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c c c Florida Municipal Insurance Trust MANAGEMENT'S DISCUSSION & ANALYSIS For the Year Ended September 30, 2010 Income and expenses. The majority of the Trust's operating income and expenses are contained within a relatively small number of accounts, Following is a brief description of those accounts. Premium income. The Trust provides insurance to members in much the same way as insurance companies provide insurance protection for customers, Coverages are rated for each individual member based on established rates, adjusted by experience modifiers and discounts to reflect the actual loss experience of the member, The experience modifier is based on prior experience adjusted by certain factors, Member premium rating is accomplished by the Trust's Administrator Underwriting Department, which has assigned each member to one of its staff underwriters, Investment income. The Trust has a highly diversified investment portfolio, The target allocations established under the Trust's investment policy are 20% equity and 80% fixed income, The Trust's investments are managed primarily through the equity and bond portfolios of the FMlvT, The Trust complies with the provisions of GASB Statement 31 by including in investment income the change in fair value of its investments, Claim payments and reserves. The Trust pays for covered losses experienced by its members as well as related claims expenses, The Florida League of Cities, Inc, (League) has a contractual agreement with the Trust to function as its administrator. All claims are processed and managed in-house by the administrator. Outside claims adjusters, attorneys, medical experts, and other professionals are contracted on an as-needed basis, Between the time a claim is reported and the time it is resolved, reserves are established for the estimated amount that will have to be paid at some future date to settle the loss, Reserves are also established for claims that have occurred but are not yet known to the Trust. This recognizes losses in the current year for claims that will be paid in future periods, This process allows a matching of current year premiums with estimated total losses that will be incurred as the result of current fiscal year coverages, Administrative expenses and contract service fees. In providing coverage and other member services, the Trust incurs administrative expenses and contract service fees with both the administrator and outside vendors, All of these expenses are budgeted and monitored on a monthly basis for compliance with budgetary limits, The administrator assesses their fees based on member premiums, and no change in this contractual arrangement is anticipated in the near future. 4