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SAIF CORPORATION BOARD OF DIRECTORS MEETING. SAIF Corporation. 2:00 p.m. Salem, Oregon

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SAIF CORPORATION BOARD OF DIRECTORS MEETING Monday SAIF Corporation 440 Church Street SE 2:00 p.m. Salem, Oregon After determining a quorum was present, the meeting was called to order at 2:01 p.m. Roll
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SAIF CORPORATION BOARD OF DIRECTORS MEETING Monday SAIF Corporation 440 Church Street SE 2:00 p.m. Salem, Oregon After determining a quorum was present, the meeting was called to order at 2:01 p.m. Roll call: Catherine Travis, Chair Robb Van Cleave, Vice Chair Krishna Balasubramani Kevin Jensen SAIF Corporation personnel present: John Gilkey, Interim President and CEO Cathy Cortes, Division Assistant III Chris Davie, Vice President of Corporate Policy and External Affairs Kathy Gehring, Vice President of Claims Michelle Graham, Vice President of Policyholder Services Bruce Hoffman, Vice President of Underwriting Services Olivia Keefer, Actuarial Analyst Gina Manley, Controller Theresa McHugh, Vice President of Financial Services Peter Merck, Research and Analysis Manager Tracy Meyer, Corporate Projects Coordinator Dave Miller, Communications Coordinator Pat Morrill, Agency and Group Program Coordinator Joe Nhem, Actuarial Supervisor Cathy Pollino, Chief Internal Auditor Shannon Rickard, Vice President of Legal Services Margaret Schachtsick, HRIS Analyst Pam Woods, Vice President of Claims Kellie Lute, Assistant to the Board Other attendees: Kevin Wick, PricewaterhouseCoopers Craig Scukas, PricewaterhouseCoopers Dona Winkler, Bickmore REGULAR BUSINESS MEETING Approval of board minutes Motion Mr. Balasubramani, second Mr. Jensen, to approve the minutes of the meeting of March 12, The vote was unanimous, and the motion was carried. SAIF Corporation 400 High St Salem, OR P: Page 2 Motion Mr. Van Cleave, second Mr. Balasubramani, to have the transcripts of the May 7, 2014, and the May 9, 2014, meetings serve as the minutes, and to approve the minutes. The vote was unanimous, and the motion was carried. Financial reports 2014 first-quarter financial report Theresa McHugh reported that financial results for the first quarter were stable. Premiums continued to increase, and new sales remained strong. Retention by premium size and policy count was at 99.9 percent. Investment income for the first quarter of 2014 was higher than the first quarter of The net realized investment gains for the first quarter were slightly less than the first quarter of At the end of the first quarter, surplus increased $7.8 million as a result of investment gains. Chair Travis asked if there are concerns regarding the increased claim counts and increased medical payments. Ms. McHugh explained that growth in claims usually occurs as premium increases. Mr. Van Cleave asked if there are concerns that severe claims will increase as a result of the growth in premium. Pam Woods replied that the severe claims have not increased as much as the claim volume has increased. First-quarter investments Gina Manley reported that SAIF s total investment portfolio was a positive 2.6 percent for the quarter, which is 32 basis points above the benchmark. SAIF s fixed income portfolio was up 2.7 percent, which is 41 basis points above the benchmark. The equity portfolio was up 1.4 percent, which is 8 basis points above the benchmark. Due to the low interest rate environment, SAIF s investments will only show a modest increase. At the end of the fourth quarter, SAIF s investment portfolio was in compliance with the approved policy. Budget report Ms. McHugh reported that first-quarter expenditures were approximately $2.6 million under budget. Major items contributing to the current year-to-date budget variance are savings in the following areas: employee costs, including SAIF s self-funded medical insurance; agent commissions; services and supplies; and equipment and facility expenses. There were overages in credit card fees and service agency fees. It is anticipated that operating expenses will be approximately $1.5 million under budget at year end. CEO s leave and expenses The board reviewed a summary of John Plotkin s leave and expenses for the first quarter, as well as Brenda Rocklin s leave and expenses for the first quarter. There were no questions. Page 3 Report from board-appointed actuary Ms. McHugh reported that Request for Proposals were issued in 2013 for the boardappointed actuary. PricewaterhouseCoopers (PWC) was selected as the new boardappointed actuary. Kevin Wick, with PWC, provided an overview of the actuarial opinion process in the regulated insurance industry. He reported that SAIF s year-end 2013 reserves for unpaid claims ($3.06 billion) are within a reasonable range, and that SAIF received a clean opinion. A review of the comparative findings with the year-end reserves for 2012 found that results are similar, with a reasonable range from $2.6 billion to $3.5 billion. There is a level of uncertainty regarding the total future payout for losses and loss expenses, primarily due to the following factors: Lifetime payments to injured workers Medical inflation Mortality changes Catastrophic claims Geographical concentration Target surplus Joe Nhem presented a report recommending that the board adopt a target surplus range of $767 million to $1,004 million. The methods utilized for determining the target surplus are a modified Risk-Based Capital (RBC) formula and a Dynamic Financial Analysis (DFA) model. The modified RBC formula adjusts the required minimum surplus formula to include the additional factors required of an operating surplus. The DFA model uses simulation to quantify the variability of key influences on SAIF s surplus. Motion Mr. Van Cleave, second Mr. Jensen, to approve the recommended target surplus range of $767 million to $1,004 million. The vote was unanimous, and the motion was carried. Group contracts Pat Morrill proposed renewing contracts with three association partners for Group Insurance Agreements. There are 46 policyholder members, representing approximately $400,000 in premium, currently participating in the three association programs. The annual payment for each group contract remained at the 2013 level. Three-year term: Oregon Concrete and Aggregate Producers Association Technology Association of Oregon Eugene Chamber of Commerce Motion Mr. Balasubramani, second Mr. Jensen, to approve the proposed group contracts as outlined by Ms. Morrill. The vote was unanimous, and the motion was carried. Page 4 Corporate Performance Report Ms. McHugh highlighted the key performance indicators for the past year. Surplus is healthy and above the minimum amount required by regulators. The direct operating expense ratio increased slightly due to the need for additional staffing as a result of the increased claim volume. Sales increased significantly in Employee turnover, mainly due to retirements, is up but within SAIF s average range of four to eight percent per year. The claims frequency rate held steady at 1.35 claims per $1.0 million in payroll. The results were positive in the return-to-work and assigned risk categories. Medical payments were reduced by approximately $113 million in For the third consecutive year, the average turnaround time for paying medical bills was 18 days. President s report Contract report John Gilkey provided the board with the pending contracts list. Mr. Gilkey noted that SAIF entered a contract with CFM Strategic Communications, Inc. (CFM), for consulting services related to internal communications on May 14, SAIF would like to expand the existing contract with CFM to include external communications. Motion Mr. Van Cleave, second Mr. Jensen, to approve the contract amendment with CFM Strategic Communications, Inc., as outlined by Mr. Gilkey. The vote was unanimous, and the motion was carried. Miscellaneous Mr. Gilkey reported that Requests for Qualifications were issued in early April for a construction project manager for the Salem campus project. Eleven submissions were received. The committee for this project reviewed the submissions and selected five candidates to be interviewed. The committee consulted with the Executive Council (EC) regarding the interview process. The EC decided it would be best to schedule the interviews for later this summer. The candidates have been contacted and are comfortable with postponing the interviews. The EC reviewed the Corporate Strategic Plan in April and made a decision to involve SAIF employees in the process. As a result, approximately one dozen focus groups were held in May to assess the strengths, weaknesses, opportunities, and threats facing the organization. Each focus group was facilitated by an EC member, or by Toni Keeton, SAIF s Corporate Projects Coordinator. Approximately 116 employees participated in the groups. The results are being compiled. The outcome should provide a view of SAIF s strategic position as it is perceived at all levels of the organization. Blue Research, Inc., conducted a policyholder survey in March. Mr. Gilkey said that the survey results showed that 76 percent of policyholders were extremely satisfied with the service they receive from SAIF. Only two percent were extremely dissatisfied. Policyholders highly valued SAIF s website and on-site safety visits from SAIF staff. Dr. Paul Abel, with Blue Research, Inc., will provide detailed information about the survey before the end of the year. Page 5 The Bend office relocation continues to move forward. Tenant improvements will be completed at the end of July. Staff will move to the new location in August. Forward-looking calendar Due to schedule conflicts with SAIF s auditors, two board meetings were scheduled September. In response to Mr. Gilkey s question, the board made a decision to consolidate the two meetings to a date in early September. Election of board officers The board elected officers in compliance with the SAIF Corporation Bylaws. Motion Mr. Van Cleave, second Mr. Jensen, to reappoint Cathy Travis as the Chair. The vote was unanimous, and the motion was carried. Motion Mr. Jensen, second, Mr. Balasubramani, to reappoint Robb Van Cleave as the Vice Chair. The vote was unanimous, and the motion was carried. Other Business/Public Comment Mr. Van Cleave asked the board to consider meeting in late July or early August. The board agreed, and a tentative meeting date will be scheduled. There was no public comment. Report from Board Compensation Committee Motion Mr. Balasubramani, second Mr. Van Cleave, to approve the Compensation Committee minutes for the meeting of May 28, The vote was unanimous, and the motion was carried. Mr. Van Cleave reported that the Compensation Committee received and discussed the annual market data and CEO salary information to determine the salary for SAIF s Interim President and CEO. The committee recommended that the board place Mr. Gilkey s annual salary at $276,300, retroactive to May 9, Approve Interim President and CEO compensation Motion Mr. Jensen, second Mr. Balasubramani, to approve the Board Compensation Committee s recommendation of an annual salary for Mr. Gilkey, SAIF s Interim President and CEO, in the amount of $276,300, retroactive to May 9, The vote was unanimous, and the motion was carried. Adjournment Motion Mr. Jensen, second Mr. Balasubramani, to adjourn the meeting. The vote was unanimous, and the motion was carried. Page 6 There being no further business, the meeting was adjourned at 3:12 p.m. Kellie Lute, Executive Assistant to the Board
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