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Help Financial Statements For Year Ended April 30, 2003• • • .High -Level Excess Liability Pool, Illinois General Purpose Financial Statements and Independent Auditors' Report April 30, 2003 and 2002 E • [] [, • • • MILLER COOPER & CO., LTD. 19 MILLER CAPER &C0.1Ltd ACCOUNTANTS AND CONsuLTANrs Members of the Board of Directors High -Level Excess Liability Pool, Illinois In planning and performing our audit of the financial statements of the High -Level Excess Liability Pool, Illinois (the Pool) for the year ended April 30, 2003, we considered its internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control. However, we noted several matters that are opportunities for strengthening internal controls and operating efficiency and certain matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the Company's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Because of inherent limitation of internal control, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the internal control to future periods is subject to the risk that may become inadequate because of changes in conditions or that the degree of compliance may deteriorate. The reportable conditions and our comments and suggestions follow: Investment Income The investments are adjusted to market value only at the end of the fiscal year. We suggest the Pool prepare monthly reconciliations of the investment accounts to properly reflect interest, dividends, and realized and unrealized gains/losses on a more timely basis. In addition, identify any unexpected differences and allow for further investigation in a timely manner. Management Response: The Treasurer reconciles the bank statements and investment reports via an excel spreadsheet that is updated monthly. Journal entries are made to record year to date cumulative investment income for periodic income statements issued to the Board for meetings and at year end. Booking interest income monthly from each account to the quick books general ledger program would add administrative effort. The equity investments, in particular, are more complicated to track in terms of realized and unrealized investment gains, and does result in some additional work for the auditors at year end. The Treasurer feels the time to make this reporting improvement is not worth the effort. 650 DUNDEE ROAD, SurrE 250 NORTHBROOX, IL 60062 -2759 PHONE 847/205 -5000 FAX 847/205 -1400 e -mail mccltd@millercooper.com Members of the Board of Directors High -Level Excess Liability Pool, Illinois REQUIRED COMMUNICATION TO THE MEMBERS OF THE BOARD OF TRUSTEES Page Two The American Institute of Certified Public Accountants requires the independent auditor to communicate certain matters related to the conduct of each audit to those members of the Pool's Board who have responsibility for the oversight of the financial reporting process. The following is our related comment. Segregation of Duties One individual has significant control over and responsibility for your accounting system. While we recognize that it may not be cost effective to employ more people, we bring it to your attention and emphasize that a strong system of supervision and review by management is needed to compensate for this weakness. While we are aware that the board has formerly accepted this reportable condition, it is important for you to continue to recognize that regular and active involvement in supervisory activities is an integral and critical component of the Pool's system of internal control procedures. Estimates Included in the Pool's Financial Statements In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. This report is intended solely for the information and use of the Board of Directors, management and others within the Pool and is not intended to be and should not be used by anyone other than these specified parties. We appreciate serving the Pool and would be happy to assist you in addressing and implementing any of the suggestions in this letter. MILLER, COOPER & CO., LTD. Certified Public Accountants Northbrook, Illinois June 10, 2003 MIUMP mgm 03 1.1 MILLER COOPER & CO., LTD. 0 0 0 • 0 0 0 E i • CONTENTS Page PRINCIPAL OFFICIALS 3 INDEPENDENT AUDITORS' REPORT 4 GENERAL PURPOSE FINANCIAL STATEMENTS Balance Sheets 6 Statements of Revenues, Expenses, and Changes in Retained Earnings - Budget and Actual 7 Statements of Cash Flows. 8 Notes to the Financial Statements 9-15 REQUIRED SUPPLEMENTARY INFORMATION 17-19 MILLER COOPER & CO., LTD. 0 0 C, ID 0 High -Level Excess Liability Pool, Illinois PRINCIPAL OFFICIALS April 30, 2003 Diane Lembesis Chairman Dave Richardson Vice- Chairman Robert Nowak Secretary Edward McKee Treasurer MILLER COOPER & CO., LTD. 11 • MILLER CAPER &Co.)Ltd ACCOUNTANTS AND CONsuLTAN 's INDEPENDENT AUDITORS' REPORT Members of the Board of Directors High -Level Excess Liability Pool, Illinois We have audited the accompanying general purpose financial statements of the High -Level Excess Liability Pool, Illinois, as of and for the years ended April 30, 2003 and 2002. These general purpose financial statements are the responsibility of the High -Level Excess Liability Pool, Illinois' management. Our responsibility is to express . an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, . evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, is the financial position of the High -Level Excess Liability Pool, Illinois as of April 30, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the general purpose financial statements of High -Level Excess Liability Pool, Illinois, taken as a whole. The accompanying financial information listed as required supplementary information in the accompanying contents, pages 17 through 19, is presented for purposes of additional analysis required by the Governmental Accounting Standards Board and is not a required part of the general purpose financial statements of the High -Level Excess Liability Pool, Illinois. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a • whole. MILLER, COOPER & CO., LTD. • Certified Public Accountants Northbrook, Illinois June 10, 2003 650 DUNDEE ROAD, surrE 250 NORTHBROO& EL 60062 -2759 PHONE 847/205 -5000 FAx 847/205 -1400 e -mail mccltd@millercooper.com 0 r • Is 1 • • GENERAL PURPOSE FINANCIAL STATEMENTS MILLER COOPER & CO., LTD. • High -Level Excess Liability Pool, Illinois BALANCE SHEETS • April 30, 2003 and 2002 ASSETS 2003 2002 • CURRENT ASSETS Cash and investments $ 7,137,854 $ 6,525,091 Interest receivable - 47,396 Total assets $ 7,137,854 $ 6,572,487 i LIABILITIES AND FUND EQUITY • CURRENT LIABILITIES Accounts payable $ 4,000 $ 4,000 Claims reserve 1,948,888 1,383,000 Total liabilities 1,952,888 1,387,000 ' FUND EQUITY Retained earnings 5,184,966 5,185,487 Total liabilities and fund equity $ 7,137,854 $ 6,572,487 0 0 • • ICA The accompanying notes are an integral part of these statements. -6- MILLER COOPER & Co., LTD. 0 • • t U • s 0 High -Level Excess Liability Pool, Illinois STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS - BUDGET AND ACTUAL Years ended April 30, 2003 and 2002 Operating revenues Member assessments Operating expenses Risk management consultants Excess insurance Claims expense Attorney's fees Case review Corporate matters Auditing fees Surety bonds Meeting expenses Office supplies and expense Memberships and dues Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Investment income (expense) NET INCOME (LOSS) Retained earnings Beginning of year End of year 2003 2002 Budget Actual Budget , Actual $ 1,215,900 $ 1,215,900 $ 1,013,250 $ 1,013,249 35,000 40,992 400,000 370,375 - 608,139 30,000 30,500 240,000 240,000 - 2,368,514 30,000 14,221 27,000 45,704 20,000 18,000 15,122 5,000 1 ,429 4,750 4,400 1,000 1,068 1,000 - 2,000 - 2,000 252 100 - 100 - 5,000 3,094 5,000 5,360 498,100 1,055,375 327,850 2,709,852 717,800 160,525 685,400 (1,696,603) 150,000 (161,046) 600,000 303,282 $ 867,800 (521) $ 1,285,400 (1,393,321) 5,185,487 6,578,808 $ 5,184,966 $ 5,185,487 The accompanying notes are an integral part of these statements. -7- MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool, Illinois STATEMENTS OF CASH FLOWS Years ended April 30, 2003 and 2002 f 0 • The accompanying notes are an integral part of these statements. -8- MILLER COOPER & Co., LTD. 2003 2002 Cash flows from operating activities Operating income (loss) $ 160,525 $ (1,696,603) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities Unrealized gain (loss) on investments 41,217 (39,646) Increase (decrease) in assets and liabilities Accounts payable - (10,875) Claims reserve 565,888 (1,738,000) Net cash provided by (used in) operating activities 767,630 (3,485,124) Cash flows from investing activities Sales of investments 2,628,562 2,973,671 Purchases of investments (672,099) (1,307,610) Investment income (loss) (154,867) 381,209 Net cash provided by investing activities 1,801,596 2,047,270 ! INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,569,226 (1,437,854) Cash and cash equivalents Beginning of year 105,879 1,543,733 End of year $ 2,675,105 $ 105,879 Reconciliation Cash and cash equivalents $ 2,675,105 $ 105,879 Investments 4,462,749 6,419,212 7 Total cash and investments $ 7,137,854 $ 6,525,091 f 0 • The accompanying notes are an integral part of these statements. -8- MILLER COOPER & Co., LTD. • High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS • Agri130, 2003 and 2002 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of High -Level Excess Liability Pool, Illinois (Intergovernmental Risk Pool), have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard - setting body for establishing governmental accounting and financial reporting principles. The more significant of the Intergovernmental Risk Pool's accounting policies are described below. 1. Reporting Entity and its Services • In evaluating how to define the Intergovernmental Risk Pool for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 14, "The Financial Reporting Entity ". Based upon the application of these criteria, there are no • potential component units to be included in the Intergovernmental Risk Pool's reporting entity. The Intergovernmental Risk Pool is defined as a joint venture under these standards. The Intergovernmental Risk Pool was organized on April 1, 1987. The current agreement expires April, 30, 2008. The purpose of the Intergovernmental Risk Pool is to act as a joint self - insurance pool • for the purpose of seeking the prevention or lessening of liability claims for injuries to persons or property or claims for errors and omissions made against the members and other parties included within the scope of coverage of the Intergovernmental Risk Pool. The initial amount of coverage provided to the members by the Intergovernmental Risk Pool was $1,000,000 per occurrence and in the aggregate, with a self - insured retention of $1,000,000. The amount of coverage provided to the members by the • Intergovernmental Risk Pool for subsequent years is as follows: Year ended Occurrence Excess April 30, Limit Coverage • 1988 -1994 $ 5,000,000 $ - 1994 -1996 5,000,000 5,000,000 1996 -1999 2,000,000 8,000,000 1999 -2000 2,000,000 10,000,000 2000 -2001 2,000,000 12,000,000 2001 -2003 3,000,000 8,000,000 Ci 0 MILLER COOPER & CO., LTD. • High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS April 30, 2003 and 2002 0 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. Reporting Entity and its Services (Continued) Entities joining the Intergovernmental Risk Pool, at its inception, must remain members for a minimum • of ten years. Entities applying for membership in the Intergovernmental Risk Pool may do so on approval of a two- thirds vote of the Board of the Intergovernmental Risk Pool. Underwriting and rate - setting policies have been established after consultation with actuaries. Members are subject to a supplemental assessment in the event of deficiencies. • Ll 100.00% 100.00% $ 15,731,720 -10- MILLER COOPER & CO., LTD. At April 30, 2003, the following municipalities were members of the Intergovernmental Risk Pool: % Share Current Assets, Cumulative Annual Liabilities, Premium Premium and Equity Contributions Village of Arlington Heights 11.77% 11.82% $ 1,858,538 Village of Chicago Ridge 2.56 2.47 389,096 Village of Deerfield 3.55 3.55 558,829 City of Des Plaines 9.24 10.16 1,598,728 Elk Grove Village 7.77 7.74 1,217,632 Village of Glenview 7.82 6.89 1,084,372 Village of Hoffinan Estates 8.51 7.74 1,217,098 Village of Lincolnshire 1.76 1.54 242,069 Village of Mount Prospect 7.29 7.38 1,161,674 Village of Oak Lawn 8.89 9.36 1,472,083 City of Park Ridge 6.04 5.74 903,752 Village of Skokie 9.16 9.77 1,537,001 Village of Streamwood 4.39 4.36 686,130 City of Wheaton 7.47 7.37 1,158,642 Village of Winnetka 3.78 4.11 646,076 • Ll 100.00% 100.00% $ 15,731,720 -10- MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS 0 April 30, 2003 and 2002 0 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2. Fund Accounting The Intergovernmental Risk Pool operates as a single proprietary fund, more specifically as an enterprise fund. Proprietary funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Goods or services from such activities are provided to outside parties. Its operations are such that: i a) The Intergovernmental Risk Pool provides risk management services to its member municipalities, and 0 • t K] • b) Members fund the Intergovernmental Risk Pool to cover the costs of providing such services. 3. Basis of Accountiniz The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Proprietary fund -type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The accrual basis of accounting is utilized by proprietary fund types. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The Intergovernmental Risk Pool has elected to apply all applicable GASB pronouncements and all FASB Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins (ARB) issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. -11- MILLER COOPER & Co., LTD. 0 High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS April 30, 2003 and 2002 • NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 4. Budgets Budgets are adopted on a basis consistent with GAAP. Annual budgets are adopted for the Intergovernmental Risk Pool. All annual budgets lapse at fiscal year end. 5. Cash Equivalents For purposes of the statement of cash flows, the Intergovernmental Risk Pool considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. 6. Claims Reserve Liabilities The Intergovernmental Risk Pool establishes claims reserve liabilities based upon an estimate of the ultimate cost of claims that have been reported but not settled, and of claims that have been incurred but not reported. The length of time for which such costs must be estimated varies depending on the individual facts and circumstances. Adjustments to claims reserve liabilities are charged or credited to expense in the period in which they are made. (See Note E) 9 7. Use of Estimates In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the 41 reporting period. Because the final resolution of potentially large claims against the Intergovernmental Risk Pool is uncertain, management believes that actual results could differ materially from those estimates. • • • -12- MILLER COOPER & CO., LTD. • • High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS April 30, 2003 and 2002 • NOTE B - LEGAL COMPLIANCE AND ACCOUNTABILITY Budgets The budget is prepared by function and activity, and includes information on the past year, current year • estimates, and requested amounts for the next fiscal year. The proposed budget is presented to the governing body for review. The governing body may add to, subtract from, or change amounts, but may not change the form of the budget. • The budget may be amended by a majority vote of the governing body. No amendments were passed for 2003 and 2002. NOTE C - DEPOSITS AND INVESTMENTS Permitted Deposits and Investments - The Intergovernmental Risk Pool's investment policy mirrors State Statutes which authorize the Intergovernmental Risk Pool to make deposits /invest in commercial banks, savings and loan institutions, obligations of the U.S. Treasury and U.S. Agencies, insured credit union shares, repurchase agreements, commercial paper rated within the three highest classifications by at least two standard rating services, and the Illinois Funds. • Investments • • The Intergovernmental Risk Pool's investments are categorized to give an indication of the level of risk assumed by the entity at year -end. Category 1 includes investments that are insured or registered for which the securities are held by the Intergovernmental Risk Pool or its agent in the Intergovernmental Risk Pool's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent in the Intergovernmental Risk Pool's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its trust department or agent but not in the Intergovernmental Risk Pool's name and uninsured, unregistered and uncollateralized investments. -13- MILLER COOPER & CO., LTD. • High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS April 30, 2003 and 2002 • NOTE C - DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) Category Fair • 1 2 3 Value Common stocks $.2,017,390 $ - $ - $ 2,017,390 Not subject to risk Money market mutual funds 92,919 Illinois Metropolitan Investment Fund 2,352,440 Illinois Funds 2,675,105 $ 7,137,854 The money market fund is secured by the Securities Investor Protection Corporation (SIPQ and additional private insurance. The Illinois Funds are managed by the Illinois State Treasurer as provided by the State Statutes, and the Illinois Metropolitan Investment Fund is managed by the financial institutions in which it is held. The market value of each fund equals the carrying value. NOTE D - CONTINGENT LIABILITIES Litigation There are several claims and legal actions pending against members of the Intergovernmental Risk Pool. 40 Management and their legal counsel believe that certain actions against the members could result in losses to the Intergovernmental Risk Pool. Except as discussed in Note E, no additional amounts have been recorded as losses and additional claims reserve because unfavorable outcomes are not probable and cannot be reasonably estimated. • • • -14- MILLER COOPER & Co., LTD. Ll High -Level Excess Liability Pool, Illinois NOTES TO THE FINANCIAL STATEMENTS • April 30, 2003 and 2002 • NOTE E - CLAIMS RESERVE LIABILITIES As discussed in Note A, the Intergovernmental Risk Pool establishes a liability for both reported and unreported insured events, which includes estimates of future payments for both claims and losses and related claims adjustment expenses. The schedule below presents the changes in claims reserve for the • years ended April 30, 2003 and 2002, respectively. Claims reserve at beginning of year • Claims expense Claims paid Claims reserve at end of year • 10 • • • • -15- MILLER COOPER & CO., LTD. $ 1,383,000 608,139 (42,251) $ 1,948,888 $ 3,121,000 2,368,514 (4,106,514) $ 1,383,000 REQUIRED SUPPLEMENTARY INFORMATION MILLER COOPER & CO., LTD. High -Level Excess Liability Pool, Illinois REQUIRED SUPPLEMENTARY INFORMATION April 30, 2003 and 2002 C, A Ten -Year Claims Development Information The table below illustrates how the Intergovernmental Risk Pool's earned revenues and investment income compare to related costs of losses and other expenses assumed by the Intergovernmental Risk Pool as of the end of each of the last ten years. The rows of the table are defined as follows: (1) This line shows the total of each fiscal year's earned contribution revenues and investment revenues. (2) This he shows each fiscal year's other operating costs of the Intergovernmental Risk Pool, including overhead and claims expense not allocable to individual claims. (3) This line shows the Intergovernmental Risk Pool's incurred claims and allocated claims adjustment expenses (both paid and accrued) as originally reported at the end • of the first year in which the event that triggered coverage under the contract occurred (called policy year). U -17- MILLER COOPER & CO., LTD. Reconciliation of Claims Reserve Liabilities by Type of Contract The schedule below presents changes in claims and liabilities for the past two years for the Intergovernmental Risk Pool's liability contracts: Liability r 2003 2002 Unpaid claims and claims adjustment expenses at the beginning of the fiscal year $ 1,383,000 $ 3,121,000 Incurred claims and claims adjustment expenses • Provision for insured events of the current fiscal year 505,000 - Increases in provision for insured events of prior fiscal years 103,139 2,368,514 Total incurred claims and claims adjustment expenses 608,139 2,368,514 Payments Claims and claims adjustment expenses attributable to insured events of the current fiscal year - - Claims and claims adjustment expenses attributable to insured events of prior fiscal years 42,251 4,106,514 • Total payments 42,251 4,106,514 Total unpaid claims and claims adjustment expenses at the end of the fiscal year $ 1,948,888 $ 1,383,000 C, A Ten -Year Claims Development Information The table below illustrates how the Intergovernmental Risk Pool's earned revenues and investment income compare to related costs of losses and other expenses assumed by the Intergovernmental Risk Pool as of the end of each of the last ten years. The rows of the table are defined as follows: (1) This line shows the total of each fiscal year's earned contribution revenues and investment revenues. (2) This he shows each fiscal year's other operating costs of the Intergovernmental Risk Pool, including overhead and claims expense not allocable to individual claims. (3) This line shows the Intergovernmental Risk Pool's incurred claims and allocated claims adjustment expenses (both paid and accrued) as originally reported at the end • of the first year in which the event that triggered coverage under the contract occurred (called policy year). U -17- MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool, Illinois REQUIRED SUPPLEMENTARY INFORMATION (Continued) Ten Year Claims Development Information April 30, 2003 and 2002 Ten -Year Claims Development Information (Continued) (4) This section of ten rows shows the cumulative amounts paid as of the end of successive years for each policy year. (5) This section of ten rows shows how each policy year's incurred claims increased or decreased as of the end of successive years. This annual re- estimation results from new information received on known claims, 0 reevaluation of existing information on known claims, as well as emergence of new claims not previously known. (6) This line compares the latest reestimated incurred claims amount to the amount originally established (line 3), and shows whether this latest estimate of claims cost is greater or less than originally thought. As data for individual policy years mature, the correlation between original estimates and reestimated amounts is commonly used to evaluate the accuracy of incurred claims currently recognized in less mature policy years. The columns of the table show data for successive policy years. -18- • 1994 1995 1996 1. Net earned required contribution and investment income $ 1,279,550 $ 1,438,193 $ 1,555,612 2. Unallocated expenses 265,087 421,320 357,205 3. Estimated incurred claims and expense, end of policy year 0 0 0 4. Paid (cumulative) as of- End of policy year 0 0 0 One year later 0 0 0 Two years later 0 0 0 Three years later 0 0 0 Four years later 0 0 150,000 Five years later 0 0 3,150,000 Six years later 0 0 6,904,128 . Seven years later 0 0 6,946,379 Eight years later 0 0 Nine years later 0 5. Reestimated incurred claims and expense: End of policy year 0 0 0 One year later 0 0 0 Two years later 0 0 0 Three years later 0 0 0 Four years later 0 0 3,089,000 Five years later 0 0 5,261,000 Six years later 0 0 8,212,128 Seven years later 0 0 8,030,267 Eight years later 0 0 Nine years later 0 6. Increase (decrease) in estimated incurred claims and expense from the end of the policy year 0 0 8,030,267 -18- • 0 �m �m 0 rm 0 • 0 • 0 0 1997 1998 1999 2000 2001 2002 2003 $ 1,411,415 $ 1,393,815 $ 1,741,861 $ 1,462,539 $ 1,546,330 $ 1,316,531 1,054,854 289,740 243,466 155,438 195,627 178,869 295,634 433,015 0 0 0 0 0 0 505,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 352,335 0 352,335 0 0 0 0 0 0 505,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 360,000 1,010,000 0 0 352,335 0 352,335 352,335 0 0 360,000 0 0 0 -19- MILLER COOPER & CO., LTD.