Trust Owned Health InsuranceFormed in 1992 in Hamilton BermudaWholly owned subsidiary of Energy Insurance Mutual EIMProtected cell captive insurance companyAt December 31 2005 EIS146s policy assets to ID: 860375
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1 Energy Insurance Services, Inc. Trust Ow
Energy Insurance Services, Inc. Trust Owned Health Insurance Formed in 1992 in Hamilton, BermudaWholly owned subsidiary of Energy Insurance Mutual (EIM)Protected cell captive insurance
2 companyAt December 31, 2005, EIS’s
companyAt December 31, 2005, EIS’s policy assets totaled $529.4 million and surplus totaled $58.8 million EIS Company Profile In August 2006, EIS’s Board authorized redomestic
3 ation in the United States Filed formal
ation in the United States Filed formal application with the S.C.Dept. of Insurance on September 18, 2006Transition to South Carolina was completed December 1, 2006 EIS Company Profile
4 PreFund PayYou Insurance Other Investmen
PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsFunding Options Pr
5 eFund PayYou Insurance Other Investments
eFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: Eliminate P
6 reFund PayYou Insurance Other Investment
reFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: Retain Pre
7 Fund PayYou Insurance Other Investments
Fund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: Redesign Pla
8 n Types Defined Contribution PlansDefine
n Types Defined Contribution PlansDefined Benefit Plans PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate R
9 edesign Retain Settle Retiree BenefitsOp
edesign Retain Settle Retiree BenefitsOption: Defined Contribution PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution
10 Eliminate Redesign Retain Settle Retire
Eliminate Redesign Retain Settle Retiree BenefitsOption: Defined Benefit Funding Options PayAsYouGoSettle the LiabilityPreFund the Liability PreFund PayYou Insurance Other Investments
11 Defined Benefit VEBA TOLI TOHI Captive
Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: PayYou PreFund PayYou Insurance Other Investments D
12 efined Benefit VEBA TOLI TOHI Captive Co
efined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: Settle PreFund PayYou Insurance Other Investments Def
13 ined Benefit VEBA TOLI TOHI Captive Comm
ined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: PreFund PreFund PayYou Insurance Other Investments Defi
14 ned Benefit VEBA TOLI TOHI Captive Comme
ned Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: VEBA Trust Investment Options Traditional (Other) Invest
15 mentsInsurance PreFund PayYou Insurance
mentsInsurance PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOpt
16 ion: Traditional Investments PreFund Pa
ion: Traditional Investments PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Reti
17 ree BenefitsOption: Insurance Types of
ree BenefitsOption: Insurance Types of Insurance Trust Owned Life Insurance (TOLI)Trust Owned Health Insurance (TOHI) PreFund PayYou Insurance Other Investments Defined Benefit VEBA TO
18 LI TOHI Captive Commercial EIS Defined C
LI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: TOLI PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI T
19 OHI Captive Commercial EIS Defined Contr
OHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOption: TOHI Forms of Insurers Captive InsurerCommercial InsurerEnergy Insurance Servic
20 es, Inc. (EIS) PreFund PayYou Insurance
es, Inc. (EIS) PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOpt
21 ion: Captive PreFund PayYou Insurance O
ion: Captive PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOpti
22 on: Commercial PreFund PayYou Insurance
on: Commercial PreFund PayYou Insurance Other Investments Defined Benefit VEBA TOLI TOHI Captive Commercial EIS Defined Contribution Eliminate Redesign Retain Settle Retiree BenefitsOp
23 tion: EIS EIS’s TOHI Policy Overvi
tion: EIS EIS’s TOHI Policy Overview Policies are a form of TOHIPolicies are purchased by a VEBA VEBA is insured on a Stop Loss basis for a portion of the claims experienced by pa
24 rticipantsEIS provides noncancelable sto
rticipantsEIS provides noncancelable stop loss insurance coverage for the life of the covered populationThe VEBA trust owns the policy, pays the premium(s) and receives payments as they
25 become dueRetirees do not directly rece
become dueRetirees do not directly receive payment from EIS Premium Determination A function of:Company’s post retirement benefit obligation (APBO)Qualified asset account limit (U
26 S code section 419)Company’s financ
S code section 419)Company’s financial strategyActuarial principalsPremium level is elective, subject to the above TOHI Funding Cash Flow RetirementPlan Sponsor VEBA Trust EIS Reti
27 rees FundingContributionsTOHI ClaimsPaym
rees FundingContributionsTOHI ClaimsPaymentsPremiums Retiree Medical Benefits Payments Current Premium Allocation 5% 95% General Account Separate Account Policy Benefit Claim Payments A
28 nnual policy claims pricingGuaranteed fa
nnual policy claims pricingGuaranteed factorsCurrent factorsAnnual medical claims of retirees covered under the policyPolicy asset performance and aggregate multiyear policy experience
29 Annual Policy Pricing Parameters Guarant
Annual Policy Pricing Parameters Guaranteed factorsCurrent FactorsBenefit Percentage Guaranteed FactorsCurrent FactorsAttachment PointBenefit PercentageAnnual MaximumLifetime MaximumN/A
30 Sample Policy BenefitPayment Calculatio
Sample Policy BenefitPayment Calculation Medicare($3,000) Plan Deductible($1,000) Plan Coinsurance ($1,200Total AmountPaid to Providers($10,000) Attachment Point($500) Total Plan Claim
31 sPaid by VEBA($4,800)Total Policy Claims
sPaid by VEBA($4,800)Total Policy ClaimsReimbursed to VEBA($3,000) Policy Coinsurance ($750) Over Annual Max($550)Plan ClaimsPaid($4,800)Benefit($3,000) Benefit($3,000) Benefit Percenta
32 ge: 80% Current Benefit Computation Fac
ge: 80% Current Benefit Computation Factors Other EIS MBP and Policy Considerations Risk shiftingIn Helvering v. Le Gierse the United States Supreme Court explained that a valid life i
33 nsurance contract, for federal tax purpo
nsurance contract, for federal tax purposes, must involve riskshifting and riskdistribution.EIS TOHI program contains a reciprocal mechanism that distributes actual claims across separa
34 te accounts according to expected values
te accounts according to expected valuesProgram Advisory CommitteeConsults with EIS on any MBP issues EIS Advantages EIS is in business to meet the needs of its policyholdersDoes not ha
35 ve earnings per share or return on equit
ve earnings per share or return on equity requirements that impact the fees charged to the policyholdersTOHI program has been in operation for over ten yearsCaptive status allows EIS to
36 take advantage of lower premium tax rat
take advantage of lower premium tax rates as compared to commercial insurers Merrill Lynch Investment Management Consultant for MBP # 15 since 1996Responsibilities include assisting EI
37 S and Policyholders with:Establishing in
S and Policyholders with:Establishing investment policy, obectives, asset allocations and guidelinesSelecting investment managersMeasuring, evaluating and reporting investment performan
38 ce Merrill Lynch Approved Invesment Mana
ce Merrill Lynch Approved Invesment Managers includes:Asset Classes:Firms:Products:Assets Custodied at State Street BankPerformance reported to Policyholders monthly Investment Informat
39 ion AllocationAsset ClassMinimum %Maximu
ion AllocationAsset ClassMinimum %Maximum %Conservative Fixed Income14.14 %28.41 %High Yield11.11 %11.11 %Large Cap Value15.04 %26.97 %Large Cap Growth6.59 %22.70 %Small Cap Growth9.23
40 %21.25 %Small Cap Value16.08 %16.08 %Int
%21.25 %Small Cap Value16.08 %16.08 %International13.85 %18.71 % Current Policyholder Experience Margaret Walsh, OGE Energy Retiree Plan Summary Eligibility for retiree medical changedA
41 dopted carve out coordination with Medic
dopted carve out coordination with MedicareEliminated Plan eligibility for anyemployee hired after February 1, 2000Increased / modified plan deductiblesIncreased retiree cost share Clai
42 ms Filing Process RetireesProviders VEBA
ms Filing Process RetireesProviders VEBA Daily / Weekly Process Submit Claims Pay Claims Report Claims Fund Claims ThirdPartyAdmin.(TPA) VEBA Quarterly TOHI Process Submit TOHI Claims
43 ThirdPartyAdmin.(TPA) EIS ClaimEligibili
ThirdPartyAdmin.(TPA) EIS ClaimEligibilityValidated TOHI Eligible Claims Pay TOHI Claims Ten Year History Program Recap TOHI through a captive offers significant advantagesMembers are
44 ownersProgram is receptive to its Policy
ownersProgram is receptive to its Policyholders’ evolving requirements and business circumstancesTOHI contract is a competitive product for funding employee benefits FAS 106 Strate
45 gy Development Involve a cross section o
gy Development Involve a cross section of the organizationModel the financial impactIf EIS Policy purchase is a consideration, complete a Policy mechanics reviewStakeholder consideratio