Insurance

9 Months Ended

Jul. 31, 2019

INSURANCE

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. For the majority of these insurance programs, we retain the initial $1.0 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits ranging between $1.0 million and $5.0 million per occurrence. To cover general liability and automobile liability losses above these primary limits, we maintain commercial umbrella insurance policies that provide aggregate limits of $200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide per occurrence limits of $75.0 million. We are also self-insured for certain employee medical and dental plans. We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $0.5 million of exposure on a per-participant, per-year basis with respect to claims.

The adequacy of our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims is based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports. We use all available information to develop our best estimate of insurance claims reserves as information is obtained. The results of actuarial studies are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years.

Actuarial Reviews Performed During 2019

We review our self-insurance liabilities on a regular basis and adjust our accruals accordingly. Actual claims activity or development may vary from our assumptions and estimates, which may result in material losses or gains. As we obtain additional information that affects the assumptions and estimates used in our reserve liability calculations, we adjust our self-insurance rates and reserves for future periods and, if appropriate, adjust our reserves for claims incurred in prior accounting periods.

We performed interim actuarial review updates during the first and second quarters of 2019 on the majority of our casualty insurance programs that considered changes in claims development and claims payment activity for the respective periods analyzed (the “Interim Reviews”). These updates were abbreviated in nature based on actual versus expected development during the periods analyzed and relied on the key assumptions in the comprehensive actuarial review performed during 2018 (most notably loss development patterns, trend assumptions, and underlying expected loss costs).

During the three months ended July 31, 2019, we performed our annual comprehensive actuarial review of the majority of our casualty insurance programs, evaluating all changes made to claims reserves and claims payment activity for the period commencing November 1, 2018 and ending April 30, 2019 (the “Actuarial Review”). The Actuarial Review was comprehensive in nature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed. The Actuarial Review and Interim Reviews excluded claims relating to certain previously acquired businesses, which we expect to evaluate during the fourth quarter of 2019.

The Actuarial Review continues to demonstrate that the changes we have made to our risk management program are positively impacting the frequency and severity of claims; however, there is some flattening of claims frequency reductions as compared to prior periods. The claims management strategies and programs that we have implemented have resulted in better than anticipated improvements in early identification of certain claims that may potentially develop adversely. Furthermore, we continue to focus on ensuring the establishment of reserves consistent with known fact patterns. However, the Actuarial Review showed unfavorable developments relative to our estimates of ultimate losses related to certain prior claim years regarding our general liability, property damage, workers’ compensation, and automobile liability programs.

Based on the results of the Actuarial Review, at July 31, 2019 we decreased our total reserves for prior periods by $3.0 million. Together with the $5.0 million increase we recorded during the first half of 2019, the net increase to our reserves for claims related to prior periods was $2.0 million for the nine months ended July 31, 2019. This adjustment was $8.0 million lower than the total adjustment related to prior year claims of $10.0 million during the nine months ended July 31, 2018.

During the fourth quarter of 2019, we expect to perform an update to our Actuarial Review for our significant insurance programs that will use updated claims data and consider changes in claims development and claims payment activity for the periods analyzed. This review will be abbreviated in nature based on actual versus expected development during the periods analyzed and will rely on the key assumptions in the Actuarial Review (most notably loss development patterns, trend assumptions, and underlying expected loss costs) and will include claims related to certain previously acquired businesses. This review may lead to further adjustments to our insurance reserves.

Insurance Related Balances and Activity



(in millions)	July 31, 2019		October 31, 2018
Insurance claim reserves, excluding medical and dental	$	510.1	$	501.4
Medical and dental claim reserves	8.8		8.9
Insurance recoverables	66.0		73.7

At July 31, 2019 and October 31, 2018, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets.

Instruments Used to Collateralize Our Insurance Obligations



(in millions)	July 31, 2019		October 31, 2018
Standby letters of credit	$	143.5	$	144.1
Surety bonds	90.9		89.2
Restricted insurance deposits	0.8		0.6
Total	$	235.2	$	233.9