ACS 16 Letter

September 14, 2001

NJAIRE ANNUAL CASH SETTLEMENT

I have enclosed your company's Statewide NJAIRE Annual Cash Settlement Reports evaluated as of First Quarter 2001.

The first report is the Annual Cash Settlement Report for the Zero Dollar Tort Threshold (Form #2). This report summarizes your company's territorial reimbursement information for calendar/accident years 1990 through 1995.

The next report is the Annual Cash Settlement Report for the Zero Dollar Tort Threshold (Form #3). This report summarizes your company's territorial reimbursement information for calendar/accident years 1996-2000 (policies in force prior to 7/1/99).

The third report is the Annual Cash Settlement Report for the Zero Dollar Tort Threshold (Form #4). This report summarizes your company’s territorial reimbursement information for calendar/accident years 1999 and 2000 (policies in force after 7/1/99). This report also includes the administrative expense assessment for 2002 NJAIRE expenses.

Following the three Annual Cash Settlement Reports is the Annual Cash Settlement True-up Report. This report combines the total amounts for Form #2, Form #3 and Form #4, and adjusts the total to reflect the 2000 monthly payments and quarterly disbursements, and re-evaluates the distribution of investment income for 1990-2000.

If the BALANCE on the Annual Cash Settlement True-up Report is positive, payment is due from your company and an invoice is enclosed. Instructions for the remittance of funds are included at the end of this letter. If the BALANCE is negative, you should expect a check from NJAIRE in approximately 8 weeks. The amount of this check will be equal to the BALANCE on the Annual Cash Settlement True-up Report, providing all companies with positive balances are able to make their full payment. As in prior Annual Cash Settlements, in the event that some companies are unable to make their full payment, your company's NJAIRE Annual Cash Settlement reimbursement check will be reduced by an amount proportional to the total payments outstanding. Once all the outstanding payments are settled, you will receive a check for the balance of your company's Annual Cash Settlement reimbursement.

For your information, an explanation of the amounts and calculations used in this evaluation of the Annual Cash Settlement Reports (including the Annual Cash Settlement True-up Report) follows:

Annual Cash Settlement Evaluations

The NJAIRE Plan of Operations requires that each Calendar/Accident year be evaluated separately and in full territory detail, and that each year be re-evaluated until NJAIRE determines that it is fully developed.

As a result, for Form #2, calendar/accident years 1990 through 1995 are being re-evaluated.

For Form #3, calendar/accident years 1996 – 1999 are being re-evaluated. Accident year 2000 is being evaluated for the first time. This is the first evaluation using claim data for accident years 1997 & 1998. Accident year 1996 is being re-evaluated using claim data and accident year 1999 is being re-evaluated based on exposure data.

For Form #4, calendar/accident year 1999 is being evaluated using exposure information, and calendar/accident year 2000 is being evaluated for the first time also using exposure information.

Data

The following table displays the account quarter submissions included for each calendar/accident year.

All submissions processed through September 1, 2001 are included.

Assessment data

Calendar/Accident Year	Form	Assessment base	Account Quarters
1990	#2	Earned Exposures	1Q90-4Q90
1991	#2	Earned Exposures	1Q91-4Q91
1992	#2	Earned Exposures	1Q92-4Q92
1993	#2	Earned Exposures	1Q93-4Q93
1994	#2	Earned Exposures	1Q94-4Q94
1995	#2	Earned Exposures	1Q95-4Q95
1996	#3	Paid BI Claims against the Zero Dollar Threshold	1Q96-1Q01
1997	#3	Paid BI Claims against the Zero Dollar Threshold	1Q97-1Q01
1998	#3	Paid BI Claims against the Zero Dollar Threshold	1Q98-1Q01
1999	#3	Zero Dollar Threshold Earned Exposures	1Q99-4Q99
2000	#3	Zero Dollar Threshold Earned Exposures	1Q00-2Q00
1999	#4	Zero Dollar Threshold Earned Exposures	3Q99-4Q99
2000	#4	Zero Dollar Threshold Earned Exposures	1Q00-4Q00

Assessment Allocation (Reimbursement) data

Calendar/Accident Year	Form	Reimbursement base	Account Quarters
1990	#2	Paid BI claimants	1Q90-1Q01
1991	#2	Paid BI claimants	1Q91-1Q01
1992	#2	Paid BI claimants	1Q92-1Q01
1993	#2	Paid BI claimants	1Q93-1Q01
1994	#2	Paid BI claimants	1Q94-1Q01
1995	#2	Paid BI claimants	1Q95-1Q01
1996	#3	Paid BI Claims against the Verbal Threshold	1Q96-1Q01
1997	#3	Paid BI Claims against the Verbal Threshold	1Q97-1Q01
1998	#3	Paid BI Claims against the Verbal Threshold	1Q98-1Q01
1999	#3	Verbal Threshold Earned Exposures	1Q99-4Q99
1999	#4	Verbal Threshold Earned Exposures	3Q99-4Q99
2000	#3	Verbal Threshold Earned Exposures	1Q00-2Q00
2000	#4	Verbal Threshold Earned Exposures	1Q00-4Q00

Annual Cash Settlement Report

Calculation of Amount Due From/Owed to Your Company. This is done separately for Form #2, Form #3 and Form #4.

A) Assessments

Accident Year 1996

Once Again, accident year 1996 will be evaluated on a per claim basis. The territorial assessments are derived by multiplying each Paid BI Claimant against the Zero Dollar Threshold by a per claim charge. The per claim charges for this year’s settlement are listed. The charges were determined based a statewide assessment of $80,000,000 as decided by the NJAIRE Actuarial Committee and approved by its Board of Directors.

Accident Years 1997-1998

Please note that the NJAIRE Actuarial Committee has decided to switch the evaluation basis for accident years 1997-1998 from exposures to claims with this year’s annual cash settlement evaluation. More information regarding the transition of exposure to claim evaluation is available in the NJAIRE Plan of Operations.

Each territory assessment is determined by multiplying the number of Paid BI Claimants against the Zero Dollar Threshold by a per claim charge. The per claim charge for this evaluation for 1997 were determined based on a statewide assessment of $70,000,000 as decided by the NJAIRE Actuarial Committee and approved by its Board of Directors. The per claim charges for accident year 1998 were based on a statewide assessment of $65,000,000.

The resulting territory assessments are summed to determine your company's total statewide Calculated Assessment. This number appears in the column titled Assessments at Present Rate on each of the Annual Cash Settlement Reports.

Please remember that NJAIRE is enabled to evaluate and adjust the assessment percentages and/or per claim charge retroactively. Therefore, a different assessment percentage/claim charge may be used for each evaluation of a calendar/accident year.

Accident years 1990 - 1995 and 1999 - 2000

Territory assessments at present rate are calculated by multiplying the indicated territory base rates by the number of appropriate exposures for that accident year by the current assessment percentage for that accident year. The following table lists this information by accident year

Accident Year

Form

Rates used

Exposure data used

Assessment Percentage

1990	Form #2	NJAFIUA	Zero Dollar Tort Threshold earned exposures	114%
1991	Form #2	MTF	Zero Dollar Tort Threshold earned exposures	102%
1992	Form #2	MTF	Zero Dollar Tort Threshold earned exposures	112%
1993	Form #2	PAIP	Zero Dollar Tort Threshold earned exposures	52%
1994	Form #2	PAIP	Zero Dollar Tort Threshold earned exposures	50%
1995	Form #2	PAIP	Zero Dollar Tort Threshold earned exposures	30%
1999	Form #3	PAIP	Zero Dollar Tort Threshold earned exposures	30%
1999	Form #4	PAIP	Zero Dollar Tort Threshold e earned exposures	25%
2000	Form #4	PAIP	Zero Dollar Tort Threshold earned exposures	20%

B) Assessment Allocations

Form #2

The following procedure is applied by accident year:

Within each territory, your company's number of BI paid claimants is divided by the number of Industrywide BI paid claimants for that territory. The resulting claimant percentage is then multiplied by the total Industrywide Assessments for the territory, generating your company's territory Assessment Allocation.

The territory Assessment Allocation totals are summed, and the final statewide result is shown on your company's Annual Cash Settlement Reports (Column (4)).

Form #3 (Accident Years 1996, 1997, and 1998 )

The following procedure is applied for accident years 1996, 1997 and 1998:

Within each territory, your company’s number of Paid Bodily Injury Claimants against the Verbal Threshold is divided by the number of Industrywide Paid Bodily Injury Claimants against the Verbal Threshold for that territory. The resulting claimant percentage is then multiplied by the total Industrywide Assessments for that territory, generating your company’s territory Assessment Allocation.

The territory Assessment Allocation totals are summed, and the final statewide result is shown on your company's Annual Cash Settlement Report (Column (6)).

Form #3 (Accident years 1999- 2000) and Form #4 (Accident years 1999 – 2000)

The following procedure is applied by accident year:

Within each territory, your company’s number of Verbal Threshold Earned Exposures is divided by the number of Industrywide Verbal Threshold Earned Exposures for that territory. The resulting exposure percentage is then multiplied by the total Industrywide Assessments for that territory, generating your company’s territory Assessment Allocation.

The territory Assessment Allocation totals are summed, and the final statewide result is shown on your company's Annual Cash Settlement Report (Column (6)).

C) Previous Financial Transactions

The amounts paid by (or paid to) your company as a result of previous evaluations of the Annual Cash Settlement are reflected in the Previous Financial Transactions column of your report. The amounts paid by your company in the 2000 monthly payments and the amounts paid to your company in the 2000 provisional disbursements are reflected in the Annual Cash Settlement True-up Report.

The amount due from (or owed to) your company on the Annual Cash Settlement Report is equal to your Assessments, minus your Reimbursements, minus your Previous Financial Action.

We have attached reports displaying the Industrywide Total Assessments and BI Paid Claimants by territory by calendar/accident year for Form #2, the Industrywide Total Assessments and Paid Bodily Injury Claimants against the Verbal Threshold Exposures by territory by calendar/accident year for Form #3 (accident years 1996, 1997, and 1998), and the Industrywide Total Assessments and Earned Verbal Threshold Exposures for Form #3 (accident years 1999 -2000) and Form #4 (Accident years 1999 – 2000). These, along with your quarterly Compiled Figures Reports and your previous Annual Cash Settlement Reports, will enable you to verify your company's Annual Cash Settlement should you wish to do so. To verify Form #2 through fourth quarter 1992, you will need to use either the revised Compiled Figures Reports (if your company resubmitted using Earned Exposures) or the Exposure Conversion Monitoring Report (enclosed). Please note that exposures were reported on an earned basis beginning with the first quarter of 1993.

The Interest Income Due from/Owed to Your Company on the Annual Cash Settlement Reports reflects the time value (interest) of the money either owed to or due from your company. The interest factors applied have been chosen by the NJAIRE Actuarial Committee and ratified by the NJAIRE Board of Directors.

Your company's share of the total 2002 NJAIRE administrative expense is shown on the Form #4 Annual Cash Settlement report and is reflected in the total amount due from or owed to your company.

Please see Section 1 of the attached summary, "Explanation of Calculations", for a description of the figures on the Annual Cash Settlement Report.

Annual Cash Settlement True-up Report

Part A, the Annual Cash Settlement True-up, adjusts the Annual Cash Settlement amount for Form #2, Form #3 and Form #4 combined due from (or owed to) your company to reflect the 2000 monthly payments and the 2000 quarterly disbursements.

Part B, the Investment Income Redistribution, reflects the differences between the method of calculating your company's share of the investment income in the provisional quarterly reimbursements, and the method of calculating your company's trued-up share annually.

For the 2000 Quarterly Reimbursements, your company received a share of the Investment Income based on your company’s share of the industrywide Earned Verbal Threshold exposures. Now, in the Annual Cash Settlement True-up, the Investment Income is redistributed based on your company's share of the total Industrywide Reimbursement amount for accident year 2000. It also re-evaluates and redistributes the 1990-1999 investment income based on how your company's share of the total Industrywide Reimbursement amount for the accident year has changed due to the development of that accident year.

The Investment Income redistributed here is the amount earned on the monthly payments while they were held by NJAIRE awaiting disbursement.

The Total Industrywide Reimbursement amounts for accident years 1990-2000 appear on the report labeled Industrywide Total Assessments. This will enable you to verify your company's share of the Investment Income Redistribution.

Column (3) reflects the time value (interest) of the money either owed to or due from your company. The interest factors applied have been chosen by the NJAIRE Actuarial Committee and ratified by the NJAIRE Board of Directors.

Please see Section 2 of the attached summary, "Explanation of Calculations", for a description of the figures on the Annual Cash Settlement True-up Report.

Remittance of Funds

If the total calculated Annual Cash Settlement amount is positive, please send a check for this amount, payable to New Jersey Automobile Insurance Risk Exchange to:

New Jersey Automobile Insurance Risk Exchange

P.O. Box 17304

Newark, New Jersey 07194

Payment should be made within 20 days of receipt of this letter. Please note that late payments will be subject to penalties as outlined in Chapter 10 of the NJAIRE Plan of Operations.

Financial Information

We have enclosed, for your information, the financial information for all companies participating in the Sixteenth NJAIRE Annual Cash Settlement.

For years 1990-1995:

The Statewide Reimbursement Reports contain by company and by accident year, the following: statewide BI paid claimants, statewide claimant percentages, statewide exposures, assessment allocations by territory summed to statewide totals, previous financial actions by territory summed to statewide totals, and what was owed to or due from companies by territory summed to statewide totals. Note that the report for Form #2 shows earned exposures.

For 1996-2000:

The Statewide Reimbursement Report contains by company, the following: statewide BI claims against the zero dollar tort threshold, statewide BI claims against the verbal threshold, statewide earned verbal threshold Exposures, statewide verbal threshold exposure percentages, statewide earned Zero Dollar tort threshold exposures, assessment allocations by territory summed to statewide totals, and what was owed to or due from companies by territory summed to statewide totals.

We have also enclosed an exhibit displaying the member companies and their company numbers.

It is important to note that the amounts owed to or due from companies on the Reimbursement Reports are exclusive of any adjustments for interest income, investment income or administrative expense assessment. Monthly payments and quarterly disbursements are not reflected here either. The amounts owed or due in the Reimbursement Report are the amounts that appear in column (6) or column (7) on Form #2 reports and columns (8) and (9) on the Form #3 and Form #4 reports of each individual company's Statewide Annual Cash Settlement Reports.

Questions

If you have any questions concerning the calculation of your company's Annual Cash Settlement, please contact:

Joseph Sigona

Information Analyst

Insurance Services Office, Inc.

(212) 469-2317

James Gilmartin

Information Assistant

Insurance Services Offices, Inc.

(201) 469-2327

Sincerely,

Fred Lloyd

Assistant Vice President

Insurance Services Office, Inc.

NJAIRE Central Processor

cc: Mr. John Wirtz, NJAIRE

Explanation of Calculations - Section 1

Annual Cash Settlement Reports

Form #2

Columns (1) and (2) are provided for information only. These are your company’s (statewide) total reported BI Paid Claimants by accident year and Earned Exposures by calendar year.

Column (3) is your company's total calculated assessment for all territories combined by calendar year.

Column (4) is your company's total calculated reimbursement for all territories combined by accident year.

Column (5) is the net amount of all previous annual calculated reimbursements and assessments by calendar/accident year. If an amount is positive, it was paid to NJAIRE. If an amount is negative, it was paid to your company by NJAIRE.

Columns (6) and (7) are the calculated assessment (Column (3)) minus the calculated reimbursement (Column (4)) minus the previous financial action (Column (5)). If the resulting amount is positive, it is placed in Column (6), the Amount Due From Company. If the amount is negative, its absolute value is placed in Column (7), the Amount Owed to Company.

Columns (8) and (9) are the amounts in Columns (6) and (7) respectively, multiplied by an interest factor. They account for the time value of these funds.

The TOTAL CALCULATED ANNUAL CASH SETTLEMENT is the sum of Columns (6) and (8) minus the sum of columns (7) and (9).

Explanation of Calculations - Section 1

Annual Cash Settlement Report

Form #3

Columns (1) and (2) are provided for information only. These are your company’s statewide total reported BI Paid Claimants against policies in which the insured chose the Zero Dollar Threshold (Column 1) and which the insured chose the Verbal Threshold (Column 2).

Columns (3) and (4) are provided for information only. These are your company’s statewide

total reported Earned Zero Dollar Tort Threshold Exposures (Column 3)

and your company’s statewide total reported Earned Verbal Tort

Threshold Exposures (Column 4).

Column (5) is your company's total calculated assessment for all territories combined.

Column (6) is your company's total calculated reimbursement for all territories.

Column (7) is the net amount of all previous annual calculated reimbursements and assessments. If an amount is positive, it was paid to NJAIRE. If an amount is negative, it was paid to your company by NJAIRE.

Columns (8) and (9) are the calculated assessment (Column (5)) minus the calculated reimbursement (Column (6)) minus the previous financial action (Column (7)). If the resulting amount is positive, it is placed in Column (8), the Amount Due From Company. If the amount is negative, its absolute value is placed in Column (9), the Amount Owed to Company.

Columns (10) and (11) are the amounts in Columns (8) and (9) respectively, multiplied by an interest factor. They account for the time value of these funds.

The TOTAL CALCULATED ANNUAL CASH SETTLEMENT on the Form #3 report is the sum of Columns (8) and (10) minus the sum of Columns (9) and (11).

Explanation of Calculations - Section 1

Annual Cash Settlement Report

Form #4

Columns (3) and (4) are provided for information only. These are your company’s

statewide total reported Earned Zero Dollar Tort Threshold

Exposures (Column 3) and your company’s statewide total reported

Earned Verbal Tort Threshold Exposures (Column 4).

Column (5) is your company's total calculated assessment for all territories combined.

Column (6) is your company's total calculated reimbursement for all territories.

Columns (10) and (11) are the amounts in Columns (8) and (9) respectively, multiplied by an interest factor. They account for the time value of these funds.

The SUBTOTAL on the Form #4 report is the sum of Columns (8) and (10) minus the sum of columns (9) and (11).

The TOTAL CALCULATED ANNUAL CASH SETTLEMENT is the sum of the SUBTOTAL and the ADMINISTRATIVE EXPENSE for the upcoming year.

Explanation of Calculations - Section 2

Annual Cash Settlement True-up Report

A. Annual Cash Settlement True-up

Column (1) is the total calculated Annual Cash Settlement due from (or, if negative, owed to) your company from the Form #1, Form #2, Form #3 and Form #4 Annual Cash Settlement Reports combined.

Column (2) shows the Monthly Payment and Quarterly Reimbursement amounts from First through Fourth Quarter 2000. The total reflects the net amount paid to (or, if negative, received from) your company as a result of the monthly and quarterly financial transactions.

Column (3) is the total in Column (2) multiplied by an interest factor of 0.. This accounts for the time value of these funds.

Column (4) is the sum of columns (1) to (3), and represents the Annual Cash Settlement amount adjusted for the transactions which have already taken place.

B. Investment Income Redistribution

Column (1) shows the years for which Investment Income is being redistributed.

Column (2) first shows the net difference between the 2000 investment income owed to your company based on the current Annual Cash Settlement and the 2000 investment income previously distributed to your company on a quarterly basis. (The share due to your company is calculated as your company's statewide reimbursement for 2000, divided by the industrywide total statewide reimbursement for 2000, and multiplied by the total investment income earned in 2000.) This amount is due from your company if positive, and owed to your company if negative.

Then, for each earlier year, it shows the net difference between the investment income for that year evaluated as of the last Annual Cash Settlement and the investment income for that year re-evaluated as of this Annual Cash Settlement. These amounts are due from your company if positive, and owed to your company if negative.

Column (3) shows the difference in Column (2) multiplied by an interest

factor. The interest factors used are:

2000 .0596801

1999 .1486590

1998 .1890024

1997 .2592348

1996 .3278381

1995 .4008266

1994 .4694584

1993 .5074936

1992 .5618299

1991 .6637394

1990 .7956751

These interest factors account for the time value of the funds.

Column (4) shows the sums of columns (2) and (3).

The BALANCE represents the total amount due from or owed to your company as a result of this Annual Cash Settlement. This amount is due from your company if positive, and owed to your company if negative. If the amount is positive, an invoice is enclosed for that amount.