The Art of Self-Insurance Max Koonce, Senior Director, Risk Management, Walmart Stores, Inc. Marc Salm, Vice President, Risk Management, Publix Super Markets,

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

2

What is self-insurance?

3

How does self-insurance compare to alternative programs?

4

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

5

What are the current realities facing self-insurers today?

6

7

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.

8

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.

9

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."

10

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.

11

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

12

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

13

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

14

• 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

15

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

16