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 $0.4 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 Review Performed During the First Quarter of 2017

During the three months ended January 31, 2017, we performed an actuarial review for the majority of our casualty insurance programs. This review considered all changes in claim developments and claim payment activity for the period commencing May 1, 2016 and ending October 31, 2016. We performed this review for all policy years in which open claims existed. This review indicated unfavorable developments in our estimates of ultimate losses related to certain general liability and workers’ compensation claims. During the three months ended April 30, 2017, we continued to see a similar trend in adverse developments related to prior year claims.

We are experiencing a moderately reduced frequency of claims in our general liability program. However, we experienced adverse developments in prior year claims, which are largely attributable to adjustments on certain property damage claims and to losses for alleged bodily injuries. The average incurred cost for our less severe claims was also higher than expected, and this contributed to the increase in projected cost estimates.

We are experiencing a reduced frequency of claims in our workers’ compensation program. However, our estimate of ultimate losses was negatively impacted by increases in projected costs for a significant number of prior year claims in California and New York. Statutory, regulatory, and legal developments have negatively impacted how these claims affect our Company.

After analyzing the recent loss developments against benchmarks and applying actuarial projection methods to determine the estimate of ultimate losses, we increased our reserves for known claims as well as our estimate of the loss amounts associated with incurred but not reported claims for prior periods by $5.0 million at January 31, 2017. As we continue to see a similar trend in adverse developments, at April 30, 2017 we increased our reserves by an additional $5.0 million, resulting in a total increase to our reserves for claims related to prior periods of $10.0 million.

During the third quarter of 2017, comprehensive actuarial evaluations are expected to be completed for our significant insurance programs using recent claims data.

Insurance Related Balances and Activity



(in millions)	April 30, 2017		October 31, 2016
Insurance claim reserves excluding medical and dental	$	432.7	$	417.9
Medical and dental claim reserves	6.8		5.9
Insurance recoverables	69.8		69.7

At April 30, 2017 and October 31, 2016, insurance recoverables are included in “Other current assets” and “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets.

Instruments Used to Collateralize Our Insurance Obligations



(in millions)	April 30, 2017		October 31, 2016
Standby letters of credit	$	120.1	$	118.3
Surety bonds	59.5		57.2
Restricted insurance deposits	11.2		11.2
Total	$	190.8	$	186.7