The Art of Self-InsuranceMax Koonce, Senior Director, Risk Management, Walmart Stores, Inc.Marc Salm, Vice President, Risk Management, Publix Super Markets, Inc.Dave North, President and CEO, Sedgwick

Session FIN201Wednesday, April 18, 201210:15 a.m. - 11:30 a.m.

Dave NorthPresident and CEO

Sedgwick

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What is self-insurance?

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How does self-insurance compare to alternative programs?

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

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What are the current realities facing self-insurers today?

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Publix Super Markets

• Publix Super Markets, Inc. is a private but widely held grocery company with its corporate headquarters in Lakeland, Florida.

• Publix is the largest employee–owned grocery store in the United States.

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Publix Super Markets

• Publix operates 1051 stores in five southern states: Florida, Georgia, South Carolina, Tennessee and Alabama.

• In 2011, Publix sales were over $27 billion.

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Publix Super Markets

In 2011, Publix was rankedNo. 102 by FORTUNE®.

Publix has been recognized for 14 years straight as one of FORTUNE® magazine's

"100 Best Companies to Work For."

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Publix’s Casualty Program

• Self-insured retentions

• Deductibles

• Corridors

• “Step ups”

• Self administration of claims

• Third party administration of claims

All designed with the help of our broker.

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Publix’s Retentions

Corridor Deductible

Corridor Deductible

Deductible Deductible Deductible

Deductible

Front

Front

Step Up Ded (one time)

SIR

SIR Deductible SIR SIR

WCGeneral Liability Druggist Fleet D&O Fiduciary

ODL (outside boards)

Professional E&O

Publix Charities

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Evolution of a Casualty Program

Objectives Minimize Total Cost of

Risk and corporate SG&A

Optimize the efficiency of the insurance purchase

Understand and control (where possible) impact to F/S

Manage internal business unit budgets and behavior

Maximize claim control (management and settlement)

Prog

ram

Fle

xibi

lity

/ Ca

sh F

low

Financial Volatility

Self-Insurance

Loss Sensitive Plans

Alternative Risk Finance

Captive

High Deductible

Guaranteed Cost

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Risk Finance – Decision Process

Quantify Risk @ Retention Options

Retention Decision

Funding Decision

Transfer

NoKe

epPost-Loss Funding

Options

Insurance

Guaranteed Cost Small Deductible

Large Deductible Self-Insurance

Pre-Loss Funding Strategy

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• Cash position

• Effective tax rate

• Cost of capital

• LOC capacity & cost

Considerations Impacting Design

• Need for admitted paper (vendors, regulators)

• Cost predictability

• Risk tolerance

Financial Operational

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Guaranteed Cost

Simple

TCOR = GC premium

100% of risk transferred to insurer

Budget certainty

No collateral and escrow

Claims administration included

Works for low risk tolerance; high corporate tax rate

No cash flow advantage

Driven more by carrier portfolio rather than individual risk

No immediate credit for good loss experience

No real control over claims handling

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