the group's percentage of total enrollment. As of September 30, 2011 and 2010,
the Trust has 41 and 36 members, respectively.
The Trust conforms all significant accounting policies to generally accepted accounting
principles applicable to governmental units. The following is a summary of the more significant
principles and practices used in the preparation of these financial statements.
A. The Reporting Entity
The accompanying financial statements present the financial position, results of operations and
cash flows of the Trust governed by the Board of Directors. Each member has a representative
on the Board of Directors. The reporting entity of the Trust includes all functions for which the
Board of Directors is considered to be financially accountable.
Based upon the application of the criteria set forth in Governmental Accounting Standards Board
Statement Number 14, The Financial Reporting Entity, there are no potential component units or
related organizations of the Trust.
B. Basis of Accounting
Basis of accounting refers to when revenues and expenses are recognized in the accounts and
reported in the financial statements. Basis of accounting relates to the timing of the
measurements made, regardless of the measurement focus applied. The Trust records are
accounted for using the accrual basis of accounting. Revenues are recognized when they are
earned and expenses are recognized when they are incurred.
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•
PUBLIC RISK MANAGEMENT OF FLORIDA
• GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended September 30, 2011 and 2010
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Pursuant to the election option made available by Governmental Accounting Standards Board
(GASB) Statement Number 20, Accounting and Financial Reporting for Proprietary Funds and
Other Governmental Entities That Use Proprietary Fund Accounting, pronouncements issued by
the Financial Accounting Standards Board (FASB) subsequent to November 30, 1989 have not
been applied.
C. Cash Equivalents
For purposes of the statement of cash flows, the Trust considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
D. Premium Revenue
Premiums are billed and recognized monthly based upon the number of participants reported
monthly to the Trust by each member.
E. Claims Payable
The liability for unpaid claims includes amounts determined from loss reports of individual cases
and amounts based upon industry statistics for claims incurred but not reported. Claims payable
is an estimate based upon an actuarial evaluation by the Trust's independent actuary and is based
on the ultimate cost of settling claims, including the effects of inflation and other societal
economic factors. While management of the Trust and the Trust's independent consulting
actuarial firm believe the amount is adequate, assumptions and projections as to future events are
necessary and the ultimate liabilities may be in excess of or less than the amounts provided. The
methods for making such estimates and for establishing the resulting liabilities are continually
reviewed, and any adjustments are reflected in earnings continually.
F.Reinsurance
The Trust uses reinsurance policies to reduce its exposure to large losses on all types of insured
events. Reinsurance permits recovery of a portion of losses from reinsurers, although it does not
discharge the primary liability of the Trust as direct insurer of the risks reinsured.
In accordance with Governmental Accounting Standards Board Statement Number 10,
Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, estimated
amounts recoverable from reinsurers that relate to paid claims are reported as assets. Estimated
amounts recoverable from reinsurers that relate to liabilities for unpaid claims are deducted from
those liabilities rather than reported as assets.
- 11 -
•
PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended September 30, 2011 and 2010
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED
G. Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results may differ from
those estimates.
NOTE 2 -DEPOSITS AND INVESTMENTS
Included in the Trust's cash balances are amounts deposited with the Florida State Board of
Administration's Local Government Investment Pool (SBA) as well as amounts deposited with
commercial banks in interest bearing demand accounts. The deposits of the Trust are fully
insured by either federal depository insurance or by the multiple financial institution collateral
pool pursuant to the Florida Security for Public Deposits Act of the State of Florida.
The Florida Security for Public Deposits Act (the Act) establishes guidelines for qualification
and participation by banks and savings associations, procedures for the administration of the
collateral requirements and characteristics of eligible collateral. Under the Act, the Trust's
deposits in qualified public depositories are considered totally insured. The qualified public
depository must pledge at least 50% of the average daily balances for each month of all public
deposits in excess of any applicable deposit insurance. Additional collateral, up to a maximum
of 125%, may be required, if deemed necessary under the conditions set forth in the Act.
Obligations pledged to secure deposits must be delivered to the State Treasurer or, with the
approval of the State Treasurer, to a bank, savings association, or trust company provided a
power of attorney is delivered to the State Treasurer.
As prescribed by the Trust's investment policy, the Trust's investment portfolio at September 30,
2011 and 2010 includes investments with the SBA. Investments with the SBA are available by
wire, on a same-day basis, and based on the SBA's availability (as an investment option) to all
local governmental units. The Trust's investments at year end were held by a third party agent
for and in the name of PRM or invested with the SBA.
The types of deposits and investments and their level of risk exposure as of September 30, 2011
and 2010 were typical of these items during the fiscal years then ended.
The investments with the SBA are $447 and $446 as of September 30, 2011 and 2010,
respectively.
In addition to demand accounts, the Trust classifies the SBA investment as cash and cash
equivalents on the balance sheet.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS -CONTINUED
Years Ended September 30, 2011 and 2010
NOTE 2 -DEPOSITS AND INVESTMENTS—CONTINUED
The investments as of September 30, 2011 and 2010 are as follows:
The securities are held in the following accounts:
2011 2010
Current Assets
Cash and Cash Equivalents $11,439,182 $14,478,226
Less Cash on Deposit 11,438,735 14,477,780
Total Securities at Fair Value $ 447 $ 446
Interest Rate Risk: As a means of limiting its exposure to fair value losses rising from rising
interest rates, investments are generally held in short-term certificates of deposit and cash-
bearing checking accounts with a commercial bank qualified as a public depository with the State
of Florida . The Trust's investment policy requires the investment portfolio to be structured to
protect safety of principal, liquidity, maximum rate of return, diversification and public
confidence.
Credit Risk: The Trust's greatest investment priority is safety of principal, avoiding capital
losses whether they are from security defaults or erosion of market values. Investments may be
made as allowed by the Florida Statutes including the SBA, interest-bearing deposits or savings
accounts in banks provided such deposits are secured by collateral as prescribed by Florida
statute, obligations of the U.S. government and its agencies and other securities in management
type investment companies, provided such investments are collateralized by U.S. government
obligations.
Custodial Credit Risk: Custodial risk is the risk that, in the event of the failure of the
counterparty, the Trust will not be able to recover the value of its investments or collateral
securities that are in the possession of an outside party. All of the Trust's investments are either
held in the name of the Trust or held in trust under the Trust's name.
Concentration of Credit Risk: In order to reduce the risk of default, the Trust will use every
possible effort whereby no single financial institution may hold more than 50% of the investment
portfolio at the current time of investment placement, exclusive of banks qualified as public
depositories with the State of Florida, U.S. Treasury securities or Federal National Mortgage or
Government National Mortgage securities held in safekeeping except on a short term basis.
- 13 -
PUBLIC RISK MANAGEMENT OF FLORIDA
• GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS -CONTINUED
Years Ended September 30, 2011 and 2010
NOTE 3 - CLAIMS PAYABLE
The Trust establishes a liability for both reported and unreported insured events, which includes
estimates of both future payments of losses and related claims adjustment expenses. The
following represents changes in those aggregate liabilities for the Trust during the past year:
2011 2010
Unpaid Claims And Claim Adjustment Expenses At The
Beginning Of The Year $ 2,531,414 $ 2,481,229
Incurred Claims And Claim Adjustment Expenses:
Provision For Insured Events Of The Current Year 40,947,759 37,283,124
Increase (Decrease) In Provision For Insured Events Of
Prior Years 2,286,882 (1,775,176)
Total Incurred Claims And Claim Adjustment Expenses 43,234,641 35,507,948
Payments:
Claims And Claim Adjustment Expenses Attributable
To Insured Events Of The Current Year 37,569,924 34,751,710
Claims And Claim Adjustment Expenses Attributable
To Insured Events Of Prior Years 4,818,296 706,053
Total Payments 42,388,220 35,457,763
Total Unpaid Claims And Claim Adjustment Expenses
At The End Of The Year $ 3,377,835 $ 2,531,414
NOTE 4- REINSURANCE COVERAGE
The Trust has purchased specific excess and aggregate excess reinsurance for protection against
losses in excess of the applicable retention. In the event all or any of the reinsuring companies
might be unable to meet their obligations under existing agreements, the Trust would be liable
for such defaulted amounts.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS -CONTINUED
Years Ended September 30, 2011 and 2010
NOTE 4—REINSURANCE COVERAGE—CONTINUED
The Trust carries the following aggregate excess reinsurance coverage:
Fund Years Attachment Point Maximum Coverage
2000/2001 Various $1,000,000
2001/2002 Various 1,000,000
2002/2003 Various 1,000,000
2003/2004 Various 1,000,000
2004/2005 Various 1,000,000
2005/2006 Various 1,000,000
2006/2007 Various 1,000,000
2007/2008 Various 1,000,000
2008/2009 Various 2,000,000
2009/2010 Various 2,000,000
2010/2011 Various 2,000,000
The Trust carries the following specific excess reinsurance coverage:
Fund Years Attachment Point Maximum Coverage
2000/2001 $ 60,000 $ 940,000
2001/2002 60,000 940,000
2002/2003 80,000 1,920,000
2003/2004 90,000 1,910,000
2004/2005 100,000 1,900,000
2005/2006 100,000 1,875,000
2006/2007 135,000 4,865,000
2007/2008 150,000 4,850,000
2008/2009 175,000 4,825,000
2009/2010 200,000 4,825,000
2010/2011 300,000 Unlimited
The amount deducted from claims expense for reinsurance recoverable was $486,045 and
$1,229,427 for the years ended September 30, 2011 and 2010, respectively.
NOTE 5 -RELATED PARTY TRANSACTIONS
The Trust receives administrative services and shares its facilities with the Public Risk
Management of Florida property and casualty risk pool. Expenses for services provided to the
Trust during the fiscal years ended September 30, 2011 and 2010 were $206,499 and $198,918,
respectively.
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PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended September 30, 2011 and 2010
NOTE 6 - CONTINGENCY - TERMINATION OF SERVICE CONTRACT
In the event of cancellation or non-renewal of the Trust's service contract, the service company
will continue to manage all pending claims and claims occurring in the service term but not
reported prior to the date of termination. The amount of fees will be based upon the service
company's prevailing rate on the date of termination. No provision has been made in the
financial statements for such service fees since the amount cannot be determined.
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REQUIRED SUPPLEMENTARY INFORMATION
PUBLIC RISK MANAGEMENT OF FLORIDA
GROUP HEALTH TRUST
CLAIMS DEVELOPMENT INFORMATION SINCE INCEPTION
•
For the Period October 1,2001 through September 30,2011
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
Required conribution and
investment revenue:
Earned $11,203,773 $14,170,524 $19,817,011 $23,595,216 $26,669,538 $31,777,240 $32,753,459 $35,775,576 $39,112,307 $46,986,990
Ceded (1,167,514) (1,163,049) (1,590,948) (1,852,674) (1,999,074) (2,299,830) (2,388,743) (1,965,696) (2,074,435) (1,767,400)
Net 10,036,259 13,007,475 18,226,063 21,742,542 24.670,464 29,477,410 30,364,716 33,809,880 37,037.872 45,219.591
Unallocated expenses 1,114,776 1,384,860 1,943,112 2,298.226 2,489.467 2,652,161 2,832,971 3.001,832 3.365,856 3.786,576
Estimated claims and
expenses,end of policy year:
Incurred 8,259,761 10,262,022 13,514,258 19,419,516 21,879,744 23,745,823 28,432,755 31,736,179 38,512,551 41,399.271
Ceded (362,855) (670,469) (367,843) (2,214,785) (1,303.424) (1,152,796) (4,195,995) (1,340,890) (1,229,427) (451,512)
Net incurred 7,896,906 9,591,553 13,146,415 17,204,731 20.576,320 22,593,027 24,236,760 30,395,289 37,283,124 40,947,759
Net paid(cumulative)as of:
End of policy year 7,253,622 8,563,883 12,001,349 15,190,218 18,345,003 20,354,701 27,147,631 27,914,060 34,751.710 37,569.924
One year later 8,056,167 9,482.164 14,169,080 17,208,429 20,310,567 22,742,848 26,579,768 28,457,453 39,557,577 -
Two years later 8,056,167 9,494,476 14,127,291 17,185,053 20.321,724 22,849,251 26,730,246 28,469,682 - -
Three years later 8,056,167 9,488,863 14.062,244 17,185,053 20,610.062 22,849,250 26,730,246 - - -
Four years later 8,056,167 9,487,152 14,062,244 17,185,053 20,610,063 22,849,250 - - - -
Five years later 8,056,167 9,487,152 14,062,244 17,185,054 20,610,063 - - - - -
Six years later 8,056,167 9,487,152 14,070,184 17,185,054 - - - - - -
Seven years later 8,056,167 9,487,152 14,070.184 - - - - - - -
Eight years later 8,056,167 9,487,152 - - - - - - - -
Nine years later 8,056,167 - - - - - - - - -
Reestimated ceded claims and expenses 362,855 670,469 359,903 2,214,784 1,303,423 1,152,797 4,045,517 1,340,872 1,263,961 -
Reestimated net incurred claims
and expenses:
End of policy year 7,896,906 9,591,553 13,146,415 17,204,731 20,576,320 22,593,027 24,236,760 30,395,289 37,283.124 40,947,759
One year later 8,056,167 9,482,163 14,169,080 17,208,429 20,310,567 22,742,848 26,579,768 28,457,453 39,557,577 -
Two years later 8.056,167 9,494,476 14,127,291 17,185,053 20,321,724 22,849,251 26,730,246 28,469,882 - -
Three years later 8,056,167 9,488,863 14,062,244 17,185,053 20,610,062 22,849,250 26,730,246 - - -
Four years later 8,056,167 9,487,152 14,062,244 17,185,053 20,610,063 22,849,250 - - - -
Five years later 8,056,167 9,487,152 14,062,244 17,185,054 20,610,063 - - - - -
Six years later 8,056,167 9,487,152 14,070,184 17,185,054 - - - - - -
Seven years later 8,056,167 9,487,152 14,070,184 - - - - - - -
Eight years later 8,056.167 9,487,152 - - - - - - - -
Nine years later 8,056,167 - - - - - - - - -
Increase in estimated net incurred claims
and expenses from end of policy year $ 159,261 $ (104,401) $ 923,769 $ (19,677) $ 33,743 $ 256,223 $ 2,493,486 $(1,925,407) $ 2,274,453 $ -
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