1 PUB (MPI) Round 2 Interrogatories 2012 GRA September 2011 PUB (MPI) 2-1 Reference: AP.2, TI.2, TI.3, TI.13, TI.14, TI.15 On or about July 7, 2011, the Corporation filed amended versions of the above-referenced documents, having removed the inter-provincial trucking PIPP costs in accordance with Board Order 122/10. Please file a table comparing the results reflected in each document as filed originally and as amended. PUB (MPI) 2-2 Reference: PUB (MPI) 1-2 Attachment A, PUB (MPI) 1-45 a) Please explain how MPI is working "with its business partners to promote a local collision repair industry that is healthy and sustainable in both economic and environmental terms". b) Please advise of MPI’s current and proposed investments in fostering sustainability. c) Please file a cost benefit analysis relating to the financial commitment for the tool allowance and registered apprentice grant program of almost $900,000 from 2010/11 through 2012/13. d) Please explain how the amounts referenced in (c) above are being expensed by the Corporation. e) Please advise of the number of apprentices who will benefit from the program by year. f) Please advise of the connection between the Autopac premium rebate process and road safety programs, on which public consultation is being sought. g) Please provide a table reflecting the recommendations made in the MNP report, MPI’s response to each recommendation and the proposed expenditures for the implementation of each recommendation. h) Please provide a full listing of performance benchmarks that have been developed pursuant to Recommendation #1 of the MNP Report.
Transcript
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PUB (MPI) Round 2 Interrogatories
2012 GRA
September 2011
PUB (MPI) 2-1
Reference: AP.2, TI.2, TI.3, TI.13, TI.14, TI.15
On or about July 7, 2011, the Corporation filed amended versions of the above-referenced documents, having removed the inter-provincial trucking PIPP costs in accordance with Board Order 122/10. Please file a table comparing the results reflected in each document as filed originally and as amended. PUB (MPI) 2-2 Reference: PUB (MPI) 1-2 Attachment A, PUB (MPI) 1-45 a) Please explain how MPI is working "with its business partners to promote a local
collision repair industry that is healthy and sustainable in both economic and environmental terms".
b) Please advise of MPI’s current and proposed investments in fostering sustainability.
c) Please file a cost benefit analysis relating to the financial commitment for the tool allowance and registered apprentice grant program of almost $900,000 from 2010/11 through 2012/13.
d) Please explain how the amounts referenced in (c) above are being expensed by the Corporation.
e) Please advise of the number of apprentices who will benefit from the program by year.
f) Please advise of the connection between the Autopac premium rebate process and road safety programs, on which public consultation is being sought.
g) Please provide a table reflecting the recommendations made in the MNP report, MPI’s response to each recommendation and the proposed expenditures for the implementation of each recommendation.
h) Please provide a full listing of performance benchmarks that have been developed pursuant to Recommendation #1 of the MNP Report.
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PUB (MPI) 2-3
Reference: PUB (MPI) 1-4 (c)
Please explain how the Corporation determined what premium amounts are charged in the competitive (non-monopoly) jurisdictions. PUB (MPI) 2-4 Reference: PUB (MPI) 1-5 (a) a) The Board requested from the Corporation the Quarterly Crown Corporation Council
(CCC) Reports for the Corporation for the last two years (as opposed to the general CCC reports). Please file the Corporation-specific reports including the reports flowing from the following reviews conducted by the CCC:
CCC Report Items Reviewed
Third quarter, 2009 Governance, corporate plans and strategic initiatives
First quarter, 2010 Capital expenditure programs
Second quarter, 2010 Governance, corporate plans and strategic initiatives
b) Please advise of whether any recommendations have been made to the Corporation by CCC within the last two years, either formally or informally.
PUB (MPI) 2-5 Reference: PUB (MPI) 1-5 (a) & (b) Attachment A a) Please file the Corporation's Audit Committee Meeting Minutes for 2009/10 together
with the Corporation's Board of Directors Meeting Minutes for 2009/10 and 2010/11.
b) Please file a copy of the External Auditor's Findings Report presented at the May 3, 2010 meeting.
c) Please file the draft mock up of the annual financial report for 2012 provided by Deloitte in the IFRS update presented at the July 2010 audit committee meeting (Agenda Item 2.1.B).
d) It is reflected on page 2 of 5 of the minutes of the January 27, 2011 meeting that MPI has earmarked a $100 million provision for IFRS 4. Please explain and provide all
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supporting documentation related to the provision. Please indicate how the current application filing is impacted.
e) Please file a copy of the "Introduction to Stochastic Modeling“ presentation made by Mr. Johnson at the January 27, 2011 meeting.
f) Please file a copy of the Risk Management Evaluation Report presented at the January 27, 2011 meeting.
g) Please file a copy of the “IFRS Update –IAS 37 Resolution and IFRS 4 Phase 2 – Financial Impact Uncertainty” report presented at the March 24, 2011 Audit Committee meeting.
h) Please file a copy of the External Auditor's Findings Report presented at the May 2, 2011 Audit Committee meeting. Please also elaborate on the DSR misclassification of 5,913 customers which resulted in an incorrect placement on the DSR scale and $482,000 in foregone revenue.
PUB (MPI) 2-6 Reference: PUB (MPI) 1-9, PUB (MPI) 1-10, Territory 2 Flat Fee a) Please confirm that the line item "Territory 2 Flat Fee" on PUB/MPI I-9(a) Attachment is
representative of the commissions referenced at the bottom of page 11 of the Regulation (under the heading "Farm Trucks") and at the top of page 12 of the Regulation (under the heading "Passenger Vehicles and A5 Trucks") and provide background on the rationale for these flat fees.
b) Please reconcile the amounts reflected in PUB/MPI I-9(a) Attachment for 2013 & onward with the changes in fees (decrease) to take effect in 2013 as reflected in the Regulation with respect to the following flat fees: "Change customer information", "Change vehicle class or policy details", "Vehicle transfer", "Estate-to-spouse transfer", "Rental car midterm change", "Car protection midterm change" and "Off-road vehicle or motorcycle midterm change"
a) Please provide details on any planned real estate or infrastructure investments or dispositions in the current or test year together with a summary of the proposed terms and conditions related thereto.
b) Please explain the decrease in total Gross Leasable Area at Cityplace in 2011.
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c) Please explain what has led to a doubling of the pension fund transfer charged against Corporate Investment Income in 2010/11.
d) Please reconcile the note disclosure detailing Investment Income and Investment
Management Fees (Note 13 of the 2011 Annual Report) with that presented in PUB/MPI I-13(c) Attachment.
PUB (MPI) 2-8 Reference: PUB (MPI) 1-14 a) Further to the response to (b), please explain the derivation of the amounts provided,
and how these amounts are intended to reflect the impact of changes in market interest rates over each of the cited periods with respect to the value of investment assets classified as HFT.
b) Further to the response to (c), please provide some measure of effectiveness of the Corporation’s immunization strategy over each of the cited periods.
c) Further to the response to (c), please discuss how “a flattened yield curve” and “a
change in credit conditions” are different from a change in market interest rates. PUB (MPI) 2-9 Reference: PUB (MPI) 1-19 (a) Attachment, CAC (MPI) 1-165 a) Please explain why the following responsibility was eliminated from the Investment
Policy Statement:
“The Working Group shall annually provide the Investment Fund Directional Plan to the Investment Committee and the Department by the end of January, which will be forwarded for approval of the Board and the Minister.”
b) Please explain why the benchmark for Universe and Long-Term bonds was changed to a 75/25 weighting (page 13).
c) Please provide a breakdown of the infrastructure investments between pooled funds, segregated funds, direct holdings and co-investments for the years 2010/11, 2011/12 and 2012/13 (page 17).
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d) Please explain why the concentration limits for U.S. and Canadian Equity Investments were eliminated. Please advise of the current concentration limits (page 27).
e) Please explain how the Corporation set benchmark returns for the US equity investment manager to incorporate 80% of RU10 and 20% of RU20.
f) Please indicate the amount of the annual remuneration paid by the Corporation, by Investment Manager, from 2008/09 through 2011/12.
PUB (MPI) 2-10 Reference: PUB (MPI) 1-23 a) Further to the response to (d), please reconcile this response (“no changes made to the
valuation methodology”) to the narrative provided in the Appointed Actuary’s Report as at 31 October 2010 in Sections 6.1.6 and 6.1.8 (“The change in selection of method used for each insurance year …”), and amend the response if needed.
b) Further to the response to (g), please provide additional rationale to that provided in the Appointed Actuary’s Report as at 31 October 2010 in Sections 6.1.6 and 6.1.8 with respect to the changes made in selection of method used for each insurance year.
PUB (MPI) 2-11 Reference: PUB (MPI) 1-24 a) Please file a copy of the “details” with accompanying analysis related to the special IBNR
Provision for a PIPP enhancement referred to in Mr. Johnson’s November 2, 2010 email (part of PUB/MPI I-24(a) Attachment A).
b) Further to the response to (c) and with respect to the evidence of favourable runoff provided to the PUB in 2011 GRA information request PUB (MPI) 2-5 and 2011 GRA hearing Exhibits 12 and 19, please provide a separation of the total amount of this runoff into the portion attributable to changes in experience vs. the portion attributable to changes in valuation methodology vs. the portion attributable to changes in valuation assumptions, including commentary on the basis for this separation.
c) Further to the response to (c), at what point during fiscal 2010/11 did evidence of the
significant Basic – Total (Net) – PIPP (undiscounted) favourable runoff attributable to changes in valuation assumptions first come to light?
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d) Further to the response to (e) and (f), please provide the referenced runoff exhibit from the actuarial review completed for the first quarter of 2011/12, with accompanying commentary as appropriate.
PUB (MPI) 2-12 Reference: PUB (MPI) 1-27 a) Further to the response to (c), please provide a history of the assumed inflation rate for
the Basic valuation at each of five most recent fiscal year ends. b) Further to the response to (c), please provide a five year history of the actual Manitoba
Consumer Price Inflation rate. c) Further to the response to (c), please provide an estimate, with supporting analysis, of
the impact on fiscal year incurred losses arising from the actual inflation rate during the latest fiscal year being below what was assumed in the prior fiscal year end valuation.
d) Further to the response to (f), please provide commentary on any perceived differences
between indexed and non-indexed coverages with respect to the risk associated with:
a) mismatch risk between payment of claims and availability of liquid assets; b) error in estimating the payment pattern of future claims; and c) asset risk including credit/default risk and liquidity risk
as outlined in the Canadian Institute of Actuaries Educational Note “Margins for Adverse
Deviations for Property and Casualty Insurance” dated December 2009. PUB (MPI) 2-13 Reference: PUB (MPI) 1-28 From the response to (c), please explain why it is that the unaudited quarterly financial statements prepared for the third quarter do not reflect any revised figures for unpaid claim liabilities or unearned premium liabilities. PUB (MPI) 2-14 Reference: PUB (MPI) 1-29 a) Further to the response to (b), how does combining the 2005 study’s assumed 120-to-
ultimate tail factor (1.0600) with the 2011 valuation’s average ratio of the latest
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cumulative incurred value to the corresponding value incurred at 120 months (0.9950) in order to derive the assumed 216-to-ultimate tail factor (1.0547) recognize the apparent differences between the 2005 study and the 2011 valuation in assumed incurred development patterns over the first several development intervals beyond 120 months?
b) Further to the response to (d), why hasn’t the 2005 analysis of the estimated 120 months-to-ultimate tail factor of 1.0600 been updated with more current experience, and when is this scheduled to occur?
c) Further to the response to (e), please provide graphs and the customary regresson fit
statistics with respect to the regressions referenced on Appendix F Pages 13 and 22, with accompanying rationale for the selected trend assumptions.
d) Further to the reference in the Appointed Actuary’s Report as at 31 October 2010 in
Sections 6.1.6 (“The change in selection of method used for each insurance year, resulted in a $29.3 million increase in estimated unpaid claims for all insurance years combined”), please provide the corresponding amount, with supporting analysis, for the Appointed Actuary’s Report as at 28 February 2011.
e) Further to the reference in the Appointed Actuary’s Report as at 31 October 2010 in
Sections 6.1.8 (“The change in selection of method used for each insurance year, resulted in a $42.1 million increase in estimated unpaid claims for all insurance years combined”), please provide the corresponding amount, with supporting analysis, for the Appointed Actuary’s Report as at 28 February 2011.
PUB (MPI) 2-15 Reference: PUB (MPI) 1-35 Please provide commentary on the performance and predictive power of the selected exponential and linear regressions for each of Bodily Injury, IRI, ABO (Indexed) and ABO (Non-Indexed), and the implications of this for the resulting exponential and linear forecasts. PUB (MPI) 2-16 Reference: PUB (MPI) 1-38 Please provide documentation of the estimated impact of the revised treatment of the change to the ICAC provision introduced in the 2012 GRA.
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PUB (MPI) 2-17
Reference: AI.12 p. 17, PUB (MPI) 1-39, CAC (MPI) 1-304
a) Please provide the assumptions and detailed calculations to demonstrate the estimated claims cost savings totaling $33.36 million and productivity improvements of $8.56 million.
b) Please also provide a net present value analysis comparing the cost of the PIPP infrastructure project against anticipated savings over the next 7 years.
c) Please provide the analysis framework that MPI intends on employing to compare actual
with forecast savings over the next seven years. PUB (MPI) 2-18 Reference: PUB (MPI) 1-40, TI.18 Section 7 Table a) Please provide a table that compares the loss ratio on fleets with that for Basic products
for the last 10 years.
b) Please confirm that there is an element of judgment or policy within the Corporation's decision to request a change in fleet rebates as opposed to the basis of the request being purely empirical.
c) Please provide the Net Premiums shown in the table at TI.18, Section 7 before the
adjustment to reflect the proposed fleet rebate schedule. d) For the 2010/11 policy year, please provide the number of customers and net premium
for fleet business at each loss ratio level, with premium shown before and after the adjustment in the Fleet Rebate Scale.
PUB (MPI) 2-19 Reference: PUB (MPI) 1-41 Please explain the factors that are behind the insurance premium for the low, medium and high vehicles not declining materially from the premium level established in 2008.
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PUB (MPI) 2-20
Reference: PUB (MPI) 1-44
For each year, please indicate the extent to which the schedule is impacted by cover due to IBNR adjustments. PUB (MPI) 2-21 Reference: PUB (MPI) 1-46, December 8, 2010 Government Press Release Please provide a flow chart of the dispute process including when mediation is proposed to be offered and the proposed mediation steps. PUB (MPI) 2-22 Reference: PUB (MPI) 1-48 (b), PUB (MPI) 1-49 a) Please discuss the trend which reflects that the loss ratio has fallen below 80 for the
years 2008 through 2012. Please also explain what factors have led to anticipated growth in the loss ratio by 4.62% in 2013.
b) Please explain the significant growth in the operating expense/policy ratio for the years 2010 through 2012, reflected in schedule 2, well in excess of inflation.
c) Please explain what factors are leading to an increase in operating expense per policy in 2015; a growth of 3.49% over the prior year after exclusion of BPR initiatives.
d) Please explain the forecasted growth in claims expense/claims ratio in 2011, 2012 and 2015, all of which increases are in excess of inflation
e) Please explain the factors leading to the increase in claims per claims employee from 245 in 2011 to 256 in 2016, (bringing the ratio in line with the 1994 ratio of 259), in light of the PIPP Infrastructure efforts.
f) Please re-file the trend analysis [schedule 2 and schedule 3] excluding IT optimization
expenditures and the impact of the premium rebate. Please indicate which categories are impacted and by how much as a result of the elimination of those expenditures from the schedule.
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PUB (MPI) 2-23 Reference: PUB (MPI) 1-51 Please provide a comparison of the amounts allocated for 2012/13 this year under the new cost allocation methodology with the same new methodology and allocators last year and explain any differences related to any proposed changes in the allocators or allocator percentages from the prior year. PUB (MPI) 2-24 Reference: PUB (MPI) 1-58 (b) a) There appears to be an error in the schedule relative to the 2009 year. Please file a
complete schedule. b) Please reconcile the FTE count in PUB/MPI I-55 (e) filed last year with the current filing
for 2010/11 and 2011/12. PUB (MPI) 2-25 Reference: PUB (MPI) 1-61 (a) & (c) a) Please indicate how the Corporation determined that $2.5 million in City Place
expenditures were non-Basic building expenditures. Please summarize the nature of those expenditures.
b) Please provide the revenue requirement impacts related to the Capital Expenditure Provisions for 2012/13.
c) In response to PUB/MPI 1-61(c), the Corporation provided a table of the costs associated with Business Transformation Office initiative expenditures for 2011/12, 2012/13 and 2013/14, namely, costs for deferred development and data processing as well as building costs. Please explain in detail what each of these expenditures entail, and the benefit of the expenditures to the Corporation.
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PUB (MPI) 2-26 Reference: PUB (MPI) 1-62 (b) & (c) Attachment A a) Please file all Board of Directors and Budget and Operations Committee meeting minutes
that pertain to the IT Optimization Provision/Project prior to February 24, 2011. Please include copies of all presentations made at those meetings related to the issue.
b) Please re-file the schedule at attachment A with totals for the columns in pages 17 through 19 and provide a schedule that reconciles the IT Optimization and Disaster Recovery Budget in (b) with the HP presentation schedule provided on page 15 entitled "Recommended Initiatives – Cost Impact on Annual MPI IT Spend".
c) Please file an MPI generated cost/benefit, NPV and total cost of ownership analysis (or the same prepared by any other party independent of HP) in support of the IT Optimization Project and the allocation of $75 million from retained earnings. Please indicate whether a peer review of the HP report was undertaken. If so please file the review. If not, please advise of why no such review was undertaken.
d) Please confirm that the IT Optimization costs do not include Mainframe Decommissioning
Costs. If the costs are included please advise of what expenditures in the detailed HP "Annual MPI IT Spend" relate to that project.
e) Please provide the engagement letter and contract with HP for the preparation of the
Report and any other tasks they propose to undertake related to the MPI IT Optimization.
f) Please provide the total cost of fees and disbursements related to the MPI IT
Optimization – Final Report Presentation and indicate the accounting treatment of the costs.
PUB (MPI) 2-27 Reference: PUB (MPI) 1-71, CAC (MPI) 1-210 a) In conjunction with filing the 1st quarter report please also include the position papers
(if revised from that presented last year) related to each accounting adjustment made and provide the rationale for the selection of each accounting policy.
b) Please also provide supporting detailed calculations related to each accounting adjustment made.
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PUB (MPI) 2-28
Reference: PUB (MPI) 1-73
a) Please reconcile the response to PUB/MPI I-73 with Ms. Kalinowsky's covering letter of August 8, 2011 relative to the Corporation's ability to complete a Risk Analysis/VAR.
b) Please file an updated Risk Analysis/VAR in advance of the GRA hearing. PUB (MPI) 2-29 Reference: PUB (MPI) 1-78 (b) Please provide tables reflecting the respective data points for the graphs provided. PUB (MPI) 2-30 Reference: PUB (MPI) 1-80 a) Please explain how the methodology change utilized "the actual growth rate in driver
units to predict future growth". b) Please explain how the "actual 2010/11 information on merit eligible vehicles per driver"
was utilized as the basis for selecting future assumptions. PUB (MPI) 2-31 Reference: PUB (MPI) 1-82 (b) The Corporation has stated that “Since last year’s reporting, seven total theft claims have been identified in which an approved immobilizer was removed or disconnected”. The Corporation has also stated that it is not aware of any case involving approved and operational immobilizers having been defeated. Does this mean that the seven total theft claims referenced involved the removal or disconnection of immobilizers by someone other than the auto thief? If not, please explain.
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PUB (MPI) 2-32 Reference: PUB (MPI) 1-83 Please provide the complement of WATSS staff being supported by MPI in 2010/11 and that forecast for 2011/12 and explain the increase in Salaries and Benefits. PUB (MPI) 2-33 Reference: PUB (MPI) 1-84 (a) The Corporation's response with reference to PUB/MPI I-82 (a) does not provide the requested information. For the years 2003/04 through 2010/11 (actual) and forecast for 2011/12 through 2014/15 please provide the annual spending on all aspects of the anti-theft initiative including the immobilizer program, support of the specialized auto-theft prosecution team, support of the Winnipeg Police Service, WATSS and all other anti-theft initiatives delivered either internally or by external parties for which the Corporation has extended financial support, in the same form as provided in response to PUB/MPI I-93 last year. PUB (MPI) 2-34 Reference: PUB (MPI) 1-86 Attachment, PUB (MPI) 1-90 Please advise of the anticipated budget for the Wildlife crash reduction pilot study and indicate to what extent MPI will be acquiring additional electronic speed indicator signs. PUB (MPI) 2-35 Reference: CAC (MPI) 1-158 a) Please explain in detail the modeling regime that is in place to ensure that each
assumption made in the stochastic modeling process is appropriately documented and supported.
b) Please explain how changes in assumptions are documented to ensure continuity.
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PUB (MPI) 2-36 Reference: CAC (MPI) 1-183 a) Please indicate the total cost incurred by Basic related to the most recent employee
opinion survey.
b) Please indicate the total costs incurred by Basic related to projects undertaken as a result of the most recent employee opinion survey.
PUB (MPI) 2-37 Reference: CAC (MPI) 1-185 Please provide a summary of the major terms of the lease of 1284 Main Street, including but not limited to, a description of the leased property, the date on which the lease was entered into, the annual lease payments paid or to be paid and the term of the lease. PUB (MPI) 2-38 Reference: CAC (MPI) 1-198 Please provide details of the current planned property refurbishment and replacement schedule by location. PUB (MPI) 2-39 Reference: CAC (MPI) 1-200 a) Please explain why information on the number of external consultants and the annual
costs incurred by MPI are not readily available from the project management office for years prior to 2009/10.
b) Please re-file the table including a total of all consultants who worked during the fiscal years, expanding the information to include the years 2005/06 through 2008/09 (or since the commencement of the Business Process Review). Please also advise why there are costs in 2010/11 with respect to consultants that are not shown on the attachment to CAC/MPI I-200.
c) Please provide a breakdown by consultant/vendor of the anticipated number of
consultants and annual cost for the years 2011/12 through 2014/15 in support of the Corporation's estimate of 120 consultants per year.
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PUB (MPI) 2-40
Reference: CAC (MPI) 1-272 Attachment C
Please confirm that as a consequence of the Corporation’s RFP for actuarial services, there will be a change in the Corporation’s Appointed Actuary. PUB (MPI) 2-41 Reference: CAC (MPI) 1-276 Please provide the calculation of contribution margin for Basic and the Corporation as a whole. Please use the following accounting definition Revenue – Variable Cost = Contribution Margin. PUB (MPI) 2-42 Reference: CAC (MPI) 1-297 Please provide the supporting assumptions and calculations that demonstrate the estimated savings related to PIPP Claims incurred and Salaries and Benefits for each of 2010/11 through 2014/15. PUB (MPI) 2-43 Reference: CAC (MPI) 1-298 (f) Please provide the target metrics and the results against targets for 2010/11 and 2011/12 to date. Please provide commentary on the measured results.
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CAC (MPI) Round 2 Interrogatories 2012 GRA
September 2011
CAC (MPI) 2-1 With reference to MPI’s response to CAC(MPI) 1-3 it could be argued that the negative development on Collision coverage is significant. If the Latest 9 Volume Weighted factors are used to 128-140 months of development with the Incurred Loss Development method the IBNR goes down by approximately $6 million. Will the Corporation consider this negative development in future reviews?
CAC (MPI) 2-2 Transcripts from the 2008 GRA have a quote from Don Palmer “These are MPI developed tables, based on MPI experience.” The quote is referring to the new mortality tables used to set case reserves for long term cases. Response to CAC (MPI) 1-1 d) states that the reserving calculator uses the ultimate mortality rates per page 6 of “Accident Benefits Long-Term Disability Losses” published by the Canadian Institute of Actuaries in July 1992. Please clarify which mortality table is used to set case reserves for long term cases. If the tables are MPI developed please explain the method of producing these tables.
CAC (MPI) 2-3 Were the mortality tables on page 6 of “Accident Benefits Long-Term Disability Losses” published by the Canadian Institute of Actuaries in July 1992 not used prior to 2005 to set case reserves for Weekly Indemnity and Accident Benefits (Indexed) coverages? If they were what is the complete nature of the change in reserving practices that occurred in 2005?
CAC (MPI) 2-4 For case reserving on serious incidents is the practice of the Corporation to put up a case reserve of $500,000 immediately and in a period of six to nine months use the reserve calculator to determine the case reserve if the claim is expected to be long term? If this is not the case please explain the Corporation’s case reserving practices for Weekly Indemnity and Accident Benefits (Indexed) claims.
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CAC (MPI) 2-5 From the 2008 GRA transcripts page 1009 the selected PFAD margin for claims development was increased from 12.5% to 15% when the change in case reserving methodology occurred in 2005. This PFAD remains at 15% for Weekly Indemnity and Accident Benefits (Indexed) coverages in the October 2010 valuation. Please explain why a 15% margin continues to be used on these lines, given the years of experience since 2005, and that this is the maximum recommended range in the Standards of Practice of the Canadian Institute of Actuaries.
CAC (MPI) 2-6 With reference to the response to CAC (MPI) 1-16 please explain why the case reserves shown in the Appointed Actuary’s Report as at October 31, 2010 Appendix E pages 8 and 16 differ from those shown on Appendix E page 21. Please reconcile the two different sets of numbers.
CAC (MPI) 2-7 With reference to the responses to CAC(MPI) 1-126 and CAC(MPI) 1-127 please explain why there were no adjustments made for anticipated ULAE for Third Party Liability – Bodily Injury and Third Party Liability Property Damage in the 2011/2012 Ratemaking Methodology but these adjustments are made in the 2012/13 Ratemaking Methodology.
CAC (MPI) 2-8 With reference to the responses to CAC(MPI) 1-126 and CAC(MPI) 1-127 please explain why there is a negative adjustment for Third Party Liability – Bodily Injury (page 6 of the 2012/2013 Ratemaking Methodology) while there is a positive adjustment for Third Party Liability – Property Damage (page 8 of the 2012/2013 Ratemaking Methodology). CAC (MPI) 2-9 With reference to TI.19 2012/2013 Basic Program Ratemaking Methodology it appears that ultimates used in ratemaking are derived from fiscal insurance years which include development from prior years. Is this the case? If so, why would this type of year be used? Ratemaking should be based on accident year information as the purpose is to project costs for the rating year in question.
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CAC (MPI) 2-10 With reference to CAC (MPI) 1-128, 1-130, 1-131, 1-132 and 1-133 would the Corporation consider showing the reconciliation of the numbers from the Claims Forecast Data Book to the numbers used in the Basic Program Ratemaking Methodology in next year’s rate application so that the reader can easily follow the flow of the calculations?
CAC (MPI) 2-11 With reference to the response to CAC (MPI) 1-134 please explain why the Corporation does not investigate fleet rating methodologies that would require fewer rebates? That is, a methodology where the rates charged were closer to adequate, rather than excessive in many cases.
CAC (MPI) 2-12 With reference to the response to CAC (MPI) 1-140 it would seem consistent to use the same weights as used in the overall loss cost and rate requirements of the 2012/2013 Basic program Ratemaking Methodology for at least Major Class 01, given that that major class comprises the majority of the overall losses. Would the Corporation consider this in their next rate application?
CAC (MPI) 2-13 With reference to the response to CAC (MPI) 1-148 would the Corporation consider showing how the work done for the Revenue Forecast Data Book 2011 flows through to the projections of premiums written and earned in Section TI.13 and elsewhere in the rate application? The goal would be to improve the readability of the overall rate application and allow the reader to follow the flow of the numbers.
CAC (MPI) 2-14 With reference to the response to CAC (MPI) 1-149 the question was related to the net claims incurred projection for 2011/12 of $333,071 and the projection of $585,436 for 2011/12. How is a 76% increase year over year justified?
CAC (MPI) 2-15 With reference to CAC (MPI) 1-34 d) the statement made in response to the question is correct but does not answer the question. Has the Corporation considered merging the
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stochastic modelling exercise with the DCAT analysis and presenting it as one report? Is this something that could be done in future years? CAC (MPI) 2-16 With reference to Appendix F, Page 12 of the Appointed Actuary’s Report as at October 31, 2010 please show the derivation of Column 3 Restated Earned Premium and explain why it differs from Column 3 of Appendix E page 8 for years prior to 1999/2000.
CAC (MPI) 2-17 With respect to the response to CAC (MPI) 1-23 can the Corporation confirm that if the Latest 9 Volume Weighted loss development factors were chosen with the tail factor and the methodology choices as per the October 31, 2010 Appointed Actuary’s report the IBNR for Accident Benefits – Other (Indexed) coverage would be approximately $90 million redundant? Can the Corporation confirm that if the loss development factors chosen were the straight average of all years with the methodology assumptions and tail factor as per the October 31, 2010 Appointed Actuary’s report the IBNR for Accident Benefits – Other (Indexed) coverage would be approximately $74 million redundant? If these figures cannot be confirmed please explain why and provide the results obtained with the assumptions suggested.
CAC (MPI) 2-18 With respect to the response to CAC (MPI) 1-24 the quote from Section 6.1.8, page 16, paragraph 3 of the Appointed Actuary’s Report as at October 31, 2010 is “To allow for the uncertainty among the methods in the most recent three years, while reflecting consistency with MPI’s reserving practices for the last five years, we selected IBNR for the three most recent years based on the higher of the Paid Bornhuetter-Ferguson and Incurred Bornhuetter-Ferguson methods. IBNR for all other insurance years is based on the Incurred Bornhuetter-Ferguson method.” It does not appear that there is more uncertainty in the methods in the most recent three years than at prior valuation points. Please explain this further including an explanation of why this year was different? CAC (MPI) 2-19 With respect to the response to CAC (MPI) 1-24 the quote from Section 6.1.8, page 16, paragraph 3 of the Appointed Actuary’s Report as at October 31, 2010 is “To allow for the uncertainty among the methods in the most recent three years, while reflecting consistency with MPI’s reserving practices for the last five years, we selected IBNR for the three most recent years based on the higher of the Paid Bornhuetter-Ferguson and Incurred
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Bornhuetter-Ferguson methods. IBNR for all other insurance years is based on the Incurred Bornhuetter-Ferguson method.” Please explain how the change in the selection of methodologies reflects consistency with MPI’s reserving practices for the last five years while the methodologies selected in the October 31, 2009 Appointed Actuary’s Report did not.
CAC (MPI) 2-20 With respect to the response to CAC (MPI) 1-32 please clarify that the 12-Month Loss Development Factor shown on the attachment is in fact the development factor for the last development period for each year? If not, please clarify exactly what those factors are and how they are applied.
CAC (MPI) 2-21 With reference to the response to CAC (MPI) 1-4 a) was it reasonable to assume that the new reserving method was completely wrong and that the entire $250 million reduction had to be held? Would it not be more reasonable to assume that total policy liabilities would go down by at least part of this amount? If the Corporation feels that holding the entire $250 million was reasonable please explain the reasons why.
CAC (MPI) 2-22 With reference to the response to CAC (MPI) 1-4 b) please explain why back testing (running the model for old years and comparing results from the model to actual) of the reserving methodology could not be performed before implementation so that there would be confidence in the new reserving methodology.
CAC (MPI) 2-23 Referring to the Appointed Actuary’s report as at October 31, 2010 page 12 and 13 how does the Corporation justify using a tail factor based on accident years 1984/85 to 1993/94? How do those tail factors have relevance for accident years post 2005 when the new reserving calculator is used?
CAC (MPI) 2-24 With reference to the response to CAC (MPI) 1-17 the question was misunderstood. If the figures for actuals and the loss development factors are correct in the response please confirm that the table below showing actual to expected at 8 to 12 months of development
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is correct. If so please produce this chart for development periods out to 44 months of development. If the table below is not correct please correct it.
CAC (MPI) 2-25 With respect to the response to CAC (MPI) 1-8 please show the derivation of the 0.9914 average of all factors since 2005/06 given in the table.
CAC (MPI) 2-26 With reference to the Appointed Actuary’s report as at October 31, 2010 Appendix E, Pages 4 and 5 please confirm that there are errors in the calculation of the Latest 9 Volume Weighted Factors starting at the 44-56 development period. If confirmed please file corrected pages. CAC (MPI) 2-27 With reference to the Appointed Actuary’s report as at October 31, 2010 can the Corporation confirm that if a tail factor of 1.000 is chosen for both Accident Benefits - Weekly Indemnity Incurred and Accident Benefits – Weekly Indemnity Paid and the methodologies chosen are consistent with the report the IBNR would be approximately $37 million overstated? If the Corporation cannot confirm this please show the calculation of the correct figure.
CAC (MPI) 2-28 Referring to Exhibit 4, Sheet 5 of the Appointed Actuary’s report as at October 31, 2010 can the Corporation confirm that if the methodology’s chosen in the Appointed Actuary’s report as at October 31, 2009 were chosen the IBNR shown on Exhibit 4, Sheet 5 would be approximately $28 million overstated. If the Corporation cannot confirm this please show the calculation of the correct figure.
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CAC (MPI) 2-29 With reference to the response to CAC (MPI) 1-9 would the Corporation consider showing all relevant numbers in the reports going forward to aid the reader in following the flow of figures? CAC (MPI) 2-30 With reference to the response to CAC (MPI) 1-36 please give the location of the calculation of the forecasted 17,121 forecasted number of total PIPP claims.
CAC (MPI) 2-31 With reference to the response to CAC (MPI) 1-36 would the Corporation consider showing the derivation of the projections in the relevant sections in future filings to enable the reader to follow the flow of the numbers and aid in the transparency of the rate application? CAC (MPI) 2-32 With reference to the response to CAC (MPI) 1-36 it is highly unlikely that after four years of negative trends in covers for Weekly Indemnity that there will be a 9.6% increase in 2011/12. However, it may be that the trend will level out. Please calculate the impact on the required rate change if a 0% increase in covers is projected for 2011/12 and a 1.5% increase is projected for 2012/13 and 2013/14. That is the projected covers on page 12 of the Claims Forecast Data Book would be 2,514 for 2011/12, 2,552 for 2012/13 and 2,590 for 2013/14. CAC (MPI) 2-33 Reference: General, Basic Expenses and Operational Efficiency Preamble: A number of rate regulated Canadian gas and electric distributors, particularly in Ontario, have operated or are operating under a multi-year formulaic incentive regulation (IR) plan. A simplified description of such a plan is presented below. The IR plan typically sets rates to recover the utility’s approved revenue requirement in a “base year.” The base year revenue requirement is approved pursuant to a formal regulatory process which involves substantial and exhaustive discovery and testing. Thereafter, for each remaining year in the IR plan, in the “price cap” version of such a plan rates are adjusted annually according to a formula that includes exogenous and preset
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parameters over which the utility has no control: these parameters typically include a measure of inflation (eg., GDP IPI) offset by a productivity target and a stretch parameter. The theory is that under such a plan, the utility has an incentive to find efficiencies since the impact of any cost reductions it can find during the term of the plan will not be reflected in rate reductions immediately in the subsequent year, i.e., they will accrue entirely or in part (if an earnings sharing mechanism is included with the plan) to the shareholder: to the extent that such efficiencies are sustainable, ratepayers will get some benefit when the plan ends and the utility is “rebased.” By way of a simplified price cap example, if inflation was 2.0%, the productivity target was 0.7%, and the stretch factor was 0.4%, the rate increase for such a regulated utility would be capped at 2.0% - 0.7% - 0.4% = 0.9% for that given year, regardless of actual cost increases. Recognizing that such a plan is not directly applicable to MPI since MPI is a non-profit public entity without a shareholder who has a claim on residual earnings on invested equity, CAC would like to explore whether an incentive mechanism – in any form – or a formulaic multi-year approach could be usefully employed at some future date for an entity such as MPI. a) At a high level, does MPI believe that such an exploration has merit under the
circumstances? b) Has MPI ever considered or investigated the efficacy of a formulaic approach with
respect to capping increases, or at least benchmarking actual performance, for e.g., its controllable operating expenses?
c) In the case of a benchmarking exercise to assess actual performance, does MPI have
any views as to (i) which costs should be deemed controllable costs for the purpose of such benchmarking, (ii) which entities should be included in the cohort group against which MPI’s performance would be assessed, and (iii) by what methodology should a productivity (and stretch factor if used) be determined.
CAC (MPI) 2-34 Reference: CAC (MPI) 1-76, CAC (MPI) 1-183 f), and PUB (MPI) 1-60, Salary Increases a) Please confirm that in the spring of 2010, the Provincial Finance Minister announced a
multi-year wage freeze for all public sector employees. b) Please provide MPI’s understanding of the Provincial Government’s current guidelines
with respect to wage settlements for public sector employees.
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c) Please provide the annual salary increases and term provided for in the recently ratified collective agreement between the Provincial Government and the MGEU representing Technical Professional Paramedical, Eden Mental Health Centre, and Diagnostic Services of Manitoba (TPP/DSM) members.
d) Please provide the annual salary increases and term provided for in the recently ratified
collective agreement between the Provincial Government and the Local 178 representing members of St. Amant Inc. Community Residential Program.
e) Please provide a comparison of recent salary increases for employees of MPI to those for
employees of Manitoba Hydro. CAC (MPI) 2-35 Reference: CAC (MPI) 1-40 The response to CAC (MPI) 1-40 indicates that the new system (BI3) has changed how claims incurred are recorded due to a change in reserving practices. a) For greater clarity, please explain how claims incurred are recorded in the new system
and how the reserving practices have changed. b) Please quantify the financial impact on the forecasted claims incurred for the fiscal years
2011/12 through to 2014/15 of the change in reserving practices, if any. CAC (MPI) 2-36 Reference: CAC (MPI) 1-41 The response to CAC (MPI) 1-41 with respect to the new BI system indicates that for each defect reported; a comprehensive Requirements Document is produced, outlining both the current and expected behavior of the system. Please file a copy of the referenced Requirements Document. CAC (MPI) 2-37 Reference: CAC (MPI) 1-121 Can MPI confirm that the response to CAC (MPI) 1-121 used the term “confidence intervals” similarly as to how this term is used in standard statistical practice? Please explain.
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CAC (MPI) 2-38 Reference: CAC (MPI) 1-122 a) Please elaborate as to why “the nature of this coverage” indicated that a Normal
distribution was appropriate. b) Please identify all statistical tests employed to test the selection of the normal
distribution as compared to other alternatives. c) Please confirm that a Normal distribution would assign a positive probability to an
interval corresponding to negative ultimate losses incurred. d) Please provide the mean and standard deviation used in the simulation. e) Did MPI consider or model ultimate incurred under the assumption of any other
distribution? CAC (MPI) 2-39 Reference: CAC (MPI) 1-134 The response to the referenced IR indicates that fleet rebates exceed fleet surcharges year over year because “fleet customers traditionally have a better claims experience than non-fleet customers.” Is it not possible to reflect this better claims experience in the rate structure, largely obviating the need for rebates for fleet customers? CAC (MPI) 2-40 Reference: CAC (MPI) 1-138 Please provide a breakdown of the reduction in 2008/09 investment income by major asset classes.
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CAC (MPI) 2-41 Reference: CAC (MPI) 1-145 The response to the referenced IR attributes considerable weight to a large decrease in claims incurred in 2008/09 for the fact that the five year actual variance from forecast is 18.7%. a) Given that the 2008/09 over forecast was 15.7% while the five year average variance is
18.7% (i.e., greater than 15.7% in 2008/09), does MPI agree that average over forecasting in the other four years exacerbated the 2008/09 results?
b) Does MPI agree that there appears to be an over forecasting bias in its methodology? CAC (MPI) 2-42 Reference: CAC (MPI) 1-147 The response to CAC (MPI) 1-147 indicates that the significant changes to the PIPP forecast are expected to increase the steepness of the rate line (relative to current levels) and possibly increase the upgrade factor in future years. For greater clarity please explain and, if possible, quantity the ‘steepness of the rate line’ and how it may impact the upgrade factor in future years. CAC (MPI) 2-43 Reference: CAC (MPI) 1-147 This response also indicates that the Revenue Forecasting Committee “did not believe using the long term trend was appropriate for selecting the 2011/12 upgrade forecast. … The Committee also believed that it was not appropriate to use a long term average (e.g., 5 years) since the recent upgrade experience was clearly lower than that of 3-5 years ago.” Please indicate if the results of any statistical tests (e.g., structural break tests) or visual scatter representations played any part in the Revenue Forecasting Committee’s decisions in this regard.
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CAC (MPI) 2-44 Reference: CAC (MPI) 1-148, TI.18 Revenue Forecast Data Book 2011 The Revenue Forecast Data Book seems to contain the forecasted assumptions for each of MPI’s revenue components. However the Revenue Forecast Data Book is incomplete in that it does not provide a schedule summarizing the forecasted revenues, by component and fiscal year, which reconcile to the various forecasted revenue amounts in the financial statements. Please prepare this summary as an appendix to the TI.18 Revenue Forecast Data Book 2011. CAC (MPI) 2-45 Reference: CAC (MPI) 1-150 l) a) Has MPI, or is MPI able to, test its 1 to 5 year periods simulation results against
historical results by using the same functional forms, assumed distributions, same number of iterations, and same filtering or data smoothing starting with data known up to 2005 for the 1 to 5 year periods beginning in 2006 and ending in 2010?
b) If the answer to the preceding part is affirmative, please undertake the suggested exercise and provide the results.
CAC (MPI) 2-46 Reference: CAC (MPI) 1-152, Schedule 1 Please provide the date on which the 2011/12 PIPP Projection was made and also the date on which the 2011/12 PIPP Revision was made. CAC (MPI) 2-47 Reference: CAC (MPI) 1-153 Please explain how “the Corporation’s efforts to improve the forecasting of PIPP losses” (emphasis added) resulted in “the significant deviations between actual and forecast in the 2008/09 to 2010/11 fiscal years.”
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CAC (MPI) 2-48 Reference: CAC (MPI) 1-155 Attachment, Claims Incurred a) Please confirm that in each year 2004/05 through 2010/11, both the Original Projected
and the Revised Forecast of Claims Incurred exceeded the Actual Claims Incurred.
b) Please confirm that in each year 2005/06 through 2010/11, the Original Projected Claims Incurred exceeded the Actual Claims Incurred by increasing amounts annually and by increasing percentages annually.
c) Please provide the dates or months in which the Original Projected and the Revised
Forecast of Claims Incurred were made for each year. CAC (MPI) 2-49 Reference: CAC (MPI) 1-158, Stochastic Modeling a) For each simulation run, please provide the specific functional form of the stochastic
equation used.
b) For each simulation run, please provide a narrative explaining how the chosen distribution was selected and how MPI smoothed the data.
c) Please identify the test employed in selecting the appropriate distribution. CAC (MPI) 2-50 Reference: CAC (MPI) 1-165 Investment Managers From the response on page 3 for Objective 1, 3 investment managers are under performing when compared to their mandate. a) Please explain the actions MPI or the Department of Finance has taken to correct the
underperformance of investment Manager A, C and D, if any. b) Please describe the procedure or protocol followed in reviewing and dealing with
underperforming investment managers. c) Please provide a summary of the performance of the Bond manager for the most recent
three fiscal years.
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CAC (MPI) 2-51 Reference: CAC (MPI) 1-166 Hedging Currency Exposure CAC (MPI) 1-166 c) asked the following “Please explain the circumstance which would compel the Corporation to again start hedging the currency exposure on its US dollar denominated assets.” The response was as follows “Any changes to the hedging strategy would be made by the Provincial Department of Finance in accordance with The Manitoba Public Insurance Corporation Act.” Please forward the following information request to the Provincial Department of Finance for a response. “Please explain the circumstance which would compel the Corporation to again start hedging the currency exposure on its US dollar denominated assets.” CAC (MPI) 2-52 Reference: CAC (MPI) 1-169 Income Forecast for Bonds Please explain how the unadjusted interest rate forecast is set and how it is used to forecast bond income over a five year period. CAC (MPI) 2-53 Reference: CAC (MPI) 1-171 Benchmarking Investment Results The annual expected return for Canadian large market capitalization equities is the S&P/TSX Capped Composite Total Return Index plus 150 basis points over a rolling four year period annualized. a) Please provide an explanation of the S&P/TSX Capped Composite Total Return Index and
why it is an appropriate benchmark.
b) Please provide the components comprising the S&P/TSX Capped Composite Total Return Index.
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CAC (MPI) 2-54 Reference: CAC (MPI) 1-174 e) Basic Compensation Expenses d) For the year 2010/11, please provide the pension-superannuation costs embedded in (i)
the 2011 GRA and (ii) the 2012 GRA. e) For each year 2011/12 and 2012/13, please provide the Strategy and Innovation costs,
the Service Operations costs, and the staffing requirements and associated costs for the BTO initiatives embedded in (i) the 2011 GRA and (ii) the 2012 GRA.
CAC (MPI) 2-55 Reference: CAC (MPI) 1-175 g) Attachment, Basic Special Services Please provide a table that shows, for each year, 2010/11, 2011/12, and 2012/13, and for each line item shown on the attachment, the cost embedded in (i) the 2011 GRA and (ii) the 2012 GRA. CAC (MPI) 2-56 Reference: CAC (MPI) 1-175 g) Attachment, Basic Special Services a) Please explain what “Future of Service, PD, and RS” refers to, why large associated costs
are forecast for 2011/12 only, and explain why there are two separate rows labeled as such.
b) Please explain what Talent management is, when it first became a basic expense, how the associated costs are allocated, why the costs are so variable year to year, and why no related costs are shown for 2010/11.
CAC (MPI) 2-57 Reference: CAC (MPI) 1-175 s) Attachment, Other Basic Expenses Please explain why the costs associated with Normal Operations more than double in 2011/12 over 2010/11, why they then spike up by over 16% in 2012/13, and then decline in 2013/14.
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CAC (MPI) 2-58 Reference: CAC (MPI) 1-175 c) The 2010/11 approved expense budget comparison to actual was provided as Attachment C. Please provide explanations for significant variances relating to compensation, special services and safety/loss prevention programs. CAC (MPI) 2-59 Reference: CAC (MPI) 1-176 b) and CAC 183 f) a) Please confirm that over the past five years, MPI management employees received
annual pay increases of 4.5% as compared to the five year provincial average increase of 3.5%.
b) Please confirm that over the past two years, MPI management employees received annual pay increases of 4.5% as compared to the two year provincial average increase of 2.1%.
CAC (MPI) 2-60 Reference: CAC (MPI) 1-176 b) and CAC 183 f) and PUB (MPI) 1-60 Attachment Please explain how the Corporate Average compounded salary rate increase of 6.56% for 2010/11 – 2012/13 as shown in the last reference is consistent with the information provided in the first two references. CAC (MPI) 2-61 Reference: CAC (MPI) 1-179 Trend Analysis a) Please file a copy of a complete Trend Analysis report, as filed in previous years,
including comparisons to ICBC, SGI, the industry and macro statistics of insurance premiums paid per capita for Manitoba, BC and Saskatchewan.
b) Please explain why the Trend Analysis report labeled TI.5 in previous GRA’s was
discontinued in the 2012 GRA.
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CAC (MPI) 2-62 Reference: CAC (MPI) 1--180 King Street property Donation Please confirm that the net donation made by MPI on behalf of policyholder rate payers as it relates to the King Street property is $980,000. CAC (MPI) 2-63 Reference: CAC (MPI) 1-183 and from last year’s GRA CAC/MSOS (MPI) 1-50 and CAC/MSOS (MPI) 2-46 Per the response to CAC/MSOS (MPI) 1-50 of last year’s GRA, MPI had conducted an employee opinion survey in November, 2009. The response further indicated that action planning was underway. a) Please confirm that the November, 2009 is the most recent employee opinion survey. If
this cannot be confirmed, please file a copy of the most recent employee opinion survey. b) Please confirm that action planning has concluded. If it has concluded, please file a copy
of the action plans. If action planning has not concluded, please advise when it will be concluded.
CAC (MPI) 2-64 Reference: CAC (MPI) 1-185—lease commitments a) Please provide a detailed description of the operations MPI is conducting at the following
locations:
i. 240 Kennedy Street, Winnipeg ii. 1745 Ellice Avenue, Winnipeg iii. 801 Century, Winnipeg
b) Please provide a list of the vehicles leased. Please indicate who the vehicles have been
leased for.
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CAC (MPI) 2-65 Reference: CAC (MPI) 1-186 and page 49 of 2010 Annual Report Please provide a detailed comparative analysis of the components comprising the accounts receivable as at February 28, 2011 of $292,035,000 compared to $289,711,000 as at February 28, 2010. CAC (MPI) 2-66 Reference: CAC (MPI) 1-187 Corporate Budget Work Plan The response to CAC (MPI) 1-187 provides an attachment relating to a 2012/13 Draft Corporate Budget Work Plan. Please confirm that for fiscal years 2009/10, 2010/11 and 2011/12 an identical Corporate Budget Work Plan would have been followed, except for the date change. If this cannot be confirmed, please file a copy of the 2009/10, 2010/11 and 2011/12 Corporate Budget Work Plans. CAC (MPI) 2-67 Reference: CAC (MPI) 1-193 b) Information request CAC (MPI) 1-193 b) was intended to obtain an expense analysis by fiscal year (not the change for the period 09/10 to 13/14). Please provide an expense analysis, justification and detailed explanations by account category for the following expense categories for expense changes from fiscal years 2009/10 to 2010/11, 2010/11 to 2011/12, 2011/12 to 2012/13 and 2012/13 to 2013/14: a) Data Processing b) Special Services c) Building Expenses d) Amortization-Capital Assets e) Amortization-Deferred Development f) Telephone/Telecommunications g) Travel and Vehicle Expenses h) Grants in Lieu of Taxes i) Other
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CAC (MPI) 2-68 Reference: CAC (MPI) 1-194 e) In its response to CAC (MPI) 1-194 e) MPI indicated that it does not have a mandate and productivity document for each of its organizational units. Without a baseline mandate and productivity document to measure against, how do senior management (President, Vice-Presidents, etc.) communicate to the organizational unit managers and staff and assure themselves that the various organizational units are meeting corporate goals and adding value to the corporation. Please explain. CAC (MPI) 2-69 Reference: CAC (MPI) 1-196 h) and i) and PUB (MPI) 1-34 -- GST a) Please provide an example of a claim repair account (invoice) (repairing a car damaged
in an automobile accident) for both a registrant and a non-registrant relating to the handling and posting of GST amounts on the repair account.
b) Please provide an example of a claim settlement account (invoice) (writing off a car damaged in an automobile accident beyond repair) for both a registrant and a non-registrant relating to the handling and posting of GST amounts on the settlement account.
c) On the attached schedule to PUB (MPI) 1-34 there is a line relating to Non-Registered
GST for the fiscal years 2011/12 through to 2013/14. The amount in brackets for each fiscal year is in excess of $1 million. Please explain the term ‘Non-Registered GST’ and provide a detailed analysis that comprises the amounts for each year.
CAC (MPI) 2-70 Reference: CAC (MPI) 1-197 a) Business Transformation Office Initiatives In the response to CAC (MPI) 1-197 a) MPI indicated that it did not have a project charter and a cost benefit analysis for the Business Transformation Office Initiatives forecasted to cost $79.5 million. f) Please confirm that MPI will prepare project charters and cost benefit analyses for each
BTO initiative before it spends any policyholder funds on any Business Transformation Office Initiatives and filed them with the Public Utilities Board when they are completed and approved by the Corporation’s Board of Directors.
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g) Please confirm that preparing project charters and cost benefit analyses for major projects are a requirement of MPI’s project management processes, guidelines and protocols.
h) Please file a copy of MPI’s project management guidelines. CAC (MPI) 2-71 Reference: CAC (MPI) 1-199 Basic broker commissions Per response to CAC (MPI) 1-199 a) the 2010/11 actual basic flat fees column reports Broker Adjustments of $208,766. a) Please provide a detailed analysis of the broker adjustments amount of $208,766. b) Please explain why the broker adjustments amount of $208,766 is not reported as part
of response to CAC (MPI) 1-199 b. If these adjustments should have been reported as part of the response to b), then please file an updated Calculation of Commissions Expense-Basic and an updated TI.11.
CAC (MPI) 2-72 Reference: CAC (MPI) 1-197 and 1-201 a) Please confirm that the operating expenses shown on the attachment to response CAC
(MPI) 1-201 b) are in addition to the expenditures shown in information request CAC (MPI) 1-197 b). If this cannot be confirmed please explain and file a chart detailing by account category and fiscal year the all inclusive anticipated costs relating to Business Transformation Office Projects and associated costs.
b) Please provide a detailed description of the Human Resource Management project. c) Please provide a detailed anticipated cost analysis by account category and fiscal year of
the Human Resource Management project including all costs included in the Business Transformation Office Projects and Associated Costs included in the operating budgets.
CAC (MPI) 2-73 Reference: CAC (MPI) 1-200 b) and Attachment, Consultants a) For each consultant identified and for each year shown on the table, please provide the
average hourly rate per consultant.
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b) Please explain why there are no consultants for Price Waterhouse Coopers or FINEOS in
2010/11 but there are significant consulting costs nevertheless. c) For 2011/12, 2012/13, and 2013/14, please provide a forecast of the number of
consultants Basic expects to retain, the total consulting cost, and the hourly rate. CAC (MPI) 2-74 Reference: CAC (MPI) 1-202 Given that Manitoba Public Insurance is a crown corporation created by and operating under The Manitoba Public Insurance Corporation Act, administers The Drivers and Vehicles Act, complies, intra alia, with the Financial Administration Act, Highway Traffic Act, The Crown Corporations Public Review and Accountability Act, etc., please confirm that the Basic Insurance Line of business is managed and operates similar to a Canadian property and casualty insurance operation (ignoring its monopoly status and its regulatory rate setting processes and mechanisms). If this cannot be confirmed please provide a detailed analysis of the differences between the MPI Basic Insurance Line of Business operations and Canadian Property and Casualty insurance operations. CAC (MPI) 2-75 Reference: CAC (MPI) 1-204 In response to CAC (MPI) 1-204 MPI provided the calculations requested in various information requests but did not complete the table. The table below has been completed from the references referred to in the response provided by MPI to CAC (MPI) 1-204, please confirm that the values are correct and calculated as described in the notes referred to in the table for Basic Insurance.
Indicator Notes 2006/7 2007/8 2008/9 2009/10
2010/11
Operating Expense Ratio i. 14.2% 15.0% 15.0% 16.0% 15.5% Claims Expense Ratio ii. 14.1% 14.7% 14.8% 14.8% 15.2% Loss Ratio iii. 82.8% 79.0% 74.5% 70.9% 44.4% Combined Ratio iv. 111.1% 108.6% 104.3% 101.8% 75.1% Investment Income Ratio v. 16.1% 16.4% 0.5% 11.6% 11.8% Investment Yield vi. 6.3% 4.0% (5.8)% 13.7% 8.4% Operating Expense/Policy vii. $48 $50 $48 $54 $59 Claims Expense/Claims viii. $409 $416 $487 $482 $487 Policies/Support Employee ix. 2,485 2,499 2,556 2,446 2,590 Claims/Claims Employee x. 253 266 233 234 245
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Premiums/Policy xi. $776 $777 $794 $807 $804 Insurance Costs/Capita xii. $536 $552 $560 $584 $598
i. Operating Expense Ratio (%) (The numerator to include the following—commissions, operating expenses, premium taxes and regulatory/appeal expenses.)
The ratio of operating expenses to net premiums earned measures the company’s operational efficiency in underwriting its book of business.
ii. Claims Expense Ratio (%) (The numerator to include claims expenses and loss
prevention/road safety expenses.)
The ratio of claims expense to net premium earned measures the company’s efficiency in adjudicating claims.
iii. Loss Ratio (%)
The ratio of claims incurred to net premiums earned measures the company’s underlying profitability, or loss experience, on its book of business.
iv. Combined Ratio (%)
The sum of the loss, operating expense and claims expense ratios, not reflecting investment income or income taxes, measures the company’s overall underwriting profitability, and a combined ratio of less than 100 indicates an underwriting profit.
v. Investment Income Ratio (%)
The ratio of investment income to net premiums earned measures the contribution of investment income toward the combined ratio in measuring the company’s overall net profitability.
vi. Investment Yield (%)
To be calculated on current market value basis as per Annual Reports.
vii. Operating Expense/Policy ($)
The operating expense/policy dollar value measures the cost efficiency or activity cost of issuing a policy.
viii. Claims Expense/Claims ($)
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The claims expense/claims dollar value measures the cost efficiency or activity cost of adjudicating a claim.
ix. Policies/Support Employee (#)
The policies/support employee number value measures the number of policies a support employee can handle or the number of support employees required to manage policies effectively and efficiently.
x. Claims/Claims Employee (#)
The claims/claims employee number value measures the number of claims a claims employee can handle or the number of claims employees required to manage claims effectively and efficiently.
xi. Premiums/Policy ($)
The premiums/policy dollar value measures net premiums written changes per policy, year over year, even if there is no premium rate increases or decreases.
xii. Insurance Costs/Capita ($)
The insurance costs/capita dollar value measures net premiums written (basic insurance) changes per capita based on the provincial population providing a social or public cost indicator.
CAC (MPI) 2-76 Reference: CAC (MPI) 1-205 In response to CAC (MPI) 1-205 MPI provided the calculations requested in various information requests but did not complete the table. The table below has been completed from the references referred to in the response provided by MPI to CAC (MPI) 1-205, please confirm that the values are correct and calculated as described in the notes per CAC (MPI) 1-204 for Basic Insurance.
Indicator 2011/12
2012/13 2013/14 2014/15
i. Operating Expense Ratio 17.1% 16.7% 15.9% 15.9% ii. Claims Expense Ratio 16.4% 16.0% 15.7% 15.7% iii. Loss Ratio 78.0% 81.6% 82.7% 81.1% iv. Combined Ratio 111.5% 114.2% 114.3% 112.7% v. Investment Income Ratio 10.8% 10.4% 10.8% 10.9% vi. Investment Yield (Note 1) TBD TBD TBD TBD vii. Operating Expense/Policy $65 $68 $67 $70
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viii. Claims Expense/Claims $536 $511 $505 $521 ix. Policies/Support Employee 2,486 2,535 2,586 2,637 x. Claims/Claims Employee 241 245 248 252 xi. Premiums/Policy $782 $753 $776 $800 xii. Insurance Costs/Capita $605 $596 $577 $600 Note 1: The response to CAC (MPI) 1-205 vi refers to PUB (MPI) 1-15 (a). The investment yields in this response are provided by invested asset type. Please calculate the investment yields combined for all invested assets types for basic insurance similar to the response to CAC (MPI) 1-204 Schedule 1 by fiscal year for fiscal years 2011/12 through to 2014/15 and enter the results into the table above labeled Investment Yield. CAC (MPI) 2-77 Reference: CAC (MPI) 1-206 e) The response to CAC (MPI) 1-206 e) indicates “The $250 million reserve redundancy was not known until the 2010/11 year end; therefore there was nothing to report”. Please reconcile this response to the statement made in Pre-Filed Testimony PT.MJM page which states “With respect, I would also comment that while the Chairman’s comments of March 30, 2011 present an accurate history of the differences between the Corporation’s initial forecast and actual PIPP costs since 2005, the synopsis failed to reference the fact the 2005 change to reserving methodology and the decision to move potentially redundant $250 million from case reserves to IBNR had been discussed with the PUB a number of times since 2005 and had been reviewed by the Board’s actuarial advisor”. CAC (MPI) 2-78 Reference: CAC (MPI) 1-215 c) and e), IFRS
a) Please confirm that an “apples to apples” comparison of IFRS versus CGAAP will be possible from the information MPI will provide for the transition year.
b) Does the response to e) indicate that MPI was legally required to implement IFRS as proposed with no opportunity for deferring the implementation? If so, please provide support.
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CAC (MPI) 2-79 Reference: CAC (MPI) 1-218 Attachment, Approved Budgets and Actuals, Road Safety and Loss Prevention Program Costs For each year shown in the attachment, please add a column to show total costs for each program. CAC (MPI) 2-80 Reference: CAC (MPI) 1-225 and PUB (MPI) 1-82 a) Please explain why average immobilizer costs have recently increased from $500 to $600 per unit. CAC (MPI) 2-81 Reference: CAC (MPI) 1-227 c) The response to CAC (MPI) 1-227 c) states “The $26.12 million was transferred to Basic Retained Earnings to bring the Retained Earnings to nil balance”. Please confirm that the $26.12 million Basic RSR was appropriated to Basic Retained Earnings with a following appropriation from Basic Retained Earnings to the IT Optimization Fund otherwise the $65 million IT Optimization fund would not have been able to be funded. CAC (MPI) 2-82 Reference: CAC (MPI) 1-232 MCT a) Please update the schedule attached to CAC (MPI) 1-232 as a response to include the
MCT as at February 28, 2011. Also please file a copy of the detail balance sheet working papers supporting the MCT calculation for each year.
b) Please provide the MCT on a forecasted basis for Basic Insurance as at February 28/29, 2012, 2013, 2014 and 2015 along with the forecasted balance sheet working papers supporting the MCT calculation for each year.
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CAC (MPI) 2-83 Reference: CAC (MPI) 1-229, IT Optimization Project Please provide the date on which MPI first made the PUB aware of this initiative. CAC (MPI) 2-84 Reference: CAC (MPI) 1-236 a), Advising the PUB of Material Financial Adjustments Please clarify whether the response provided to the referenced information request is the confirmation as sought by the information request. CAC (MPI) 2-85 Reference: CAC (MPI) 1-250 a) Please provide a response to CAC (MPI) 1-250 a). The information request was as follows: Please provide a table recalculating the initial claims incurred forecast based on the MPI currently (October 31, 2010) accepted development factors for the fiscal years 2006/07 through to 2010/11, compare the results to the reported initial claims incurred forecasts and actual and re-file the chart on Page 3 of SM.2 page 3 by including an additional column labeled “current initial claims incurred forecasts”. CAC (MPI) 2-86 Reference: Selkirk Service Centre Preamble: In June, 2011 MPI officially opened a new service centre in Selkirk. a) Please prepare and file a detail cost analysis of the new service centre, including the cost
of the land, compared to the costs of the new service centre in Winkler. b) Please prepare and file a detail cost analysis of the old claims centre, including the land. c) Please prepare an analysis of the unamortized cost of the old claims centre. d) Please prepare an analysis of the operating costs of the old claims centre compared to
the new service centre (if actual expenses are not available please use annualized budgeted expenses).
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e) Please advise how the old Selkirk claim centre was disposed. If the centre was sold, please prepare and file a complete capital gain (loss) analysis of the sale transaction by account category.
CAC (MPI) 2-87 Reference: CAC (MPI) 1-251 b) and g) a) With respect to response to CAC (MPI) 1-251 b), for greater clarity and understanding
please provide a detailed narrative explanation relating to the cost benefit analysis attachment. Please explain the relationship and basis of comparison among Current Glass Claims Environment, In-House, Mitchell and Other Vendor.
b) The corporation declined to provide the most recent Internal Audit Report relating to the
eGlass system as per response to CAC (MPI) 1-251 g). Please file a copy of the Audit Committee of the Board of Directors’ Minute relating to receiving an Internal Audit Report relating to the eGlass system.
CAC (MPI) 2-88 Reference: CAC (MPI) 1-252 a) and b) Please confirm that the Ultimate PIPP Claims Incurred on a present value discounted basis for the period 94/95 through to 15/16 will decrease by $508,555,000, which is a decrease of $246,286,000 for the period 94/65 through to 10/11 and $262,269,000 for the period 11/12 through to 15/16. If this cannot be confirmed, please explain in detail. CAC (MPI) 2-89 Reference: CAC (MPI) 1-254 On page 6 item 5.3 of the MPI – ATA – MMDA Agreement dated July 20, 2010 it refers to the creation of a joint initiative to develop Key Performance Indicators and use Manitoba Public Insurance data for benchmarking and assisting in Best Practices. a) Please advise the date this initiative has or will commence. b) Please provide an outline of the Key Performance Indicators being developed. c) Please define and explain the MPI data to be used for benchmarking. d) Please provide a cost estimate to complete this initiative.
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e) Were the terms of the new agreement reflected in the 2011 GRA? CAC (MPI) 2-90 Reference: CAC (MPI) 1-260 CASUALTY REINSURANCE a) Per response to CAC (MPI) 1-260 c) please confirm, the ceded premiums written and
remitted to reinsurers for the period 1996/97 through to 2010/11 is $54,361,000 and the claims recovered from reinsurers for the same period is $45,076,000.
b) Per response to CAC (MPI) 1-260 c) for the fiscal period 2005/06, it appears,
$23,229,000 of ceded claims incurred was returned to reinsurers. Please explain in detail the reason for this unusual adjustment.
c) Of the ceded claims incurred of $45,076,000, please provide the amount that has been
collected in cash to February 28, 2011. Please provide an aged accounts receivable analysis by year for the outstanding balance.
CATASTROPHE REINSURNCE d) Per response to CAC (MPI) 1-260 c) please confirm, the ceded premiums written and
remitted to reinsurers for the period 1996/97 through to 2010/11 is $99,543,000 and the claims recovered from reinsurers for the same period is $113,694,000.
e) Of the ceded claims incurred of $113,694,000, please provide the amount that has been
collected in cash to February 28, 2011. Please provide an aged accounts receivable analysis by year for the outstanding balance.
BROKER f) In response to CAC (MPI) 1-260 d) it refers to “consultation with our broker”. Please
provide a summary profile of the reinsurance broker engaged by MPI. CAC (MPI) 2-91 Reference: CAC (MPI) 1-267 Please explain why there was a negotiated 6.25% increase in labour rates for 2010.
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CAC (MPI) 2-92 Reference: CAC (MPI) 1-271 For greater clarity please explain the terms ‘fiscal year ultimate’ and ‘accident year ultimate’ and the difference between the two terms. CAC (MPI) 2-93 Reference: CAC (MPI) 1-276 d) a) Please confirm that in financial terms ‘contribution margin’ can be defined as the
difference between variable revenues and variable costs. b) Please confirm that, intra alia, the definition of “Generally Accepted Accounting Principles
(GAAP) encompass broad principles and conventions of general application as well as rules and procedures that determine accepted accounting practices at a particular time” as per CICA Handbook Section 1100.02 (b).
c) Please confirm that preparing an annual corporate operating budget is acceptable
practice within GAAP. d) Please confirm that the contribution margin approach to preparing an income statement
is acceptable within GAAP for internal attention directing and reporting purposes for any given product or line of business.
CAC (MPI) 2-94 Reference: CAC (MPI) 1-281 b) The response to CAC (MPI) 1-281 b) indicates that the corporation has engaged an IT business partner; namely, Hewlett Packard to assist with the development and implementation of the MPI new service vision and philosophy. Please file a copy of the Terms of Reference with the mentioned IT business partner. CAC (MPI) 2-95 Reference: CAC (MPI) 1-283—Compliance to Legislative Authority Audit The attachment as a response to CAC (MPI) 1-283 indicates the compliance to two Acts; namely, The Manitoba Public Insurance Corporation Act and The Crown Corporations Public Review and Accountability Act.
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Please explain why other Acts such as The Drivers and Vehicles Act, The Highway Traffic Act, The Financial Administration Act are not listed on the Compliance with Legislative Authorities Appendix A. CAC (MPI) 2-96 Reference: CAC (MPI) 1-286 In the response to CAC (MPI) 1-286 MPI makes a compelling case to retaining 5 territories for its current rating system based on expected costs for each territory. Please provide an analytical commentary arguing for additional territories to increase the actuarial accuracy with respect to relativities and resulting fairer rates. CAC (MPI) 2-97 Reference: CAC (MPI) 1-298 f) The response to CAC (MPI) 1-298 f) indicates that the corporation has developed PIPP metrics organized around 22 categories. Please file a copy of the document describing the inputs and the measurements of the 22 PIPP metrics. CAC (MPI) 2-98 Reference: CAC (MPI) 1-301 g) In response to CAC (MPI) 1-301 g) it appears the corporation does not track operation expenses for FINEOS and CARS on a financial account basis. a) For greater clarity please explain in detail how operating expenses are tracked for the
FINEOS and CARS systems in the general ledger system. b) Please provide a table detailing the operating expenses by account category (general
ledger account) for FINEOS and CARS by fiscal year for the years 2007/08 through to 2010/11 and forecasted for fiscal years 2011/12 through to 2014/15.
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CAC (MPI) 2-99 Reference: CAC (MPI) 1-303 b) a) Please advise if the PIPP vendor-submitted account payment backlog is now up-to-date.
If not, please provide a status report and the date the payments will be up-to-date. b) Please provide the anticipated costs to bring the payment backlog up-to-date. c) As a result of the payment backlog, please provide a table analyzing the financial impact
on claims incurred by fiscal year, if any. CAC (MPI) 2-100 Reference: CAC (MPI) 1-304 Please confirm that “claims paid” is a component of claims incurred. Please confirm that claims incurred equals claims paid plus the change in unpaid claims for a specific period of time. If this cannot be confirmed, for greater clarity, please list the components comprising claims incurred. CAC (MPI) 2-101 Reference: CAC (MPI) 1-305 In response to CAC (MPI) 1-305 the corporation states “The post-implementation costs of supporting the new bodily injury claims administration system and processes are considered operational and have been factored into the operational budget of the respective departments”. Please provide a table, by account category, for fiscal year 2011/12 comprising the operational budget for administering/operating the new bodily injury claims system and compared this budget to the operational budget, by account category, for administering the CARS system for fiscal year 2010/11. CAC (MPI) 2-102 Reference: CAC (MPI) 1-307 In response to CAC (MPI) 1-307 the corporation states with respect to the Human Resource Management System that “A project plan is currently being generated”.
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Please advise when the project plan will be completed and if a copy can be filed with the Public Utilities Board before the end of the Hearings. CAC (MPI) 2-103 Reference: PUB (MPI) 1-2 In response to PUB (MPI) 1-2 the corporation states, intra alia, that it is currently developing a roadmap for the Future of Physical Damage, Service and Road Safety (the Future Vision) and that the final report will only be available in the 4th quarter of this fiscal year. a) The Future Vision may likely have significant cost implications for MPI going forward and
impacting basic insurance rates for fiscal years 2012/13 and onwards. Since this report will not be available before the Public Utilities Board has to rule on the 2012/13 basic insurance rates, what assurances can MPI provide to the Public Utilities Board that there will be minimal or no financial impact on basic insurance rates for 2012/13 and onwards as a result of the implementation of the Future Vision.
b) As part of the Service Objectives to meet the changing service expectations of
customers, partners and staff “New Preferred Service Channels” will be investigated. Please elaborate on what type of new preferred services channels MPI is considering.
CAC (MPI) 2-104 Reference: PUB (MPI) 1-5 b) and CAC (MPI) 1-214 a) As a response to PUB (MPI) 1-5 b) the corporation filed Audit Committee Minutes for 2009/10 and 2010/11 fiscal years. In response to CAC (MPI) 1-214 a) the corporation stated that since “IFRS 4 has not been finalized yet and therefore Manitoba Public Insurance is unable to determine the impact”. On page 2 of 5 of the January 27, 2011 Audit Committee Minutes it states next to the heading labeled “Special Provisions: - Information Technology Optimization Reserve – Provision for IFRS 4-Phase 2” the following: “Mr. Palmer presented Agenda Item 2.1D ‘Special Reserve Provisions: Information Technology Optimization Reserve and Provision for IFRS – Phase 2’. For the year ending February 28, 2011, the IT Optimization Reserve fund is projected to be $75 million of which $65 million will be allocated to Basic. The Provision for IFRS 4 is an earmarked amount of $100 million recognizing the uncertainty of the amount due to no firm IFRS guidelines yet
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set. The external auditors were questioned and provided comments. Following discussion, Members received the report as information.” a) Please file a copy of the assumptions and detailed calculation relating to the IFRS 4
provision of $100 million.
b) Please advise if the $100 million provision has been booked as Unpaid Claims and claims incurred for the fiscal year ended February 28, 2011.
c) Please file a copy of the advice the corporation has received from its external auditors
relating to the $100 million IFRS 4 provision. CAC (MPI) 2-105 Reference: PUB (MPI) 1-5 b) On page 3 of 5 of the January 27, 2011 Audit Committee Minutes Mr. Palmer presented a number of policies to the Audit Committee for approval: a) Policy for Allocation of Balance Sheet Items – Assets, Liabilities, Retained Earnings and
Accumulated Other Comprehensive Income (Loss)
b) Policy for Allocation of Investment Income and other Comprehensive Income (Loss) c) Policy for Allocation of Service Fees and Other Revenue
d) Policy for Write-off of Uncollectible Accounts and Allowance for Doubtful Accounts e) Policy for Writing Down Investments f) Policy for Allocation of Reinsurance Ceded Premiums Written g) Policy for Valuation of Private Equity and Venture Capital Please file a copy of each policy. CAC (MPI) 2-106 Reference: PUB (MPI) 1-5 b) On page 4 of 5 of the January 27, 2011 Audit Committee Minutes it refers to the Office of the Auditor General having prepared an audit report on PIPP.
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Please file a copy of the Office of the Auditor General’s audit report on PIPP. CAC (MPI) 2-107 Reference: PUB (MPI) 1-5 b) On page 3 of 6 of the March 24, 2011 Audit Committee Minutes it states “Mr. Palmer presented Agenda Item 2.5.H ‘Annual Report – Draft Management Discussion and Analysis’. This is the first annual report prepared under IFRS. Complex topics discussed include the large release of unpaid claims reserves and accompanying significant net income, with pending rate decreases and surplus rebates. Following discussion, Members received the report as information”. a) Please confirm that the Annual Report -- Draft Management Discussion and Analysis
refers to the 2010 Annual Report which relates to the fiscal period March 1, 2010 to February 28, 2011.
b) Please confirm that MPI is implementing IFRS reporting standards effective March 1,
2011. c) Please explain the sentence in the Minute which states “This is the first annual report
prepared under IFRS”. CAC (MPI) 2-108 Reference: PUB (MPI) 1-5 b) On page 6 of 6 of the March 24, 2011 Audit Committee Minutes it states “Mr. Bittner presented Agenda Item 2.5.P Review of Audit Committee Terms of Reference as they relate to Corporate Governance”. Please file a copy of the Audit Committee Term of Reference. CAC (MPI) 2-109 Reference: PUB (MPI) 1-5 b) On page 3 of 4 of the May 2, 2011 Audit Committee Minutes it states “Mr. Kowalchuk and Mr. Sissons presented Agenda Item 2.1.G External Auditors’ Findings Report. The significant audit, accounting, and reporting matters included the claims liability actuarial reserve release, accounting treatment of the surplus distribution, and Driver Safety Rating which had 5,913 customers incorrectly placed resulting in $482,000 in foregone revenues. There
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were no audit misstatements or control deficiencies. Following discussion, Members received the report as information.” a) Please confirm that the 5,913 customers incorrectly placed on the DSR scale have been
corrected and the $482,000 in revenues collected. If this cannot be confirmed, please provide an explanation of the actions taken to-date and how the $482,000 of revenues will be collected.
b) Please file a copy of the External Auditors’ Findings Report. CAC (MPI) 2-110 Reference: PUB (MPI) 1-5 b) On page 3 of 4 of the May 2, 2011 Audit Committee Minutes it indicates that the Fourth Quarter Financial Report was circulated at the beginning of April. Please file a copy of the Fourth Quarter Financial Report referred to in the Audit Committee Minutes. CAC (MPI) 2-111 Reference: PUB (MPI) 1-13 c) Per the attachment as a response to PUB (MPI) 1-13 c) Basic forecasted investment income has decreased materially for the fiscal years 2011/12 through to 2014/15 from last year’s GRA to this year’s GRA:
Fiscal Year Decreased investment income 2011/12 $(11,751,000) 2012/13 $(18,988,000) 2013/14 $(21,982,000) 2014/15 $(23,945,000)
Please provide supporting reasons for the forecasted decrease in Basic Insurance investment income for the above years from one year to the next.
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CAC (MPI) 2-112 Reference: PUB (MPI) 1-15 e) and f) The attachment to PUB (MPI) 1-15 e) and f) provides a schedule of investment purchases and sales for equities and bonds respectively. a) Please explain why the “Book Value Sold” for each month starting March 1, 2010
through to February 28, 2011 is identical to the value as at March, 2009 for both attachment e) and f). If the attachments are incorrect, please re-file corrected attachments.
b) Please provide the reasons and source of funds for the unusually large amount of investment purchases of $341,539,074.44 and sales of $293,968,407.54 for the month of October, 2010.
CAC (MPI) 2-113 Reference: PUB (MPI) 1-24 e) and f) The response to PUB (MPI) e) and f) suggests that a “runoff exhibit is attached” for the first quarter of 2011/12. Per the information request filings the runoff exhibit referred to in the response seems to be missing. Please file a copy of the mentioned runoff exhibit. CAC (MPI) 2-114 Reference: PUB (MPI) 1-25 In response to PUB (MPI) 1-25 MPI’s external auditor KPMG LLP stated the following: “In our capacity as external auditors to MPI, KPMG has been engaged to provide an opinion as to whether the financial statements of the Corporation are fairly presented taken as a whole. In each of the fiscal years from 2005 to present, KMPG has opined that the financial statements present fairly, in all material respects, the financial position of MPI and its results of operations and its cash flows in accordance with Canadian generally accepted accounting principles. We believe that our opinion remain appropriate for each of these years.” Please arrange for the following questions to be answered by the Corporation’s external auditor. a) Please provide the definition of Canadian generally accepted accounting principles.
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b) Please provide compelling evidence and arguments supporting your statement of belief
which states “We believe that our opinion remain appropriate for each of these years”. c) With respect to IFRS 4 is your opinion that a provision should be booked to unpaid
claims and claims incurred for the year ended February 28, 2011 estimating the financial impact of changing the discount factor to a risk free rate from the current rate? Please explain your response fully.
CAC (MPI) 2-115 Reference: PUB (MPI) 1-27 d) In response to PUB (MPI) 1-27 d) a margin for adverse deviations for reinsurance was judgmentally selected to provide a minimal buffer for uncollectible reinsurance of $1.7 million. a) Please provide an analysis and schedule of reinsurance ceded claims receivable that
have been uncollectible and written off for the fiscal year 1994/95 through to 2010/11 by fiscal year and by reinsurer.
b) Please provide a schedule of each reinsurance company and their credit rating that are
participating in the 2011/12 corporate reinsurance program. CAC (MPI) 2-116 Reference: PUB (MPI) 1-44 The schedule in response to PUB (MPI) 1-44 provides a breakdown of PIPP costs by component. a) Please explain why the Expense component for 2011 of 38.3% or $62.3 million was
unusually high both in percentage and dollar terms compared to previous years. b) Please provide a detail breakdown of the composition of expenses for 2011 of $62.3
million compared to 2011 of $24.3 million.
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CAC (MPI) 2-117 Reference: PUB (MPI) 1-49 b) and TI.9 Per TI.9 the total FTE’s for 2011 is 1,850.4. Per Schedule 1 of PUB (MPI) 1-49 b) the Basic Insurance FTE’s for 2011 is 1,325. a) Please confirm that the difference between the FTE’s reported in TI.9 of 1,850.4 and per
Schedule 1 of PUB (MPI) 1-49 b) of 1,325.0 or 525.4 are FTE’s working for lines of business other than Basic Insurance.
b) Please provide a detailed analysis of the bases or allocation formulas used to estimate
the Basic Insurance FTE’s of 1,325 for 2011. CAC (MPI) 2-118 Reference: PUB (MPI) 1-49 f) The chart as a response to PUB (MPI) 1-49 f) plots the growth in claims expense, operating expense, claims expense per claim and operating expense per policy compared to CPI for the fiscal years 1993 through to 2011. a) Please explain the reasons for the significant differences between CPI and the growth in
claims expenses and operating expenses especially since 2003. b) Please update this chart including ICBC, SGI and the P and C Industry for the years
1993 to 2011 for growth in claims expense, growth in operating expense, growth in claims expense per claim and growth in operating expense per policy.
CAC (MPI) 2-119 Reference: PUB (MPI) 1-51 c) The attachment to the response to PUB (MPI) 1-51 c) provides a summary of the 2011/12 Cost Allocation comparison of the “Old” allocation methodology to the Deloitte allocation methodology. Please reconcile, per the Deloitte allocation methodology, Basic’s share of Insurance COB of $152,970,000 to the Total assigned to Basic LOB Normal Operations of $170,063,000 and explain the difference.
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CAC (MPI) 2-120 Reference: PUB (MPI) 1-54 a) Per the attachment to the response to PUB (MPI) 1-54 a) compensation expenses increase (decrease) as follows:
F – Forecast P -- Projected a) For the fiscal years 09/10 and 10/11 please explain in detail the significant increases in
compensation expense of 8.4% and 12.2% respectively. b) Please advise if the corporation adjusted compensation scales or levels for staff and
management during fiscal years 09/10 and 10/11. If yes, please file a copy of the compensation analysis report and provide an explanatory narrative justifying the changes incorporated, by position, into the pay scales.
CAC (MPI) 2-121 Reference: Manitoba Civil Service Wage Freeze Please confirm that the Manitoba Civil Service of about 13,500 civil servants implemented a wage freeze for 2010 and 2011 earlier this year. CAC (MPI) 2-122 Reference: PUB (MPI) 1-59 f) The attachment to the response to PUB (MPI) 1-59 f) shows an increase in Management positions from 101.0 in 2005 to 152.0 in 2011, an increase of 50% or 51 management positions.
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Please provide a detailed analysis of the 51 management positions and the rationale and justification for creating these additional new positions. CAC (MPI) 2-123 Reference: PUB (MPI) 1-62 g) In response to PUB (MPI) 1-62 g) the corporation states, intra alia, “However, any deviations from these preliminary estimates will not affect Basic Autopac rates since costs will be recovered from the IT Optimization Fund”. a) Please confirm that for the external audited annual financial report periodic operating
expenses relating to IT Optimization and amortization expenses from deferred IT Optimization expenditures will be processed and reported through the corporate income statement on an annual basis and not directly charged to the IT Optimization Fund reported under Basic Retained Earnings.
b) Please confirm that the IT Optimization Fund reported under Basic Retained Earnings is
in fact a prepayment of excess insurance premiums by Autopac rate payers for MPI management to spend on IT optimization projects as MPI management sees fit. If this cannot be confirmed, please provide a detailed explanation.
c) Please confirm that should MPI management not wish to spend the IT Optimization fund
on various IT projects, these excess Basic RSR funds could be return to Autopac rate payers in the form of a surplus distribution. If this cannot be confirmed, please provide a detailed explanation.
CAC (MPI) 2-124 Reference: CAC (MPI) 1-229 and PUB (MPI) 1-62 c) MPI IT Optimization – Final Report Presentation On page 3 of the October 17, 2010 the Key Findings are summarized as follows:
Key Findings Explanations Current State is High Risk of Failure MPI at high risk of outages due to single
points of failure. Technology Out of Date Technology is out of date and no longer
current. BC/DR does not meet business needs Disaster recovery and business continuity
plans cannot be executed as they are currently defined.
Security at Risk Security is low maturity and data cannot be kept secure and malicious actions cannot be effectively audited.
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Complex Environment Application environment is complex with many interdependencies, technologies, and no single source of truth for data values.
Enterprise system is cumbersome AOL has grown over the years both in size and in terms of the number of interdependent systems and it is now difficult and costly to modify.
Processes Siloed Processes, tools, and roles are defined vertically rather than horizontally which reduces the efficiency of IT and leads to increased complexity.
Low Process Maturity IT Process maturity is low which leads to inefficiencies, negative impacts on reliable IT service delivery and overall risk to the environment.
a) Please provide a detailed explanation of each Key Finding and the reasons these
particular key findings were not resolved through the BPR processes of the last number of years.
b) Based on the MPI IT Optimization – Final Report Presentation prepared by HP, please
confirm that MPI, after spending tens of millions of dollars on BPR, is now more at risk of IT failures then it was prior to BPR. If this cannot be confirmed please provide a compelling case why that is not so.
c) Please confirm that EDS was acquired by HP and that essentially the consultants working
on MPI projects from HP previously worked for EDS. If this cannot be confirmed please explain.
d) Please provide the CV’s of the IT experts employed at MPI (not consultants). e) Please provide the CV’s of the IT expert on the Board of Directors. f) Please confirm that the MPI Board of Directors has engaged an IT expert to advise the
Board of Directors on matters relating to IT governance. If this cannot be confirmed, please explain how the Board of Directors discharges its duties with respect to IT governance.
g) On page 7 of the report it indicates that the AOL and CARS (the most business critical
applications) operate on unsupported versions of databases/code.
i. Please explain why MPI’s most critical applications would operate on unsupported versions of databases/code.
ii. Please confirm that the data extracted from AOL and CARS for forecasting purposes is correct and not suspect.
iii. Please advise the date that AOL and CARS will operated on supported versions of databases/code.
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CAC (MPI) 2-125 Reference: PUB (MPI) 1-66 a) Please file a copy of CICA Handbook, Section 3064. CAC (MPI) 2-126 Reference: PUB (MPI) 1-68 a) Please re-file the attachment to PUB (MPI) 1-68 a) calculating and including the compound annual growth rates for each information technology expense account for the following periods:
2004/05 through to 2009/10 2004/05 through to 2013/14 2009/10 through to 2013/14
CAC (MPI) 2-127 Reference: PUB (MPI) 1-80 In the response to PUB (MPI) 1-80 the corporation indicates “earned driving days” have been incorporated into the DSR forecasting methodology. Please define earned driving days and explain how earned driving days are determined for DSR forecasting purposes. CAC (MPI) 2-128 Please provide the five story series in the Winnipeg Free Press in the month of August, 2011 outlining road safety issues in Manitoba. CAC (MPI) 2-129 With reference to the response to CAC (MPI) 1-40 the answer states that “A greater weight was given to 2010/11 due to the implementation of the new BI3 system and the automated reserving functionality in that year.” Page 15 of the Claims Forecast Data Book 2011 states that there was improper functioning of the automatic reserving and closing function relating to these covers in the new BI3 system leading to an overstatement of accident benefits other covers and costs for year ending February 28, 2011. Please reconcile these two statements.
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CAC (MPI) 2-130
With reference to the response to CAC (MPI) 1-40 please justify a 12 month incurred forecast of 51,019 for 2011/12, more than a 13% year over year increase from 2009/10, given that there was a decreasing trend in the years 2007/08 to 2009/10 and the overstatement in 2010. The derivation of the estimate given in the response to CAC (MPI) 1-40 does not explain how this increase can be reasonable. CAC (MPI) 2-131 With reference to the response to CAC (MPI) 1-42 please give the derivation of the forecasted number of total PIPP claims shown as 17,121. CAC (MPI) 2-132 With reference to the response to CAC (MPI) 1-57 please give the derivation of the three year weighted average covers per thousand exposures of 124.44 covers. CAC (MPI) 2-133 With reference to the response to CAC (MPI) 1-58 please show the derivation of the base Fire – Total projected 2011/12 covers of 912. Please show specifically the derivation of the two year weighted average covers per thousand exposures of 1.16 covers. CAC (MPI) 2-134 With reference to the response to CAC (MPI) 1-68 would the Corporation not expect that the immobilizer program is affecting the number of Attempted Theft covers similar to the effect on the Total Theft covers? The table below shows the year over year annual % change in covers for both Total Theft and Attempted theft. These numbers indicate a relationship. Please explain why this relationship is not accounted for in the forecasts on page 51 of the Claims Forecast Data Book 2011.
Total Theft Total Attempted Theft
2007/08 ‐35.4% ‐21.0%
2008/09 ‐43.7% ‐46.2%
2009/10 ‐23.4% ‐26.7%
2010/11 ‐17.6% ‐27.5%
Annual % Change
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CAC (MPI) 2-135
With reference to the response to CAC (MPI) 1-71 would the Corporation not expect that the immobilizer program is affecting the number of Partial Theft covers similar to the effect on Total Theft covers? The table below shows the year over year annual % change in covers for both Total Theft and Total Partial Theft. These numbers indicate a relationship. Please explain why this relationship is not accounted for in the forecasts on page 51 of the Claims Forecast Data Book 2011.
Total Theft Total Partial Theft
2007/08 ‐35.4% ‐44.2%
2008/09 ‐43.7% ‐32.0%
2009/10 ‐23.4% ‐5.3%
2010/11 ‐17.6% ‐22.7%
Annual % Change
CAC (MPI) 2-136 With reference to the responses to CAC (MPI) 1-79 and CAC (MPI) 1-80 please submit the tables on pages 53, 54 and 55 of the Claims Forecast Data Book 2011 showing the historical incurreds and severities net of reinsurance. CAC (MPI) 2-137 With reference to the response to CAC (MPI) 1-79 please submit a table showing the derivation of the ratio of Hail-Total-Losses-to-Total severity of .335 referenced in the response and shown on page 53 of the Claims Forecast Data Book 2011. With reference to the response to CAC (MPI) 1-82 please submit a table showing the derivation of the ratio of Hail-Total-Losses-to-Total severity of .365 referenced in the response and shown on page 54 of the Claims Forecast Data Book 2011. CAC (MPI) 2-138 With reference to the response to CAC (MPI) 1-84 there is no section 3.7.3 in the Claims Forecast Data Book 2011. Please confirm the section noted should be 4.3.7.3. CAC (MPI) 2-139 With reference to the response to CAC (MPI) 1-90 would the Corporation not expect that the immobilizer program is affecting the number of All Other covers similar to the effect on Total Theft covers, given that the All Other peril is comprised primarily of claims of
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electronic equipment stolen from vehicles? The table below shows the year over year annual % change in covers for both Total Theft and Total All Other. These numbers indicate a relationship. Please explain why this relationship is not accounted for in the forecasts on page 59 of the Claims Forecast Data Book 2011. Annual % Change
Total Theft Total All Other
2007/08 -35.4% -39.8%
2008/09 -43.7% -31.5%
2009/10 -23.4% -22.2%
2010/11 -17.6% -29.7%
CAC (MPI) 2-140
With reference to the responses to CAC (MPI) 1-93 and CAC (MPI) 1-97 please provide a table showing the derivation of the 25.14 Repair/Replacement covers per 1000 exposures and show the calculation of the projected decrease in covers for both Glass Repairs and Replacements and Total Glass. CAC (MPI) 2-141 With reference to the response to CAC (MPI) 1-94 please give the increases to labour rates and increases in parts costs when replacing glass that drive the 14.16% increase in severity. CAC (MPI) 2-142 With reference to the response to CAC (MPI) 1-106 please give the derivation of the severity forecast for 2011/12 of 439? CAC (MPI) 2-143 With reference to the response to CAC (MPI) 1-123 were other data sources considered and, if not, could they be considered in future rate applications? CAC (MPI) 2-144 With reference to the response to CAC (MPI) 1-235 please submit Sections AI.18.1 and AI.18.2 of the 2010 General Rate Application.
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CAC (MPI) 2-145 With reference to the response to CAC (MPI) 1-232 please give the full calculation of the current year Total Capital Available and Minimum Capital Required shown in the attachment to the response. CAC (MPI) 2-146 With reference to the response to CAC (MPI) 1-212 there appears to be an error in the calculation of the increase from 2011/12 to 2012/13 for net income. Please submit a corrected exhibit.
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CMMG (MPI) Round 2 Interrogatories
2012 GRA
September 2011
CMMG (MPI) 2-1 Please Identify which years of the last decade MPI has been ordered or has made rebates to its rate payers. CMMG (MPI) 2-2 Using the data produced in CMMG IR 1-4, and with reference to the Corporation’s refusal to answer CMMG I.R. 1-3, please estimate the percentage reduction in the required rate for the last seven years and the approximate annual premium involved CMMG (MPI) 2-3 With reference to the Corporation’s refusal to answer CMMG 1-6, please restate the Corporation’s previous calculations in previous G.R.A.’s as to the effect of the adoption of the comparative fault allocation. CMMG (MPI) 2-4 How much are the claims costs for wildlife collision in the White Shell Park on an annual basis, and more specifically along the Trans Canada Highway in the Whiteshell? CMMG (MPI) 2-5 Please provide the calculations used in the Corporation’s exploration of the feasibility of various collision mitigation strategies referred to in CMMG 1-9 - ie. What were the costs projected, what payback period was estimated, - ie please provide your calculations. CMMG (MPI) 2-6 With respect to CMMG IR 1-13, please set out the Corporation’s argument that it advanced at the second rebate Technical Conference with respect to the Corporation’s argument against that motorcycles should have received a bigger rebate than private passengers.
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CMMG (MPI) 2-7 With reference to CMMG IR 1-16, please provide the overall premium revenue change for motorcycles based on the elimination of the subsidization of heavy truck and related vehicle PIPP costs. CMMG (MPI) 2-8 With reference to CMMG IR 1-19, please confirm whether the restated loss costs reflect that the change was done only for the prior year (as stated), or whether it is done for each of the ten year’s loss costs. CMMG (MPI) 2-9 With reference to CMMG 1-20, please restate the amount of the excess retained earnings. CMMG (MPI) 2-10 With reference to the MPI discussion paper “Safer Roads”, please advise whether MPI has now included motorcyclists in its definition of “vulnerable road user”.
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MUCDA (MPI) Round 2 Interrogatories
2012 GRA
September 2011
MUCDA (MPI) 2-1
Further to the current feasibility investigation mentioned in the Corporation’s response to MUCDA (MPI) 1-22, provide the following information:
a) the instructions given to the person(s) undertaking the investigation;
b) the date on which the instructions were given;
c) the date by which the investigation is expected to be completed, or was completed; and,
d) a summary of any interim recommendations (if the investigation is ongoing) or a copy of the final recommendations and supporting reasons (if the investigation is completed).
MUCDA (MPI) 2-2 Particularize the way in which the considered online search database would not, as hinted at in the Corporation’s response to MUCDA (MPI) 1-22, provide all of the information that new disclosure requirements impose pursuant to the Motor Vehicle Information Disclosure Regulation. MUCDA (MPI) 2-3 Further to the Corporation’s response to MUCDA (MPI) 1-23, is the Corporation’s current feasibility investigation considering the possibility of making available information only to certain groups, such as the Manitoba Used Car Dealers Association, if not to the general public at large? If not, explain the Corporation’s decision. MUCDA (MPI) 2-4 Identify all companies and organizations, including the Manitoba Used Car Dealers Association, that have requested online search access to the Corporation’s information about vehicle history.
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MUCDA (MPI) 2-5 Given that the Corporation responded to MUCDA (MPI) 1-24 and 1-25 with a statement that it does not track the requested information, explain from where the information came that appears in the Corporation’s response to MUCDA (MPI) 1-26. MUCDA (MPI) 2-6 The Corporation’s reply to MUCDA (MPI) 1-27 outlines the procedure followed in providing claims data in response to public enquiries. Consider that, in the absence of an online search database, MUCDA members could add to the volume of claims data requests, beginning when the new disclosure requirements come into effect at the end of 2011. In this light, a) Is the Corporation in a position to handle approximately up to 80,000 annual requests
for detailed claims data and summary claims data, which reflects the average annual number of sales that motor vehicle dealers make and that would now trigger information disclosure requirements?
b) Does the Corporation expect that it could make its replies within the interval that the
Corporation mentions in its reply to MUCDA 1-28, even at such an increased annual volume?
c) If the Corporation is unable or unwilling to make available a “self-help” or online search
database that would allow at least MUCDA members to conduct searches to comply with new information disclosure requirements within the timely expectations of consumers buying a vehicle, suggest other ways in which sellers could reasonably comply with the requirements of The Business Practices Act and its newest regulation.
MUCDA (MPI) 2-7 Confirm that, as set out in MUCDA (MPI) 1-18, the Corporation does not ask bidders at MPI salvage auctions whether or not they are dealers, within the meaning of s. 1(1) of The Drivers and Vehicles Act. MUCDA (MPI) 2-8 Confirm that, as set out in MUCDA (MPI) 1-18, the Corporation does not ask bidders at MPI salvage auctions whether or not they hold a valid dealer’s permit, within the meaning of s. 96(1) of The Drivers and Vehicles Act.
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MUCDA (MPI) 2-9 Confirm that, on the basis of the Corporation’s responses to MUCDA (MPI) 1-18 and 1-19, it is possible that successful bidders at MPI salvage auctions can be persons who fall within the definition of “dealers” as set out at s. 1(1) of The Drivers and Vehicles Act, but who do not hold a valid dealer’s permit as required by s. 96(1) of The Drivers and Vehicles Act. MUCDA (MPI) 2-10 Confirm that, on the basis of the Corporation’s responses to MUCDA (MPI) 1-18 and 1-19, it is possible that successful bidders at MPI salvage auctions can be persons who a) purchase at least five vehicles in a 12-month period through MPI salvage auctions, even
though they do not hold a valid dealer’s permit as required by s. 96(1) of The Drivers and Vehicles Act; or,
b) engaged in transactions of purchase or sale, within the meaning of s. 110(6) of The Drivers and Vehicles Act, of at least five vehicles in a a 12-month period through MPI salvage auctions, even though they do not hold a valid dealer’s permit as required by s. 96(1) of The Drivers and Vehicles Act.
MUCDA (MPI) 2-11 Comment on the Corporation’s responsibility, if any, to enforce provisions of The Drivers and Vehicles Act in general, and s. 96(1) in specific. MUCDA (MPI) 2-12 Will the Corporation undertake, first, to consider and study the possibility that successful bidders at MPI salvage auctions can be persons who fall within the definition of “dealers” as set out at s. 1(1) of The Drivers and Vehicles Act, but who do not hold a valid dealer’s permit as required by s. 96(1) of The Drivers and Vehicles Act; and, secondly, to report in its 2013 rate application process whether or not the Corporation should change, or will have by then changed, its procedures at salvage auctions to identify dealers and aim to ensure compliance with The Drivers and Vehicles Act.
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