1. The Art of Self-Insurance
Max Koonce, Senior Director, Risk Management, Walmart Stores, Inc.
Marc Salm, Vice President, Risk Management, Publix Super Markets, Inc.
Dave North, President and CEO, Sedgwick
Session FIN201
Wednesday, April 18, 2012
10:15 a.m. - 11:30 a.m.

2. Dave North
President and CEO
Sedgwick

3. What is self-insurance?

4. How does self-insurance compare to alternative programs?

5. What are the keys to an effective self-insurance program?

6. What are the current realities facing self-insurers today?

8. Publix Super Markets
Publix Super Markets, Inc. is a private but widely held grocery company with its corporate headquarters in Lakeland, Florida.
Publix is the largest employee–owned grocery store in the United States.

9. Publix Super Markets
Publix operates 1051 stores in five southern states: Florida, Georgia, South Carolina, Tennessee and Alabama.
In 2011, Publix sales were over $27 billion.

10. Publix Super Markets
In 2011, Publix was ranked No. 102 by FORTUNE®. Publix has been recognized for 14 years straight as one of FORTUNE® magazine's "100 Best Companies to Work For."

11. Publix’s Casualty Program
Self-insured retentions
Deductibles
Corridors
“Step ups”
Self administration of claims
Third party administration of claims
All designed with the help of our broker.

12. Publix’s Retentions Corridor Deductible Deductible Front
Corridor Deductible
Deductible
Front
Step Up Ded (one time)
SIR WC
General Liability
Druggist
Fleet
D&O
Fiduciary
ODL (outside boards)
Professional E&O
Publix Charities

13. Evolution of a Casualty Program
Objectives
Minimize Total Cost of Risk and corporate SG&A
Optimize the efficiency of the insurance purchase
Understand and control (where possible) impact to F/S
Manage internal business unit budgets and behavior
Maximize claim control (management and settlement)
Alternative Risk Finance
Self-Insurance
Captive
Program Flexibility / Cash Flow
Loss Sensitive Plans
High Deductible
Guaranteed Cost
Financial Volatility

14. Risk Finance – Decision Process
Quantify Retention Options
Retention Decision
Insurance
Transfer
Keep
Funding Decision
Post-Loss Funding Options No
Pre-Loss Funding Strategy
Guaranteed Cost Small Deductible
Large Deductible
Self-Insurance

15. Considerations Impacting Design
Financial
Operational
Cash position
Effective tax rate
Cost of capital
LOC capacity & cost
Need for admitted paper (vendors, regulators)
Cost predictability
Risk tolerance

16. Guaranteed Cost Simple TCOR = GC premium No cash flow advantage
100% of risk transferred to insurer
Budget certainty
No collateral and escrow
Claims administration included
Works for low risk tolerance; high corporate tax rate
No cash flow advantage
Driven more by carrier portfolio rather than individual risk
No immediate credit for good loss experience
No real control over claims handling
Simple Program Structure