California Self-Insurers’ Security Fund
Alternative Security Program Overview
November 10, 2010
Disclosure

Securities or investments are offered through MMC Securities Corp (“MMCSC”), a registered broker-dealer, and member of FINRA/SIPC. Main
office: 1166 avenue of the Americas, New York, NY 10036. Phone: 212.345.5000. MMCSC, Oliver Wyman, and Marsh Inc. are affiliated entities
that are owned and operated by Marsh & McLennan Companies, Inc. MMCSC or any of its affiliates may have an independent business
relationship with any of the companies described herein. Trademarks and service marks are the property of their respective owners.

This material has been prepared for informational purposes only. It is not an offer to buy or sell any security or commodity or other financial
instrument or to participate in any trading strategy. The implementation of or investment in the Alternative Security Program (“ASP”) involves a
high degree of risk and should be considered only by institutional investors who can bear the economic risks of replacing collateral with a
portfolio based approach utilizing synthetic collateralized debt obligations and credit default swaps (“credit derivatives”). Certain inherent risks of
credit derivatives include, but are not limited to the following: counterparty default risk; correlation may exist between reference entities and
counterparties not assumed in risk models; reference entities may exhibit greater correlation than assumed in risk models; estimated recovery
rates may greatly differ from actual recovery rates; reference entities may default on their worker’s compensation payments without triggering an
ISDA default; and depending on future market conditions, credit protection may not be available at renewal of the ASP or may only be available
at excessive cost. ASP sponsors/Investors should not rely on rating agency ratings and should conduct their own analysis or due diligence –
identical ratings for different financial products do not guarantee identical risk characteristics since default rates may vastly differ.

Certain of the information contained herein concerning credit ratings and default rates is based upon or derived from information provided by
third-parties and other industry sources as indicated herein. Results from simulations are for illustrative purposes only and certain assumptions
have been made regarding simulations because some models are proprietary to their respective owners and cannot be replicated. No
representation or warranty, express or implied, is made by MMCSC as to the accuracy or completeness of the information set forth herein, and
nothing contained in this presentation is, or shall be relied upon as, a promise or representation, whether as to the past or the future. MMCSC
has not independently verified any such information and assumes no responsibility for its accuracy or completeness. In addition, this
presentation includes certain estimates and assumptions made by MMCSC which may or may not prove accurate. Certain assumptions have
been made for modeling purposes only to simplify the presentation and/or calculation and are for illustrative purpose only; this does not reflect
the performance of any specific scenario. Simulated performance is hypothetical and may not take into account material economic and market
factors. Accordingly, there can be no assurance that estimated returns will be realized or that actual returns or performance results will not
materially differ from those estimated herein. Therefore, recipients should not place undue reliance on these results. Past performance is not
indicative of future results, which may vary.

No person has been authorized to make any representation or give any information with respect to the ASP, other than the information contained
herein. Prospective institutional investors should not rely on any information other than that contained in this presentation or any supplement to
this presentation.

Neither MMCSC nor any of its registered representatives, is making any representation regarding the legality of an investment herein by
institutional investors. Prospective institutional investors are not to construe the contents of this presentation as legal, tax or business advice.
Each institutional investor should consult with its own advisors as to legal, tax business, financial, and related aspects of investing in the ASP.

This material may not be redistributed without the prior written consent of MMCSC.
1
Contents
 Self-Insurers’ Security Fund
 Alternative Security Program (“ASP”)
 Assessments
 Financial Strength
2
Self Insurers’ Security Fund
Self-Insurers’ Security Fund
Overview
Purpose:
Ensure the timely payment of workers compensation (“WC”) claims
to injured workers in the event of default by a member
Founded:
July 6, 1984 by the State of California
Organization:
501(c)(6) non-profit
Authority:
CA Labor Code Sections 3740-3747
Governance:
Board of Trustees
6 elected by member companies
1 ex-officio from CA Department of Industrial Relations (“DIR”)
Membership:
All CA employers self-insured for WC
588 self insured entities
$6.6 billion exposure
Mission Statement:
"To provide continuity of workers' compensation benefits to injured workers of insolvent, private self-insured
companies at the lowest overall long-term cost, equitably distributed to the self-insurance community."
Source: California Self-Insurers Security Fund 2010, http://securityfund.org
4
Self-Insurers’ Security Fund
Board composition and staff
Board of Trustees:
Tim East, Chair
The Walt Disney Corporation
Jill Dulich
Marriott International
Sean McNally
Grimmway Farms
Theresa Muir
Southern California Edison
Janice Murphy
Kaiser Permanente
William Zachry
Safeway Inc.
Staff:
Regulator:
Jeff Pettegrew, Executive Director
Ming Kan, Controller
James Ware, Chief, Office of Self
Insurance Plans (“OSIP”)
Cathy Aguilar, Claims Manager
Source: California Self-Insurers Security Fund 2010, http://securityfund.org
5
Self-Insurers’ Security Fund
Structure
Department of Industrial Relations
(“DIR”)
Legal
authority
Self Insurers’
Security Fund
(“SISF”)
Excluded
Office of Self Insured Plans
(“OSIP”)
Credit fees
ASP
Risk takers
Collateral
Default
protection
Self
insured employers
Self
Selfinsured
insuredemployers
employers
Defaulted claim
payments
Assessments
Defaulted
estate
Audits and regulatory
enforcement
Annual reporting
requirements
Defaulted
estate
Ongoing claim
payments
Claimants
Claimants
Claimants
Claimants
Defaulted self insured employer
6
Alternative Security Program
Alternative Security Program
Structure
Fees/Premium
Bank / Surety
Security
Self-Insured
WC Obligation
Employer
Assessment
Fees/Premium
Regulator
Injured workers
Additional
Assessment
Security Fund
Security
WC Obligation
8
Alternative Security Program
Participation requirements
≥ $5,000,000
≥ $500,000
≥ B3/B-
Full
net worth
net income (5 year average)
credit rating
Partial
as for Full, but either
- downgraded for “cause,” OR
- revoked
Excluded
new self insured – 3 year wait
defaulted
failure to post (60+ days)
revoked (minimum or no claims)
at the Board’s request e.g. one ineligible rating
Source: California Code of Regulations, Title 8, Subchapter 2, Article 3 - §15220
9
Alternative Security Program
Summary
ASP participation expanded in 2010 due to improved credit ratings…
2010/11
$
Assessed
ASP
Excluded
5,848
599
6,448
Not Assessed1
124
Total Security
6,572
#
350
238
588
2009/10
$
5,525
741
6,266
%Δ
#
338
258
596
110
588
6,377
596
$
%
323
(142)
181
6%
-19%
3%
14
12%
195
3%
$ in millions
1. The following were not assessed
- Employers revoked prior to 2003
- Partial deposits posted to OSIP
- the first $220,000 of each Excluded deposit
Sources: Office of Self Insurance Plans, CA Self Insurers’ Security Fund 6/28/10
10
Alternative Security Program
Industry distribution
Industry concentrations remain primarily in Medical Services, Food & Beverage and Utilities…
Others <$100 Each
13%
2010/11
Medical Services
20%
Aerospace & Defense
2%
Automotive
2%
2009/10
Air Transportation
2%
Broadcast Media
2%
Food & Beverage
Retl/Whsl
18%
Hotels & Restaurants
2%
Consumer Durables
Retl/Whsl
4%
Business Services
3%
Food & Beverage
4%
Telephone
6%
Consumer Products
Retl/Whsl
10%
Utilities
12%
Source: Moody’s Analytics Industry Groups, Office of Self Insurance Plans, Factiva, Company financial statements
11
Alternative Security Program
Rating distribution
Ratings improved with the economic outlook, raising the weighted average rating (WARF)…
Baa3
WARF 488 619
25%
2010/11
2009/10
% of ASP Notional
20%
15%
10%
5%
0%
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1
B2
B3
Source: OSIP, Bloomberg, Moody’s, S&P, Moody’s KMV CreditEdge & RiskCalc at 5/15/10
12
Assessments
Assessments
Total
Although the ELP fee increased reflecting higher risk transfer costs, the DLF declined significantly…
Excess Liability
Protection - ELP
Pre-exsiting default
shortfall - PEDSF
19.9
30%
12.8
19%
17.1
29%
9.6
16%
14.4
27%
6.2
12%
14.2
30%
23.5
50%
20.1
52%
Default Loss Fund DLF
33.8
51%
32.7
55%
32.6
61%
32.6
70%
20.6
65%
11.3
35%
Aggregate fees
ASP Size
%
$ millions
2003/04
66.5
4,675
1.42
2004/05
59.4
5,201
1.14
2005/06
53.2
5,893
0.90
2006/07
46.8
5,516
0.85
25.2
57%
2007/08
31.9
5,318
0.60
18.4
48%
2008/09
38.7
5,596
0.69
23.3
50%
2009/10
46.8
5,545
0.84
19.0
43%
2010/11
44.2
5,870
0.75
14
Assessments
Rates
Although 2010 rates increased on average 5.5%, they remain significantly below those at ASP inception…
27
7%
6
A2
36
34
7%
7
8
A3
Baa1
44
58
41
55
7%
5%
9
Baa2
71
66
7%
10
Baa3
90
83
8%
11
Ba1
124
119
5%
12
13
Ba2
Ba3
142
170
136
156
5%
9%
14
B1
244
237
3%
15
B2
293
283
4%
16
B3
355
338
5%
1. Moody’s equivalent
Source: CA Self Insurers’ Security Fund
Past performance does not guarantee future results
-34%
400
300
-57%
200
-33%
100
-38%
-40%
0
B3
29
B2
A1
10/11
B1
5
09/10
500
Ba3
5%
6%
Ba2
20
23
Ba1
21
24
Baa3
Aa2
Aa3
Baa2
3
4
Baa1
3%
A3
17
A2
18
A1
Aa1
03/04
Aa3
2
600
Aa2
%Δ
3%
Aa1
09/10
16
Aaa
10/11
16
Rate - basis points
Index Rating1
1
Aaa
15
Financial Strength
Financial Strength
Assets
… and gross assets have increased 629% since ASP inception…
350
Net
327 Capital Target
Gross
(Net Assets)
300
275
250
216
153
$ millions
204
191
200
150
143
155
149
113
109 101
79
100
50
229
52
45
0
(3)
(50)
(55)
(100)
2003
2004
2005
2006
2007
2008
2009
2010
Current
1
1. Unaudited Sep 30, 2010
Past performance does not guarantee future results.
17
Financial Strength
Recent defaults
A summary of the Fund’s claim reserves is as follows…
Default
7/21/2010
8/3/2009
4/3/2009
3/30/2009
11/25/2008
Estate
Triple A Machine Shop
Fleetwood
Circuit City Stores
Fairchild
Mervyn's
2008-Current
2007 & Prior
64 Estates
Total Reserves
(Net)
197,950
27,340,033
18,374,074
1,464,960
30,626,968
SISF Paid
Ultimate Loss
Cost
Security Deposit
Over/(Under)
2,405,606
3,499,705
1,053,653
4,404,129
197,950
29,745,639
21,873,779
2,518,613
35,031,097
292,901
11,563,964
14,119,256
1,141,943
720,000
94,951
(18,181,675)
(7,754,523)
(1,376,670)
(34,311,097)
78,003,985
11,363,093
89,367,078
27,838,064
(61,529,014)
42,240,382
167,600,003
209,840,385
100,415,453
(109,424,932)
120,244,367
178,963,096
299,207,463
128,253,517
(170,953,946)
The Fund has been carefully following the ongoing conservation of Contractors Access Program, and has sufficient
financial resources to address any liabilities that may be assumed from this situation.
Source: CA Self Insurers’ Security Fund Independent Actuarial Report and Estate Financial Data Report 6/30/2010
Past performance does not guarantee future results.
18