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

During the three months ended January 31, 2019, we performed an actuarial review of the majority of our casualty insurance programs that considered changes in claim developments and claim payment activity for the period commencing May 1, 2018 and ending October 31, 2018 for all policy years in which open claims existed. During the three months ended April 30, 2019, we continued to review the majority of our casualty insurance programs and performed an actuarial update for the period commencing October 31, 2018 and ending January 31, 2019. The actuarial update is abbreviated in nature based on actual versus expected developments during the periods analyzed and relies on the key assumptions in the comprehensive actuarial study performed during 2018 (most notably loss development patterns, trend assumptions, and underlying expected loss costs).

The actuarial review and update continue to indicate the changes we have made to our risk management program have reduced the frequency of claims; however, we are experiencing adverse developments that impact claim costs relating to certain prior periods. Claim management initiatives include programs to identify those claims earlier in the claims cycle that may potentially develop adversely and ensure the establishment of reserves consistent with known fact patterns. However, with respect to claims related to prior fiscal years, the actuarial review and update showed unfavorable developments in our estimates of ultimate losses related to some general liability, property damage, workers’ compensation, and automobile liability claims.

Based on the results of the actuarial review and subsequent developments, at January 31, 2019 we increased our total 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. The results of the actuarial update performed during the three months ended April 30, 2019 did not require a further adjustment to our reserves in the aggregate. For the six months ended April 30, 2019, the total increase to our reserves for claims related to prior periods was $5.0 million. This adjustment was $1.0 million higher than the total adjustment related to prior year claims of $4.0 million during the six months ended April 30, 2018.

During the third quarter of 2019, comprehensive actuarial evaluations are expected to be completed for our significant insurance programs using updated claims data, and these evaluations may lead to further adjustments to our insurance reserves.

Insurance Related Balances and Activity



(in millions)	April 30, 2019		October 31, 2018
Insurance claim reserves, excluding medical and dental	$	517.4	$	501.4
Medical and dental claim reserves	11.4		8.9
Insurance recoverables	73.7		73.7

At April 30, 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)	April 30, 2019		October 31, 2018
Standby letters of credit	$	143.5	$	144.1
Surety bonds	89.2		89.2
Restricted insurance deposits	0.8		0.6
Total	$	233.5	$	233.9