Public Utilities Board (PUB) To

PUB (MPI)

August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-1

PUB (MPI) 1-1

Part and I OV Page No.: 38 Chapter: PUB Approved 1. Requested Vehicle Rate and Any Changes to Other Fees Issue No: and Discounts 7. Update on DCAT 9. Cost of Operations and Cost Containment Measures 19. Current IT Strategic Plan and IT Expenses and Projects 21. Asset Liability Management Study Topic: Financial Overview Sub Topic:

Preamble to IR (If Any):

Question:

Please file the Corporation's Board of Directors, Audit Committee and Investment Committee Working Group meeting minutes that relate to:

a) Asset Liability Management/ Investment Strategy; b) IT Optimization/BTO Projects; c) Impairment Provision; d) RSR or Total Equity Targets/DCAT; e) Capital Maintenance and/or Build and Release provisions; f) Enterprise Risk Management; g) Cost Containment; and h) Approval of the 2019 GRA.

Rationale for Question:

To understand Corporate decisions that impact Basic.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-1

RESPONSE:

Please see Appendix 1.

Matters not related to the information request have been redacted from the various minutes.

RATIONALE FOR REFUSAL TO FULLY ANSWER THE QUESTION:

Minutes of the Investment Committee Working Group are not herein provided. The investments are administered by the Minister of Finance pursuant to The Financial Administration Act. The minutes are not provided because they reflect advice, opinions and policy options for the Minister of Finance.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting AUDIT, FINANCE & RISK COMMITTEE MINUTES

Date: October 5, 2017 Page: 3 of 5

Enterprise Risk Agenda Item C.2 “Enterprise Risk Management Framework” Management was deferred to the next meeting of the Audit, Finance & Risk Framework Committee to allow the new Chief Financial Officer and Chief Executive Officer to consider future reporting relationships of the Finance and Internal Audit Departments.

Page 1 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting INVESTMENT COMMITTEE MINUTES

Date: November 16, 2017 Page: 2 of 3

Corporate Bond Mr. Yien presented Agenda Item C.1 “Corporate Bond Implementation Implementation Plan” which was discussed by the Members. Plan The Committee supports the intention to purchase additional Corporate Bonds to increase the weight of the allocation from the current 2% to 4%. The purchase is accordance with the Investment Policy Statement approved in principle subject to due diligence of the Corporate Bond Implementation review. As part of the due diligence review it is the Committee’s understanding that the purpose of the various investment funds will be clearly defined through the Asset Liability Management study that is currently underway.

Mr. DiNoto and Mr. Makarchuck of Mercer (Canada) Limited joined the meeting via teleconference.

Asset Liability Mr. Yien presented Agenda Item C.2 “Asset Liability Management Management Study” which was discussed by the Members. Study The Committee will meet in early December, 2017, to discuss the final report. Mr. DiNoto and Mr. Makarchuck withdrew from the meeting.

Page 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting INVESTMENT COMMITTEE MINUTES

Date: December 8, 2017 Page: 2 of 4

Mercer Asset Mr. Giesbrecht presented Agenda Item B.1 “Mercer Asset Liability Liability Management Presentation” which was discussed by Management the Members. Presentation

Messrs. DiNoto and Makarchuk withdrew from the meeting.

Page 3 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting INVESTMENT COMMITTEE MINUTES

Date: December 8, 2017 Page: 3 of 4

Asset Liability Mr. Giesbrecht presented Agenda Item C.1 “Asset Liability Management Study Management Study Recommendations”. Recommendations Moved by Ms. Wowryk and seconded by Mr. Grestoni that the Members approve the following: 1) Segregating assets by their underlying purpose: a. Basic liabilities b. RSR c. Extension/SRE d. Pension 2) Approve acceptance of Mercer’s ALM report as advice to management for developing appropriate asset mixes and policies to be submitted April 30, 2018 with the intention of fully implementing the plan within the next 24 months from today’s date 3) Inclusion of BBB rated corporate bonds into corporate bond allocation 4) The authority for management to direct the Department of Finance to purchase up to an additional 6% corporate bonds by February 28, 2018

Asset Liability Members received Agenda Item D.1 “Asset Liability Management Management Phase 2 Update” as information. Phase 2 Update

Mercer Asset Members received Agenda Item D.2 “Mercer Asset Liability Liability Management Study Phase 2 Report” as information. Management Study Phase 2 Report

Page 4 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting AUDIT, FINANCE & RISK COMMITTEE MINUTES

Date: January 18, 2018 Page: 3 of 8

Annual Review of Mr. Giesbrecht presented Agenda Item C.1 “Annual Review of Accounting Accounting Policies”. Policies Moved by Mr. Grestoni and seconded by Mr. Bubis that the Members recommend that the Board approve the following policies:

• Policy for Allocation of Expenses • Policy for Allocation of Balance Sheet Items – Assets, Liabilities, Retaining Earnings and Accumulated Other Comprehensive Income (Loss) • Policy for Allocation of Investment Income and Other Comprehensive Income (Loss) • Policy for Allocation of Service Fees and Other Revenue • Policy for Write-Off of Uncollectible Accounts and Allowance for Doubtful Accounts • Policy for Writing Down Investments • Policy for Allocation of Reinsurance Ceded Premiums Written • Policy for Valuation of Private Equity, Venture Capital and Infrastructure Investments; and • Policy for Capitalization of Organizational and Development Costs

CARRIED

Page 5 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting AUDIT, FINANCE & RISK COMMITTEE MINUTES

Date: January 18, 2018 Page: 4 of 8

Annual Review of Mr. Giesbrecht presented Agenda Item C.3 “Annual Review of Non Accounting Non Accounting Policies”. Policies Moved by Mr. Grestoni and seconded by Mr. Bubis that the Members recommend that the Board approve the following non accounting policies:

• Risk Governance and Management Policy • Environmental and Sustainable Development Policy • Board of Directors’ and CEO’s Expenses Policy • Whistleblower Policy • Provision of Non-Audit Services by External Auditors

CARRIED

Page 6 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting AUDIT, FINANCE & RISK COMMITTEE MINUTES

Date: January 18, 2018 Page: 6 of 8

Enterprise Risk Agenda Item E.3 “Enterprise Risk Management Framework” Management was deferred to the next meeting of the Audit, Finance & Risk Framework Committee.

Risk Management Agenda Item E.4 “Risk Management Evaluation Report - Evaluation Report Review” was deferred to the next meeting of the Audit, Finance - Review & Risk Committee.

Page 7 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting INVESTMENT COMMITTEE MINUTES

Date: January 31, 2018 Page: 2 of 3

Mercer ALM Study Mr. Bunston presented Agenda Item C.1 “Mercer ALM Study Phase 3 Report Phase 3 Report”. Following discussion, Members received the report as information.

Page 8 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting INVESTMENT COMMITTEE MINUTES

Date: April 30, 2018 Page: 2 of 4

Asset Liability Mr. Giesbrecht presented Agenda Item B.1 “Asset Liability Management Study Management Study Recommendations and Implementation Recommendations Plan”. and Implementation Moved by Ms. Wowryk and seconded by Mr. Grestoni that the Plan Members recommend to the Board that it approve for the Minister of Finance’s consideration the following:

1. Approval to invest in the listed new asset classes of private debt, global equity and global low volatility equities;

2. The creation of five segregated portfolios for Basic Claims Liabilities, Extension, SRE, Employee Future Benefits and RSR;

3. Adoption of asset allocations for each portfolio as shown in Figure 3 Recommended Target Asset Allocations (ALM Implementation Plan, April 30, 2018, found on page 10 of agenda item B.1 Attachment A);

4. Adoption of the Implementation Plan (as described in the ALM Implementation Plan, April 30, 2018, found on pages 12 to 22 of agenda item B.1 Attachment A); Page 9 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting INVESTMENT COMMITTEE MINUTES

Date: April 30, 2018 Page: 3 of 4

5. Realization of gains in Canadian and U.S. equity portfolios in 2018/19;

6. Hire a consultant to assist with search for external managers;

7. Hire a transition manager to manage the transitions between public market asset classes as necessary (purchases and sales).

CARRIED

[Corporate Secretary Note: Title in slide 17 of the presentation was amended from “non-marketable bonds and private debt” to “non-marketable bonds”. Title and weights in the proposed asset class column in slide 28 of the presentation was also amended. The corrected presentation has been uploaded on the Portal as a separate PDF document.]

Mr. Steski joined the meeting. Mr. VanKoughnet and Ms. Shock withdrew from the meeting.

Investment Policy Mr. Giesbrecht presented Agenda Item B.2 “Investment Policy Statement Statement”. Moved by Mr. Grestoni and seconded by Ms. Wowryk that the Members approve the recommended changes to the Investment Policy Statement. CARRIED

Page 10 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Board of Directors - Committee Meeting AUDIT, FINANCE & RISK COMMITTEE MINUTES

Date: May 17, 2018 Page: 4 of 10

Dynamic Capital Mr. Johnston presented Agenda Item B.4 “Dynamic Capital Adequacy Test Adequacy Test (DCAT) and Minimum Capital Test (MCT)”. (DCAT) and Minimum Capital Moved by Ms. Schock and seconded by Mr. Grestoni that the Test (MCT) Members recommend that the Board approve a lower Total Equity Rate Stabilization Reserve (RSR) target (36% MCT) for the 2019/20 fiscal year based on the minimum capital required to achieve satisfactory future financial condition at the 1-in-40 year level under the 2018 Dynamic Capital Adequacy Test;

an upper Total Equity RSR target of 85% MCT for the 2019/20 fiscal year based on a 1-in-40, 2-year operating range above the lower RSR target as calculated in the 2018 Dynamic Capital Adequacy Test report; and,

the Corporation include these RSR targets in the 2019 General Rate Application.

CARRIED

The Committee directed Management to provide the final 2018 DCAT report for information to the Board Members prior to June 1, 2018.

Page 11 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Minutes of the Four Hundred and Forty-Fourth Meeting October 12, 2017 Page 4

In Camera – 17-175 An In Camera discussion was held with Messrs. Yien, Bunston, Asset Johnston, Steski and Koury in attendance to discuss the Asset Lia- Liability bility Matching program. Manage- ment Messrs. Yien, Bunston, Steski and Koury withdrew from the meeting.

Page 12 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Minutes of the Four Hundred and Forty-Fourth Meeting October 12, 2017 Page 5

Budget 17-179 Mr. Yien presented Agenda Item 5.1 “Budget Stretch Target Up- Stretch date”. Members received the report for discussion. Target Update

Revised 17-182 Members received Agenda Item 6.1 “Revised Actuarial Opinion on Actuarial the Future Financial Condition of Basic Insurance in the 2017 Dy- Opinion on namic Capital Adequacy Test (DCAT) Report” as information. the Future Financial Condition of Basic Insurance in the 2017 Dynamic Capital Adequacy Test (DCAT) Report

Page 13 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Minutes of the Four Hundred and Forty-Sixth Meeting December 14, 2017 Page 2

Investment 17-201 Moved by Mr. Bubis and seconded by Ms. Wowryk that the Mem- Committee bers ratify the recommendation of the Investment Committee to ap- Report – prove the following: Asset Liability 1. Segregating assets by their underlying purpose: Manage- a. Basic liabilities ment Study b. RSR Recommen- c. Extension/SRE dations d. Pension 2. Approve acceptance of Mercer’s ALM report as advice to management for developing appropriate asset mixes and policies to be submitted April 30, 2018 with the intention of fully implementing the plan within the next 24 months from today’s date 3. Inclusion of BBB rated corporate bonds into corporate bond allocation 4. The authority for management to direct the Department of Fi- nance to purchase up to an additional 6% corporate bonds by February 28, 2018 CARRIED

Page 14 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the Four Hundred and Forty-Sixth Meeting December 14, 2017 Page 4

In Camera – 17-216 Members held an in camera discussion. 2019 General Rate Application Page 15 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the February 8, 2018 Manitoba Public Insurance Board of Directors Meeting Page 2

Audit, 18-019 Moved by Mr. Grestoni and seconded by Ms. Schock that the Mem- Finance & bers ratify the recommendation of the Audit, Finance & Risk Com- Risk mittee to approve the following policies: Committee Report – Annual • Policy for Allocation of Expenses Review of • Policy for Allocation of Balance Sheet Items – Assets, Liabili- Accounting Policies ties, Retaining Earnings and Accumulated Other Comprehen- sive Income (Loss) • Policy for Allocation of Investment Income and Other Compre- hensive Income (Loss) • Policy for Allocation of Service Fees and Other Revenue • Policy for Write-Off of Uncollectible Accounts and Allowance for Doubtful Accounts • Policy for Writing Down Investments • Policy for Allocation of Reinsurance Ceded Premiums Written • Policy for Valuation of Private Equity, Venture Capital and In- frastructure Investments; and • Policy for Capitalization of Organizational and Development Costs

CARRIED

Page 16 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Minutes of the February 8, 2018 Manitoba Public Insurance Board of Directors Meeting Page 3

Audit, 18-021 Moved by Mr. Grestoni and seconded by Ms. Schock that the Finance & Members ratify the recommendation of the Audit, Finance & Risk Risk Committee to approve the following non accounting policies: Committee Report – • Risk Governance and Management Policy Annual Re- • Environmental and Sustainable Development Policy view of Non Accounting • Board of Directors’ and CEO’s Expenses Policy Policies • Whistleblower Policy • Provision of Non-Audit Services by External Auditors

CARRIED

Planning & 18-025 Moved by Mr. Chale and seconded by Ms. Nabess that the Mem- Technology bers ratify the recommendation of the Planning & Technology Committee Committee to approval for the Corporate Strategic Initiative and IT Report – Support Contracts budgets broken down as follows: Final Corporate • $22.16 million for Corporate Strategic Initiatives for 2018/19 Strategic (the majority to be allocated to DXC (formerly HP), IBM, Mitch- Initiatives and IT ell, and FINEOS according to the terms of contracts. Board ap- Support proval will be sought for any further services to be provided by Contracts other entities in accordance with the corporate directives). 2018/2019 • $9.79 million to engage IBM for the support and operation of the data centre in 2018/19.

• $3.5 million in 2018/19 to be distributed amongst the DXC/IBM Master Service Agreements as management deems appropriate, to provide daily maintenance and support for the Corpora- tion’s enterprise systems.

CARRIED Page 17 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the February 8, 2018 Manitoba Public Insurance Board of Directors Meeting Page 6

2019 Gen- 18-044 eral Rate Mr. Crozier joined the meeting to present Agenda Item 6.1 “2019 Application General Rate Application”. Following discussion, Members received the report as information.

Mr. Crozier withdrew from the meeting and Mr. Wennberg joined the meeting.

Page 18 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the April 19, 2018 Meeting Page 2

Planning & 18-060 Moved by Mr. Chale and seconded by Ms. Schock that the Mem- Technology bers ratify the recommendation of the Planning & Technology Com- Committee mittee to approve the purchase of annual support and maintenance Report – from INFOR for Manitoba Public Insurance’s (MPI’s) Human Re- INFOR source Management and Financial Management systems at a cost Contract not to exceed $650,000 CAD plus tax for the period June 1, 2018 Approval until May 31, 2019. CARRIED

Page 19 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the April 19, 2018 Meeting Page 3

Planning & 18-063 Moved by Mr. Chale seconded by Mr. Bubis that the Members ratify Technology the recommendation of the Planning & Technology Committee to Committee authorize Management to complete negotiations and award the Report – Legacy Modernization Assessment tender to one or two vendors at Legacy a total combined cost not to exceed $900,000 plus taxes and ex- Moderniza- penses against the $2M project budget. tion Assess- ment Tender CARRIED Award

President & 18-067 Mr. Graham presented Agenda Item 3.1 “President and CEO’s Re- CEO’s port” providing a report on the following items: Report • Public Utilities Board Technical Conferences • Capital Maintenance Provision • Asset Liability Management Study

Page 20 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the April 19, 2018 Meeting Page 5

Extension 18-071 Mr. Giesbrecht presented Agenda Item 4.4 “Extension Transfer”. Transfer Moved by Mr. Grestoni and seconded by Mr. Bubis that the Mem- bers approve a transfer of excess retained earnings from the Exten- sion line of business to the Basic line of business as at February 28, 2018 in the amount of $37,300,000 to ensure Basic exceeds the minimum requirement of $201 million for satisfactory financial condition and closes the 2017/18 fiscal year with the Rate Stabilization Reserve (RSR) in sound financial condition. CARRIED

2019/20 18-072 Mr. Johnston presented Agenda Item 5.1 “2019/20 Basic Autopac Basic Program and Rates”. Autopac Program Moved by Ms. Schock and seconded by Mr. Grestoni and Rates 1. That the Members approve the 2019/20 General Rate Appli- cation forecast before the impact of proposed changes to the Corporation’s Asset and Liability Management program. 2. That the Members approve the methodology used to determine the 2019/20 Basic break-even rate indication per Ac- cepted Actuarial Practice of +.02% on the understanding that minor changes to this indication may occur as a result of the Board’s decision on the ALM implementation strategy presented to the Investment Committee on April 30, 2018.

3. That the Members approve the methodology used to determine the 2019/20 Basic rate indication of 2.9% after inclusion of investment income on the Rate Stabilization Reserve and a Capital Maintenance Provision.

CARRIED

Ms. Kacher joined the meeting. Mr. Keith rejoined the meeting and Mr. Johnston withdrew from the meeting.

Page 21 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Minutes of the April 19, 2018 Meeting Page 6

Ms. Kacher and Mr. Keith withdrew from the meeting. Mr. Wennberg joined the meeting.

PDR Busi- 18-076 Mr. Wennberg presented Agenda Item 5.5 “PDR Business Case ness Case and Customer Claims Reporting System (CCRS) Next Steps”. and Cus- tomer Moved by Mr. Grestoni and seconded by Mr. Bubis that the Mem- Claims Re- bers authorize Management to begin closing down activities for the porting Sys- Customer Claims Reporting System (CCRS) project effective im- tem (CCRS) mediately. Next Steps Following discussion, Members received the report as information.

CARRIED

Messrs. Wennberg and Giesbrecht withdrew from the meeting.

Page 22 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1 Minutes of the May 17, 2018 Meeting Page 3

Investment 18-104 Moved by Mr. Grestoni and seconded by Ms. Schock that the Mem- Committee bers ratify the recommendation of the Investment Committee to ap- Report – prove for the Minister of Finance’s consideration of the following: Asset Liability 1. Approval to invest in the listed new asset classes of private Manage- debt, global equity and global low volatility equities; ment Study Recommen- dations and 2. The creation of five segregated portfolios for Basic Claims Lia- Implementa- bilities, Extension, SRE, Employee Future Benefits and RSR; tion Plan 3. Adoption of asset allocations for each portfolio as shown in Fig- ure 3 Recommended Target Asset Allocations (ALM Implemen- tation Plan, April 30, 2018, found on page 10 of agenda item B.1 Attachment A);

4. Adoption of the Implementation Plan (as described in the ALM Implementation Plan, April 30, 2018, found on pages 12 to 22 of agenda item B.1 Attachment A);

5. Realization of gains in Canadian and U.S. equity portfolios in 2018/19;

6. Hire a consultant to assist with search for external managers;

7. Hire a transition manager to manage the transitions between public market asset classes as necessary (purchases and sales).

CARRIED Page 23 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the May 17, 2018 Meeting Page 4

Members identified the importance of notifying Department of Fi- nance of the details of the ALM Implementation Plan.

2019/20 18-109 Mr. Johnston presented Agenda Item 4.2 “2019/20 Basic Autopac Basic General Rate Application”. Autopac General Moved by Ms. Wowryk and seconded by Ms. Nabess that the Mem- Rate bers approve the application to the Public Utilities Board for Application 2019/20 rates for the Basic Autopac Program as set out below:

1. Overall 2.2% increase to the average rate for Basic Autopac comprised of a 0.1% break-even rate change and a 2.1% net capital maintenance provision. 2. Rates for individual risk classifications to be adjusted based on statistically determined experience indicators. 3. Classification changes to be implemented on a revenue neu- tral basis. 4. No change to the driver premiums or vehicle premium discounts on the Driver Safety Rating (DSR) scale. CARRIED

Page 24 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-1 Appendix 1

Minutes of the May 17, 2018 Meeting Page 5

Dynamic 18-110 Moved by Ms. Schock and seconded by Ms. Wowryk that the Mem- Capital bers ratify the recommendation of the Audit, Finance & Risk Com- Adequacy mittee to approve a lower Total Equity Rate Stabilization Reserve Test (DCAT) (RSR) target of 36% MCT for the 2019/20 fiscal year based on the and minimum capital required to achieve satisfactory future financial Minimum condition at the 1-in-40 year level under the 2018 Dynamic Capital Capital Test Adequacy Test; (MCT) an upper Total Equity RSR target of 85% MCT for the 2019/20 fiscal year based on a 1-in-40, 2-year operating range above the lower RSR target as calculated in the 2018 Dynamic Capital Adequacy Test report; and, the Corporation include these RSR targets in the 2018 GRA. CARRIED

Mr. Johnston withdrew from the meeting.

Page 25 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-2

PUB (MPI) 1-2

Part and Part V RM Page No.: 15-16, 19 of 58 and Chapter: RM Appendix 8 PUB Approved 2. Rate Indication Issue No: Topic: Ratemaking in Accordance with Accepted Actuarial Practice Sub Topic: Change Documentation

Preamble to IR (If Any):

In RM Appendix 8, the Corporation states: There were no significant methodology or assumption changes made in the 2019 GRA (from the 2018 GRA).

However, at a minimum, the basis of selection of the cash flow discount rate has changed to no longer include consideration of the expected new money yield on non- marketable bonds [p. 19].

Question:

Please identify, describe, and provide the rationale for any significant changes in methodology or basis of selection of assumptions being introduced with this Application (relative to the 2018 GRA). Please include the estimated impact of each such change, with supporting documentation.

Rationale for Question:

To assess the reasonableness of any significant changes in methodology or basis of selection of assumptions.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-2

RESPONSE:

The Corporation maintains that its statement at Part V, RM Appendix 8 is correct. The method of deriving the new money yield is based on PUB Order 130/17 (see page 28) issued within the 2018 GRA. This method was also adopted for the 2019 GRA.

The exclusion of non-marketable bonds is, with respect, neither a methodology nor an assumption change. It is a decision by the Corporation to refrain from purchasing non-marketable bonds in the future (i.e. the Corporation will allocate no “new money” for purchasing non-marketable bonds). Please also see PUB (MPI) 1-3.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-3

PUB (MPI) 1-3

Part and Part RM Page No.: 19 of 58 Chapter: PUB Approved 2. Rate Indication Issue No: Topic: Ratemaking in Accordance with Accepted Actuarial Practice Sub Topic: Cash Flow Discount Rate

Preamble to IR (If Any):

The Corporation states: The investment return used to discount future payments is based on the market value weighted yield of MPI’s marketable bonds portfolio i.e. the new money yield. The investment return of 3.21% reflects the projected yield as at the midpoint of rating year 2019/20 i.e. September 1, 2019.

In its response to PUB (MPI) 1-12 a) of the 2018 GRA, the Corporation stated: The Corporation has used the projected duration weighted investment return of the Corporation’s fixed income portfolio as the basis for the discount rate selection on the assumption that this investment return is reflective of the assets that are expected to be acquired with the net cash flows., in effect explaining that the use of a portfolio yield rate was intended as an approximation of a new money yield rate.

Question: a) Please provide supporting documentation for the derivation of the assumed 3.21% cash flow discount rate, linking to the Investment section as appropriate. b) Given that non-marketable bonds also back the actuarial liabilities, why does the cash flow discount rate not also depend on the expected new money rate for non- marketable bonds? c) Please show the derivation of an alternate cash flow discount rate based on an appropriately weighted average expected new money yield rate as at 1 September 2019 (consistent with the financial forecast) for the mix of fixed income

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-3

investments and durations expected to back the related actuarial liabilities, and prepare an alternate overall rate indication using this alternate cash flow discount rate, with supporting documentation. d) Please repeat the response to part c) above reflecting the Board approved 50/50 interest rate forecast.

Rationale for Question:

To assess the sensitivity of the rate indication to the cash flow discount rate selection.

RESPONSE: a) See Figure 1 for the supporting documentation for the derivation of the assumed 3.21% new money yield as of September 1, 2019. The Investment section does not provide this information.

Figure 1: New Money Yield Calculation

Line No. New Money Yield Calculation Q2 2019/20* 1 (C$000s) 2 Market Value 3 Provincial Bonds 977,873 4 Corporate Bonds 381,264 5 Total Marketable Bonds 1,359,137 6 7 Percentage Allocation 8 Provincial Bonds 71.9% 9 Corporate Bonds 28.1% 10 Total Marketable Bonds 100.0% 11 12 Yield To Maturity 13 Provincial Bonds 2.95% 14 Corporate Bonds 3.90% 15 New Money Yield 3.21% 16 * Forecast for August 31, 2019, which is used for the September 1, 2019 New Money Yield

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-3

b) MPI does not intend to purchase non-marketable bonds going forward. As such, “new money” derived from policies issued in the 2019/20 rating year, will not be allocated for the purchase of non-marketable bonds. Given that the discount rate (for ratemaking) must represent the “expected investment income to be earned on assets that might be acquired with the net cash flows resulting from the revenue at the indicated rate” (see Part V, Ratemaking, page 19), the discount rate calculation excludes non-marketable bonds. c) Per the response to (b) above, the discount rate of 3.21% “reflects the cash flow discount rate based on an appropriately weighted average expected new money yield rate as at September 1, 2019 for the mix of fixed income investments and durations” expected to back the policies issued in the 2019/20 rating year. d) Based on the 50/50 interest rate forecast, the discount rate would increase from 3.21% to 3.50%. This would decrease the required overall rate (exclusive of Net CMP) to breakeven from 0.1% to -0.5% (see Part V, Ratemaking, page 40). The required overall rate (inclusive of Net CMP) would also decrease from 2.2 to 1.2% (see Part V, Ratemaking, page 41).

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-4

PUB (MPI) 1-4

Part and Part V RM Page No.: 29 of 58 Chapter: PUB Approved 2. Rate Indication Issue No: Topic: Ratemaking in Accordance with Accepted Actuarial Practice Sub Topic: Vehicle Drift

Preamble to IR (If Any):

Question: a) Please provide supporting documentation for the derivation of the estimated and projected annual overall vehicle drift assumptions for 2017/18 through 2019/20, including commentary on the relationship with the HTA vehicle drift assumptions documented in REV.1.2. b) Please explain why it is necessary to apply vehicle drift adjustments through to the average earning date for the March 2019 rate (rather than the average written date for the March 2019 rate).

Rationale for Question:

To assess the reasonableness of Vehicle Drift assumptions.

RESPONSE: a) Per Part V, Ratemaking, page 29, the annual overall vehicle drift for 2017/18 of 2.24% is “determined per the rate model”.

Appendix 1 shows the derivation of the annual overall vehicle drift up to March 1, 2019 (in a format similar to Part V, RM Appendix 7). As indicated, the annual

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-4

overall vehicle drift up to March 1, 2019 is 2.71%. The annual overall vehicle drift for 2018/19 was determined by solving the following equation:

((1 + 2.71%) / ((1 + 2.24%) ^ (4/12))) - 1 i.e. 1.96%

Appendix 2 shows the derivation of the annual overall vehicle drift up to March 1, 2020 (per Part V, RM Appendix 7). The annual overall vehicle drift, up to March 1, 2020, is shown at 4.92%. The annual overall vehicle drift for 2019/20 was determined by solving the following equation:

((1 + 4.92%) / (1 + 2.71%)) - 1 i.e. 2.15% b) MPI will review the appropriateness of using the average earned date in the 2020 GRA. If the Corporation used the average written date (instead of the average earned date) in the context of the 2019 GRA, the breakeven required overall rate change would increase from 0.1% to 1.4% but the required overall rate change inclusive of Net CMP would remain unchanged at 2.2%.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-4(a) Appendix 1

Appendix 1 Drift Calculation by Major Class (Trended to March 1, 2019)

Major Class Row Description Notes Overall Priv Pass Comm Public Motorcycle Trailer ORV

[1] 2018/19 Written Premiums [a] 986,304,184 893,171,487 36,082,358 26,448,834 13,569,983 16,323,142 708,380 [2] Number of Vehicles [a] 1,149,140 801,666 46,246 12,690 17,023 200,677 70,838 [3] 2018/19 Average Rate [a] 858.30 1,114.14 780.23 2,084.23 797.16 81.34 10.00

[4] Projected Volume Growth [b] 1.98% 1.98% 1.98% 1.98% 4.13% 4.13% [5] 2017/18 Actual Volume Growth [c] 1.44% 1.44% 1.44% 1.44% 2.76% 2.76% [6] 2018/19 Selected Volume Growth [c] 1.50% 1.50% 1.50% 1.50% 3.19% 3.19% [7] Number of Vehicles - Adjusted [d] 1,177,775 817,578 47,164 12,942 17,361 208,966 73,764

[8] Projected Drift [e] 2.63% 3.34% 2.50% -2.32% 0.44% 2.33% 0.00% [9] 2017/18 Actual Drift [f] 2.34% 1.92% 2.96% 0.13% 1.87% 0.00% [10] 2018/19 Selected Drift [f] 2.55% 1.85% -3.27% 0.40% 1.70% 0.00% [11] 2018/19 Average Rate - Adjusted [g] 880.86 1,151.39 799.73 2,035.80 800.70 83.24 10.00

[12] 2018/19 Written Premiums - Adjusted [h] 1,037,451,635 941,354,187 37,718,270 26,347,291 13,900,871 17,393,375 737,640

[13] HTA Drift per Revenue Forecast [i] 3.20% [14] HTA Drift per Rate Model [j] 3.12% [15] 2018/19 Average Rate [k] 1,104.43 [16] 2018/19 Average Rate - Adjusted [l] 1,138.85 [17] Adjust to Revenue Forecast [m] 1.0008

[18] Projected Drift - Adjusted [n] 2.71% 3.43% 2.58% -2.24% 0.53% 2.33% 0.00% [19] 2018/19 Average Rate - Adjusted [o] 881.58 1,152.35 800.39 2,037.49 801.36 83.24 10.00 [20] 2018/19 Written Premiums - Adjusted [p] 1,038,301,396 942,138,952 37,749,714 26,369,256 13,912,460 17,393,375 737,640

Notes: [a] From the Rate Model; based on the population of vehicles as at November 1, 2017; premiums reflect the approved 2018/19 rates [b] = ((1 + [5]) ^ (4/12) * (1 + [6]))- 1; trended from November 1, 2017 to March 1, 2019 [c] Selected based on historical volume growth for HTA and non-HTA vehicles; See Part V(i), Revenues [d] = [2] * [4]; Overall = Sum of major classes [e] = ((1 + [9]) ^ (4/12) * (1 + [10]))- 1; trended from November 1, 2017 to March 1, 2019; Overall = [11] / [3] - 1 [f] Selected based on historical drift for each major class; 2018/19 Selected Drift for the Public major class adjusted to reflect VFH vehicles eligibility for DSR discoun [g] = [3] * (1 + [8]); Overall = [12] / [7] [h] = [7] * [11]; Overall = Sum of major classes [i] = ((1 + 2.40%) ^ (4/12) * (1 + 2.39%)) - 1; See Part V(i), Revenues [j] = ([16] / [15]) - 1 [k] = Sum [1] / Sum [2] for HTA Units [l] = Sum [12] / Sum [7] for HTA Units [m] = (1 + [13]) / (1 + [14]) [n] = (1 + [8]) * [17] - 1 for HTA Units; [8] for non-HTA Units; Overall = [19] / [3] - 1 [o] = [3] * (1 + [18]); Overall = [20] / [7] [p] = [7] * [19]; Overall = Sum of major classes

Manitoba Public Insurance Page 1 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-4(a)

Appendix 2 Drift Calculation by Major Class (Trended to March 1, 2020)

Major Class Row Description Notes Overall Priv Pass Comm Public Motorcycle Trailer ORV

[4] Projected Volume Growth [b] 3.51% 3.51% 3.51% 3.51% 7.43% 7.43% [5] 2017/18 Actual Volume Growth [c] 1.44% 1.44% 1.44% 1.44% 2.76% 2.76% [6] 2018/19 Selected Volume Growth [c] 1.50% 1.50% 1.50% 1.50% 3.19% 3.19% [7] 2019/20 Selected Volume Growth [c] 1.50% 1.50% 1.50% 1.50% 3.17% 3.17% [8] Number of Vehicles - Adjusted [d] 1,200,163 829,842 47,871 13,136 17,621 215,591 76,102

[9] Projected Drift [e] 4.73% 5.98% 4.40% -1.93% 0.85% 4.07% 0.00% [10] 2017/18 Actual Drift [f] 2.34% 1.92% 2.96% 0.13% 1.87% 0.00% [11] 2018/19 Selected Drift [f] 2.55% 1.85% -3.27% 0.40% 1.70% 0.00% [12] 2019/20 Selected Drift [f] 2.55% 1.85% 0.40% 0.40% 1.70% 0.00% [13] 2018/19 Average Rate - Adjusted [g] 898.93 1,180.75 814.52 2,043.94 803.90 84.65 10.00

[14] 2018/19 Written Premiums - Adjusted [h] 1,078,856,998 979,839,489 38,991,924 26,849,205 14,165,488 18,249,872 761,020

[15] HTA Drift per Revenue Forecast [i] 5.82% [16] HTA Drift per Rate Model [j] 5.63% [17] 2018/19 Average Rate [k] 1,104.43 [18] 2018/19 Average Rate - Adjusted [l] 1,166.63 [19] Adjust to Revenue Forecast [m] 1.0018

[20] Projected Drift - Adjusted [n] 4.92% 6.17% 4.59% -1.75% 1.03% 4.07% 0.00% [21] 2018/19 Average Rate - Adjusted [o] 900.53 1,182.90 816.00 2,047.66 805.36 84.65 10.00 [22] 2018/19 Written Premiums - Adjusted [p] 1,080,784,052 981,621,072 39,062,821 26,898,023 14,191,244 18,249,872 761,020

Notes: [a] From the Rate Model; based on the population of vehicles as at November 1, 2017; premiums reflect the approved 2018/19 rates [b] = ((1 + [5]) ^ (4/12) * (1 + [6]) * (1 + [7]))- 1; trended from November 1, 2017 to March 1, 2020 [c] Selected based on historical volume growth for HTA and non-HTA vehicles; See Part V(i), Revenues [d] = [2] * [4]; Overall = Sum of major classes [e] = ((1 + [10]) ^ (4/12) * (1 + [11]) * (1 + [12]))- 1; trended from November 1, 2017 to March 1, 2020; Overall = [13] / [3] - 1 [f] Selected based on historical drift for each major class; 2018/19 Selected Drift for the Public major class adjusted to reflect VFH vehicles eligibility for DSR discounts [g] = [3] * (1 + [9]); Overall = [14] / [8] [h] = [8] * [13]; Overall = Sum of major classes [i] = ((1 + 2.40%) ^ (4/12) * (1 + 2.39%) * (1 + 2.54%)) - 1; See Part V(i), Revenues [j] = ([18] / [17]) - 1 [k] = Sum [1] / Sum [2] for HTA Units [l] = Sum [14] / Sum [8] for HTA Units [m] = (1 + [15]) / (1 + [16]) [n] = (1 + [9]) * [19] - 1 for HTA Units; [9] for non-HTA Units; Overall = [21] / [3] - 1 [o] = [3] * (1 + [20]); Overall = [22] / [8] [p] = [8] * [21]; Overall = Sum of major classes

Manitoba Public Insurance Page 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-5

PUB (MPI) 1-5

Part and Part V RM Page No.: 31 of 58 Chapter: PUB Approved 2. Rate Indication Issue No: Topic: Ratemaking in Accordance with Accepted Actuarial Practice Sub Topic: Expected Return on Investment Assets Supporting Basic Total Equity

Preamble to IR (If Any):

The proposed approach to recognizing the expected return on investment assets supporting Basic Total Equity draws on information shown in Figure INV-53 RSR Investment Income.

Question:

Please provide supporting documentation for the derivation of the information shown in Figure INV-53, with links to other GRA exhibits as appropriate.

Rationale for Question:

To assess the reasonableness of the proposed approach to recognizing the expected return on investment assets supporting Basic Total Equity.

RESPONSE:

Figure INV-54 provides the asset values for Basic RSR, which supports Figure INV-53.

Sections 3 to 11 of the Investment chapter of the Application show how the results of the investment portfolio for the Basic line of business were calculated. The basic line of business portfolio is a combination of the Basic Claims and the RSR portfolios. Where appropriate, the above sections contain discussions and assumptions for the

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-5

RSR portfolio that are separate and different from the assumptions used for the Basic Claims portfolio. For example:

• Cash: Section 3 discusses the cash holdings, which is forecasted to have $0 dollars over the four-year forecast for RSR.

• Marketable Bonds: Section 4 discusses how the interest income and capital return, which is the same process for Basic claims and Basic RSR, is calculated. Separate assumptions for the RSR portfolio are provided for yield to maturity and convexity.

• Non-Marketable bonds: Section 5 describes the calculation process for MUSH bonds. Asset values for MUSH in the RSR portfolio are included in Figure INV- 54.

• Private Debt and Growth Assets: Sections 5 to 10 provide the assumption for private debt and all of the growth asset classes (Canadian equity, global equity, low volatility global equity, real estate and infrastructure). Note that there are no private debt and growth assets in the Basic Claims portfolio, so all assumptions and tables (for 2019/20 and thereafter) show information for the RSR portfolio only.

• Rebalancing: Separate rebalancing assumptions for RSR are provided in Section INV.11.3.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-6

PUB (MPI) 1-6

Part and I COM Page No.: 9 Chapter: PUB Approved 3. Compliance with Board Orders Issue No: Topic: Compliance with PUB Orders Sub Topic: Board Order 130-17 11.23

Preamble to IR (If Any):

Order 11.23 - A Technical Conference shall be held on road safety and loss prevention in early 2019, which shall be initiated by the Board but on such dates as are mutually agreed as between the Board and MPI.

MPI expects to begin preparations for this Technical Conference in Q3 of 2018.

Question:

Please advise as to what preparations MPI intends to undertake for the Technical Conference.

Rationale for Question:

To understand the progress of the response to Order 11.23.

RESPONSE:

In preparation for the Technical Conference in 2019, the Corporation intends to prepare progress summary reports, in consultation and collaboration with stakeholders, for each of the identified topics including:

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-6

• progress on the implementation of the Loss Prevention Strategy and Framework,

• activities of the External Stakeholder Committee on Loss Prevention and member feedback on the effectiveness of that committee;

• activities of the Provincial Road Safety Committee and progress on priorities noted within the Provincial Road Safety Plan - Road to Zero;

• progress on the 2017-2020 Road Safety Operational Plan;

• review of the Corporation's priorities for road safety and loss prevention;

• review of business case related to Experienced Rider Program;

• success of the Drug Impaired Driving Communication Strategy and any other efforts undertaken by the Corporation to address drug-impaired driving;

• the Corporation's ongoing efforts to address speed and distracted driving;

• progress on the High School Driver Education Program Redevelopment;

• an update on the Corporation's rural road strategy;

• a jurisdictional scan conducted by the Corporation of road safety measures; and

• an examination of safety for drivers and clients of Vehicles For Hire.

In the coming months, the Corporation will confirm with the PUB, the Technical Conference’s objectives, its schedule of topics, and the expected approach for including the information on the public record; as well as establish the expected duration and potential dates of the Technical Conference.

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-6

The Corporation invited members of the External Stakeholder Committee on Loss Prevention to provide any additional road safety issues or subject matter that they wished to see discussed at the Technical Conference at the June quarterly meeting.

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-7

PUB (MPI) 1-7

Part and VI INV Page No.: 48 Chapter: PUB Approved 4.a. Financial Forecast- Financial Forecast Accuracy Issue No: Topic: Canadian Equities Sub Topic: Turnover Assumption

Preamble to IR (If Any):

The average mid-point of the range for the manager’s expected future turnover was 20%. Based on this information, a 20% turnover ratio was used in the model for 2018/19. However, after separation of asset classes in the financial model occurs … at the end of Q4 2018/19, the forecasted turnover rate thereafter will be 0% because it is expected that equity holdings will be held in pooled funds.

Question: a) Why does the planned shift to pooled funds necessarily imply a turnover assumption of 0%? b) Please summarize the accounting treatment of changes in unrealized gains/losses on such pooled funds.

Rationale for Question:

To assess the reasonableness of the Basic financial forecast assumptions.

RESPONSE: a) When the Corporation holds units in a pooled fund only turnover of the pooled fund units results in a realization of gains. The Corporation does not plan to sell any units of the fund and therefore does not plan to realize any gains. Turnover of

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holdings within the fund will not result in the realization of gains for the Corporation, as it is only turnover of the pooled fund units that results in the realization of gains. b) The Corporation expects no change to the accounting treatment of the unrealized gains/losses on such pooled funds. The investments are anticipated to remain as Available for Sale.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-8

PUB (MPI) 1-8

Part and VIII FFM Page No.: 6 Chapter: PUB Approved 4.a. Financial Forecast- Financial Forecast Accuracy Issue No: Topic: Financial Forecast Model Sub Topic: Update for ALM Changes

Preamble to IR (If Any):

Prior to the update, Investment Assets and Income were allocated to each line of business through an allocation process. As a result of the recent Asset Liability Management (ALM) strategy, an update has been made whereby investment assets are directly assigned to each operating line of business (Basic and Non-Basic) as well as to Employee Future Benefits.

Question: a) Please provide a complete list of the Corporation’s investment portfolio “buckets” into which investment assets have been assigned for financial forecast modeling purposes. b) Are financial forecast modeling assumptions separately specified for each of these investment portfolio buckets?

Rationale for Question:

To assess the reasonableness of the Basic financial forecast assumptions.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-8

RESPONSE: a) Starting in Q1 of 2019/20, the five financial portfolios modeled are: 1) Basic Claims, 2) RSR, 3) Employee Future Benefits, 4) SRE and 5) Extension. b) Starting in Q1 2019/20 for fixed income, the yield to maturity and duration assumptions used in the financial model for Basic Claims are separate from those used for non-Basic Claims (including RSR and Employee Future Benefits). All portfolios containing growth assets (i.e. equities, real estate and infrastructure) use a single set of return assumptions for growth assets in the financial model. The Basic Claims portfolio contains no growth assets.

The asset mixes for Basic Claims, RSR and Employee Future Benefits each use different assumptions as shown in Figure INV-1, reproduced below for convenience.

Figure INV- 1: Asset Mix to be Implemented End of Q4 2018/19

Employee Line Future No. Target Weights Basic Claims RSR Benefits

1 Fixed Income 2 Provincial Bonds 60.0% 20.0% 0.0% 3 Corporate Bonds 20.0% 10.0% 20.0% 4 MUSH 20.0% 5.0% 0.0% Private Debt 0.0% 15.0% 20.0% 5 Total Fixed Income 100.0% 50.0% 40.0%

6 Public Equities 7 Canadian Equities 0.0% 12.0% 10.0% 8 Global Equities 0.0% 13.0% 18.0% 9 Global Low Volatility 0.0% 10.0% 7.0% 10 Total Equities 0.0% 35.0% 35.0%

11 Alternatives 12 Canadian Real Estate 0.0% 10.0% 15.0% 13 Infrastructure 0.0% 5.0% 10.0% 14 Total Alternatives 0.0% 15.0% 25.0%

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9

PUB (MPI) 1-9

Part and V REV 1.1-1.2; Figure Page No.: 7-10 Chapter: REV-5 PUB Approved 4.b. – Financial Forecast – Changes in Projected Financial Issue No: Results Topic: Motor Vehicle Premiums Sub Topic: Volume and Upgrade Factors

Preamble to IR (If Any):

Question:

a) Please provide a restated PF.1, PF.2 and PF.3 and R.1 pages 5 and 6 "Motor Vehicle Premiums Written and Earned," to reflect a volume factor of 1.75% throughout the forecast period. b) Please provide a restated PF.1, PF.2 and PF.3 and R.1 pages 5 and 6 "Motor Vehicle Premiums Written and Earned," to reflect a vehicle upgrade factor of 2.65% throughout the forecast period. c) Please provide the impact of the changes in (b) on the indicated rate in accordance with accepted actuarial practice.

Rationale for Question:

To test the forecast's sensitivity to changes in the volume and upgrade factors.

RESPONSE:

a) Please see Appendix 1 for PF.1, PF.2, PF.3 and REV.1. Changing the volume factor to 1.75% throughout the forecast period reduces the overall required rate change based on breakeven rates (inclusive of the net CMP), from 2.2% to 2.1%.

b) Please see Appendix 2 for PF.1, PF.2, PF.3 and REV.1.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9

c) Changing the vehicle upgrade factor to 2.65% throughout the forecast period reduces the overall required rate change based on breakeven rates (inclusive of the net CMP), from 2.2% to 1.8%.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (a) Appendix 1

PF.1 STATEMENT OF OPERATIONS – 2019/20 Basic Premium Rate Increase of 2.1% Rate Increase with 1.75% Volume Factor Upgrade throughout the forecast

Multi-year - Statement of Operations

Line 2019 GRA - 2019/20 Basic Premium Rate increase of 2.1% with 1.75% Volume Factor Upgrade throughout the forecast No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Motor Vehicles 955,941 1,018,965 1,021,835 1,089,227 1,137,276 1,186,631 1,238,412 4 Drivers 49,946 69,148 68,902 70,903 72,885 74,723 76,565 5 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 6 Total Net Premiums Written 994,593 1,076,138 1,079,541 1,148,710 1,198,513 1,249,473 1,302,858

7 Net Premiums Earned 8 Motor Vehicles 922,617 988,774 992,430 1,058,052 1,115,049 1,163,800 1,214,459 9 Drivers 48,819 59,391 59,546 69,896 71,887 73,798 75,638 10 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 11 Total Net Premiums Earned 960,142 1,036,190 1,040,780 1,116,528 1,175,288 1,225,717 1,277,978 12 Service Fees & Other Revenues 22,849 23,322 23,875 25,913 27,747 29,730 31,905 13 Total Earned Revenues 982,991 1,059,512 1,064,655 1,142,441 1,203,035 1,255,447 1,309,883

14 Claims Incurred 783,040 870,564 855,242 899,901 948,146 999,054 1,053,382 15 DPAC \ Premium Deficiency Adjustment - (15,750) (29,287) (5,339) (4,503) 3,172 8,092 16 (a) Claims Incurred - Interest Rate Impact (15,801) (23,797) (8,185) 8,621 11,468 10,144 10,085 17 Total Claims Incurred 767,239 831,017 817,770 903,183 955,111 1,012,370 1,071,559

18 Claims Expense 143,337 136,975 137,168 135,440 139,228 144,372 146,834 19 Road Safety/Loss Prevention 13,146 13,843 13,606 12,694 12,819 13,007 13,285 20 Total Claims Costs 923,722 981,835 968,544 1,051,317 1,107,158 1,169,749 1,231,678

21 Expenses 22 Operating 70,201 73,799 75,060 73,613 76,320 80,019 82,936 23 Commissions 37,378 40,407 40,373 42,795 45,011 46,887 48,830 24 Premium Taxes 29,143 31,445 31,559 33,838 35,608 37,128 38,703 25 Regulatory/Appeal 4,443 4,666 4,669 4,840 4,998 5,114 5,233 26 Total Expenses 141,165 150,317 151,661 155,086 161,937 169,148 175,702

27 Underwriting Income (Loss) (81,896) (72,640) (55,550) (63,962) (66,060) (83,450) (97,497)

28 Investment Income 111,731 82,203 191,848 82,178 84,900 87,867 90,628 29 (b) Investment Income - Interest Rate Impact 4,589 - (0) (1) (0) (0) 0 30 Net Investment Income 116,320 82,203 191,848 82,177 84,900 87,867 90,628

31 Net Income (Loss) 34,424 9,563 136,298 18,215 18,840 4,417 (6,869)

32 Total net Impact due to interest rate change (b) - (a) 20,390 23,797 8,185 (8,621) (11,468) (10,145) (10,085)

Manitoba Public Insurance Page 1 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (a) Appendix 1

PF.2 STATEMENT OF FINANCIAL POSITION – 2019/20 Basic Premium Rate Increase of 2.1% Rate Increase with 1.75% Volume Factor Upgrade throughout the forecast

Multi-year - Statement of Financial Position

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Assets 4 Cash and cash equivalents 72,998 11,929 28,189 64,575 79,677 90,983 90,141 5 Investments 2,272,545 2,451,402 2,509,362 2,598,204 2,705,101 2,816,087 2,928,238 6 Investment property 34,720 35,916 13,906 13,548 13,553 13,760 15,246 7 Due from other insurance companies 2 ------8 Accounts receivable 389,186 357,114 355,241 376,497 392,151 408,206 425,030 9 Prepaid expenses 714 - 17,949 25,237 31,131 29,386 22,792 10 Deferred policy acquisition costs - 9,628 - - - - - 11 Reinsurers' share of unpaid claims 1,269 ------12 Property and equipment 89,280 86,710 89,855 91,050 88,996 88,335 90,227 13 Deferred development costs 55,423 72,551 43,654 47,106 59,149 61,156 63,186 14 2,916,137 3,025,250 3,058,156 3,216,217 3,369,758 3,507,913 3,634,860

15 Liabilities 16 Due to other insurance companies 141 2,642 144 144 144 144 144 17 Accounts payable and accrued liabilites 39,327 31,906 40,996 40,602 41,678 43,356 44,182 18 Financing lease obligation 3,125 2,931 2,925 2,843 2,743 2,634 2,518 19 Unearned premiums and fees 508,089 548,406 548,485 584,043 610,924 638,639 667,807 20 Provision for employee current benefits 16,633 16,953 17,155 17,865 18,583 19,310 20,046 21 Provision for employee future benefits 331,910 316,773 341,796 357,994 373,916 389,867 406,138 22 Provision for unpaid claims 1,806,067 1,920,634 1,851,493 1,931,504 2,012,599 2,090,639 2,166,990 23 2,705,292 2,840,245 2,802,994 2,934,995 3,060,587 3,184,589 3,307,825

24 Equity 25 Retained Earnings 170,975 134,734 307,273 325,488 344,328 348,743 341,873 26 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,267) (35,158) (25,417) (14,837) 27 Total Equity 210,845 185,005 255,161 281,222 309,170 323,326 327,036

28 Total Liabilities & Equity 2,916,137 3,025,250 3,058,155 3,216,217 3,369,757 3,507,915 3,634,861

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PF.3 STATEMENT OF CHANGES IN EQUITY - 2019/20 Basic Premium Rate Increase of 2.1% Rate Increase with 1.75% Volume Factor Upgrade throughout the forecast

Multi-year - Statement of Changes in Equity

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Total Equity 4 Retained Earnings 5 Beginning Balance 99,251 125,171 170,975 307,273 325,488 344,328 348,743 6 Net Income (Loss) from annual operations 34,424 9,563 136,298 18,216 18,839 4,416 (6,870) 7 Transfer (to) / from Non-Basic Retained Earnings 37,300 ------8 Total Retained Earnings 170,975 134,734 307,273 325,488 344,328 348,743 341,873

9 Total Accumulated Other Comprehensive Income 10 Beginning Balance 81,749 49,148 39,870 (52,111) (44,267) (35,158) (25,417) 11 Other Comprehensive Income for the Year (41,879) 1,123 (91,981) 7,844 9,109 9,740 10,580 12 Total Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,267) (35,158) (25,417) (14,837) 13 Total Equity Balance 210,845 185,005 255,161 281,222 309,170 323,326 327,036

14 Total Equity 15 Rate Stabilization Reserve 16 Retained Earnings 170,975 134,734 307,273 325,488 344,328 348,743 341,873 17 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,267) (35,158) (25,417) (14,837) 18 Total Rate Stabilization Reserve 210,845 185,005 255,161 281,222 309,170 323,326 327,036

19 Retained Earnings ------20 Total Equity Balance 210,845 185,005 255,161 281,222 309,170 323,326 327,036

21 RATE STABILIZATION RESERVE TARGETS 22 PUB RSR Target 180,000 180,000 180,000 180,000 180,000 180,000 180,000 23 DCAT Total Equity Lower Target (*@34% MCT Ratio) 201,000 201,000 143,000* 156,000* 174,000* 181,000* 188,000* 24 DCAT Total Equity Upper Target (**@85% MCT Ratio) 442,000 442,000 305,000* 337,000* 363,000* 380,000* 398,000*

25 MCT RATIO (%) 44% 28% 70% 70% 71% 71% 68%

Manitoba Public Insurance Page 3 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (a) Appendix 1

REV.1 PREMIUMS WRITTEN AND EARNED - 2019/20 Basic Premium Rate Increase of 2.1% Rate Increase with 1.75% Volume Factor Upgrade throughout the forecast

Premiums Written and Earned 2019 GRA - 2019/20 Basic Premium Rate increase of 2.1% with 1.75% Volume Factor Upgrade throughout the forecast For the Years Ended February, Line No. BASIC 2018A 2019B 2020F 2021F 2022F 2023F 1 (C$ 000s, except where noted) 2 3 HTA Volume Change 1.44% 1.75% 1.75% 1.75% 1.75% 1.75% 4 HTA Upgrading & Other Changes 2.40% 2.39% 2.54% 2.58% 2.51% 2.54% 5 Rate Change 3.70% 2.60% 2.08% 0.00% 0.00% 0.00% 6 Premiums Unearned during Year 46.37% 46.26% 46.26% 46.26% 46.26% 46.26% 7 8 Basic Insurance Written 9 Last Year Premiums Written 904,245 972,433 1,039,489 1,107,127 1,155,512 1,205,264 10 Volume Increase 12,976 17,018 18,191 19,375 20,221 21,092 11 Total Volume Written 917,221 989,451 1,057,680 1,126,501 1,175,734 1,226,356 12 13 Upgrading & Other Changes 21,967 23,696 26,881 29,011 29,530 31,137 14 Total With Upgrading 939,188 1,013,147 1,084,562 1,155,512 1,205,264 1,257,493 15 16 Impact of Rate Change 34,750 26,342 22,565 0 0 0 17 Adjustments (1,505) 0 0 0 0 0 18 Total Premium Written Before Rebates 972,433 1,039,489 1,107,127 1,155,512 1,205,264 1,257,493 19 20 Fleet Rebates (13,377) (14,935) (15,532) (16,150) (16,796) (17,463) 21 Anti Theft & Other Charges (3,115) (2,719) (2,367) (2,087) (1,837) (1,618) 22 Total Premiums Written 955,941 1,021,835 1,089,227 1,137,276 1,186,631 1,238,412 23 24 Reinsurance Ceded (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) 25 Total Net Premiums Written 944,647 1,010,639 1,077,807 1,125,627 1,174,750 1,226,293 26 27 Basic Insurance Earned 28 Beginning Unearned Premium Balance 409,960 443,284 472,688 503,863 526,090 548,921 29 Premiums Written 955,941 1,021,835 1,089,227 1,137,276 1,186,631 1,238,412 30 Unearned Premiums during Year 443,284 472,688 503,863 526,090 548,921 572,874 31 Premiums Earned 922,617 992,430 1,058,052 1,115,049 1,163,800 1,214,459 32 33 Reinsurance Ceded (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) 34 Total Net Premiums Earned 911,323 981,234 1,046,632 1,103,401 1,151,919 1,202,340

Manitoba Public Insurance Page 4 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (b) Appendix 2

PF.1 STATEMENT OF OPERATIONS – 2019/20 Basic Premium Rate Increase of 1.8% Rate Increase with 2.65% Vehicle Upgrade Factor throughout the forecast

Multi-year - Statement of Operations

Line 2019 GRA - 2019/20 Basic Premium Rate Increase of 1.8% with 2.65 % Vehicle Upgrade Factor throughout the forecast No. For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Motor Vehicles 955,941 1,018,965 1,021,864 1,084,866 1,130,732 1,178,475 1,228,182 4 Drivers 49,946 69,148 68,902 70,903 72,885 74,723 76,565 5 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 6 Total Net Premiums Written 994,593 1,076,138 1,079,570 1,144,349 1,191,969 1,241,317 1,292,628

7 Net Premiums Earned 8 Motor Vehicles 922,617 988,774 992,446 1,055,722 1,109,515 1,156,390 1,205,188 9 Drivers 48,819 59,391 59,546 69,896 71,887 73,798 75,638 10 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 11 Total Net Premiums Earned 960,142 1,036,190 1,040,796 1,114,198 1,169,754 1,218,307 1,268,707 12 Service Fees & Other Revenues 22,849 23,322 23,876 25,835 27,624 29,568 31,692 13 Total Earned Revenues 982,991 1,059,512 1,064,672 1,140,033 1,197,378 1,247,875 1,300,399

14 Claims Incurred 783,040 870,564 853,862 896,983 943,502 992,470 1,044,612 15 DPAC \ Premium Deficiency Adjustment - (15,750) (29,661) (4,119) (4,644) 3,291 7,371 16 (a) Claims Incurred - Interest Rate Impact (15,801) (23,797) (8,189) 8,612 11,451 10,126 10,071 17 Total Claims Incurred 767,239 831,017 816,012 901,476 950,309 1,005,887 1,062,054

18 Claims Expense 143,337 136,975 137,168 135,425 139,216 144,330 146,780 19 Road Safety/Loss Prevention 13,146 13,843 13,606 12,693 12,818 13,003 13,279 20 Total Claims Costs 923,722 981,835 966,786 1,049,594 1,102,343 1,163,220 1,222,113

21 Expenses 22 Operating 70,201 73,799 75,060 73,606 76,313 79,998 82,908 23 Commissions 37,378 40,407 40,374 42,735 44,839 46,652 48,536 24 Premium Taxes 29,143 31,445 31,560 33,769 35,442 36,906 38,425 25 Regulatory/Appeal 4,443 4,666 4,669 4,840 4,998 5,114 5,233 26 Total Expenses 141,165 150,317 151,663 154,950 161,592 168,670 175,102

27 Underwriting Income (Loss) (81,896) (72,640) (53,777) (64,511) (66,557) (84,015) (96,816)

28 Investment Income 111,731 82,203 191,876 82,215 84,936 87,853 90,693 29 (b) Investment Income - Interest Rate Impact 4,589 - (0) (1) (0) (0) 0 30 Net Investment Income 116,320 82,203 191,876 82,214 84,936 87,853 90,693

31 Net Income (Loss) 34,424 9,563 138,099 17,703 18,379 3,838 (6,123)

32 Total net Impact due to interest rate change (b) - (a) 20,390 23,797 8,189 (8,613) (11,451) (10,126) (10,071)

Manitoba Public Insurance Page 1 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (b) Appendix 2

PF.2 STATEMENT OF FINANCIAL POSITION – 2019/20 Basic Premium Rate Increase of 1.8% Rate Increase with 2.65% Vehicle Upgrade Factor throughout the forecast

Multi-year - Statement of Financial Position

2019 GRA - 2019/20 Basic Premium Rate Increase of 1.8% with 2.65 % Vehicle Upgrade Factor throughout the forecast Line No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Assets 4 Cash and cash equivalents 72,998 11,929 28,194 64,061 77,831 88,019 86,291 5 Investments 2,272,545 2,451,402 2,510,416 2,599,297 2,706,055 2,816,873 2,928,980 6 Investment property 34,720 35,916 13,906 13,548 13,553 13,760 15,246 7 Due from other insurance companies 2 ------8 Accounts receivable 389,186 357,114 355,249 375,340 390,415 406,043 422,317 9 Prepaid expenses 714 - 18,325 24,266 30,237 28,327 22,395 10 Deferred policy acquisition costs - 9,628 - - - - - 11 Reinsurers' share of unpaid claims 1,269 ------12 Property and equipment 89,280 86,710 89,855 91,050 88,996 88,335 90,227 13 Deferred development costs 55,423 72,551 43,654 47,107 59,151 61,160 63,190 14 2,916,137 3,025,250 3,059,599 3,214,669 3,366,238 3,502,517 3,628,646

15 Liabilities 16 Due to other insurance companies 141 2,642 144 144 144 144 144 17 Accounts payable and accrued liabilites 39,327 31,906 40,996 40,602 41,678 43,356 44,182 18 Financing lease obligation 3,125 2,931 2,925 2,843 2,743 2,634 2,518 19 Unearned premiums and fees 508,089 548,406 548,499 582,026 607,897 634,866 663,075 20 Provision for employee current benefits 16,633 16,953 17,155 17,865 18,583 19,310 20,046 21 Provision for employee future benefits 331,910 316,773 341,796 357,994 373,917 389,867 406,138 22 Provision for unpaid claims 1,806,067 1,920,634 1,851,120 1,930,671 2,011,245 2,088,710 2,164,431 23 2,705,292 2,840,245 2,802,635 2,932,145 3,056,207 3,178,887 3,300,534

24 Equity 25 Retained Earnings 170,975 134,734 309,075 326,778 345,156 348,994 342,871 26 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,255) (35,125) (25,363) (14,759) 27 Total Equity 210,845 185,005 256,964 282,524 310,031 323,631 328,112

28 Total Liabilities & Equity 2,916,137 3,025,250 3,059,599 3,214,669 3,366,238 3,502,518 3,628,646

Manitoba Public Insurance Page 2 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (b) Appendix 2

PF.3 STATEMENT OF CHANGES IN EQUITY - 2019/20 Basic Premium Rate Increase of 1.8% Rate Increase with 2.65% Vehicle Upgrade Factor throughout the forecast

Multi-year - Statement of Changes in Equity

Line 2019 GRA - 2019/20 Basic Premium Rate Increase of 1.8% with 2.65 % Vehicle Upgrade Factor throughout the forecast No. For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Total Equity 4 Retained Earnings 5 Beginning Balance 99,251 125,171 170,975 309,075 326,778 345,156 348,994 6 Net Income (Loss) from annual operations 34,424 9,563 138,100 17,704 18,378 3,838 (6,123) 7 Transfer (to) / from Non-Basic Retained Earnings 37,300 ------8 Total Retained Earnings 170,975 134,734 309,075 326,778 345,156 348,994 342,871

9 Total Accumulated Other Comprehensive Income 10 Beginning Balance 81,749 49,148 39,870 (52,111) (44,255) (35,125) (25,363) 11 Other Comprehensive Income for the Year (41,879) 1,123 (91,981) 7,856 9,130 9,762 10,604 12 Total Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,255) (35,125) (25,363) (14,759) 13 Total Equity Balance 210,845 185,005 256,964 282,524 310,031 323,631 328,112

14 Total Equity 15 Rate Stabilization Reserve 16 Retained Earnings 170,975 134,734 309,075 326,778 345,156 348,994 342,871 17 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,255) (35,125) (25,363) (14,759) 18 Total Rate Stabilization Reserve 210,845 185,005 256,964 282,524 310,031 323,631 328,112

19 Retained Earnings ------20 Total Equity Balance 210,845 185,005 256,964 282,524 310,031 323,631 328,112

21 RATE STABILIZATION RESERVE TARGETS 22 PUB RSR Target 180,000 180,000 180,000 180,000 180,000 180,000 180,000 23 DCAT Total Equity Lower Target (*@34% MCT Ratio) 201,000 201,000 143,000* 156,000* 173,000* 181,000* 189,000* 24 DCAT Total Equity Upper Target (**@85% MCT Ratio) 442,000 442,000 305,000* 336,000* 363,000* 379,000* 397,000*

25 MCT RATIO (%) 44% 28% 70% 70% 71% 71% 68%

Manitoba Public Insurance Page 3 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-9 (b) Appendix 2

REV.1 PREMIUMS WRITTEN AND EARNED - 2019/20 Basic Premium Rate Increase of 1.8% Rate Increase with 2.65% Vehicle Upgrade Factor throughout the forecast

Premiums Written and Earned 2019 GRA - 2019/20 Basic Premium Rate Increase of 1.8% with 2.65 % Vehicle Upgrade Factor throughout the forecast For the Years Ended February, Line No. BASIC 2018A 2019B 2020F 2021F 2022F 2023F 1 (C$ 000s, except where noted) 2 3 HTA Volume Change 1.44% 1.50% 1.50% 1.50% 1.50% 1.50% 4 HTA Upgrading & Other Changes 2.40% 2.65% 2.65% 2.65% 2.65% 2.65% 5 Rate Change 3.70% 2.60% 1.82% 0.00% 0.00% 0.00% 6 Premiums Unearned during Year 46.37% 46.26% 46.26% 46.26% 46.26% 46.26% 7 8 Basic Insurance Written 9 Last Year Premiums Written 904,245 972,433 1,039,519 1,102,765 1,148,969 1,197,108 10 Volume Increase 12,976 14,587 15,593 16,541 17,235 17,957 11 Total Volume Written 917,221 987,020 1,055,111 1,119,307 1,166,203 1,215,064 12 13 Upgrading & Other Changes 21,967 26,156 27,960 29,662 30,904 32,199 14 Total With Upgrading 939,188 1,013,176 1,083,072 1,148,969 1,197,108 1,247,263 15 16 Impact of Rate Change 34,750 26,343 19,694 0 0 0 17 Adjustments (1,505) 0 0 0 0 0 18 Total Premium Written Before Rebates 972,433 1,039,519 1,102,765 1,148,969 1,197,108 1,247,263 19 20 Fleet Rebates (13,377) (14,935) (15,532) (16,150) (16,796) (17,463) 21 Anti Theft & Other Charges (3,115) (2,719) (2,367) (2,087) (1,837) (1,618) 22 Total Premiums Written 955,941 1,021,864 1,084,866 1,130,732 1,178,475 1,228,182 23 24 Reinsurance Ceded (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) 25 Total Net Premiums Written 944,647 1,010,668 1,073,446 1,119,084 1,166,594 1,216,063 26 27 Basic Insurance Earned 28 Beginning Unearned Premium Balance 409,960 443,284 472,702 501,846 523,063 545,148 29 Premiums Written 955,941 1,021,864 1,084,866 1,130,732 1,178,475 1,228,182 30 Unearned Premiums during Year 443,284 472,702 501,846 523,063 545,148 568,142 31 Premiums Earned 922,617 992,446 1,055,722 1,109,515 1,156,390 1,205,188 32 33 Reinsurance Ceded (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) 34 Total Net Premiums Earned 911,323 981,250 1,044,302 1,097,867 1,144,508 1,193,069

Manitoba Public Insurance Page 4 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10

PUB (MPI) 1-10

Part and V Pro Formas PF.1-PF.3 Page No.: 4-7 Chapter: PUB Approved 4.d. Financial Forecast – Justification for the use of Naïve Issue No: Forecast Topic: Interest Rate Forecast Sub Topic: 2.2% Rate Change

Preamble to IR (If Any):

Question: a) Please provide an updated PF.1, PF.2, PF.3 and actuarially indicated rate (with supporting schedules) based on a 25-basis point increase in interest rates in 2018/19. b) Please provide an updated PF.1, PF.2, PF.3 and actuarially indicated rate (with supporting schedules) based on a 50-basis point increase in interest rates in 2018/19. c) Please provide an updated PF.1, PF.2, PF.3 and actuarially indicated rate (with supporting schedules) based on a 50-basis point increase in interest rates in 2018/19 and 50-basis point increase in interest rates in 2019/20.

Rationale for Question:

To understand the impact of changing interest rate on actuarial indicated rate and forecasted financial results.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10

RESPONSE:

To model the requested changes in interest rates, MPI will assume that the rate change will occur at the end of the year. For example, MPI will assume that the 25- basis point increase in 2018/19 for question (a) below will occur on March 1, 2019.

Further, to model the effect of the change in interest rates, MPI will also assume that the only other change is in the new money yield as at September 1, 2019, which is used to determine rates.

a) Please see Appendix 1 for PF.1, PF.2 and PF.3. The change in interest rates increased the new money yield as at September 1, 2019 from 3.21% to 3.46%. This has the effect of reducing the overall required rate change based on breakeven rates from 0.1% to -0.4%. The effect on the overall required rate change based on breakeven rates (inclusive of the net CMP), is a reduction from 2.2% to 1.6%.

b) Please see Appendix 2 for PF.1, PF.2 and PF.3. The change in interest rates increased the new money yield as at September 1, 2019 from 3.21% to 3.71%. This reduces the overall required rate change based on breakeven rates from 0.1% to -0.9% and the overall required rate change based on breakeven rates (inclusive of the net CMP), from 2.2% to 1.0%.

c) Please see Appendix 3 for PF.1, PF.2 and PF.3. The change in interest rates increased the new money yield as at September 1, 2019 from 3.21% to 3.71%. This reduces the overall required rate change based on breakeven rates from 0.1% to -0.9% and the overall required rate change based on breakeven rates (inclusive of the net CMP), from 2.2% to 0.1%.

Compared to (b), the effect of the net CMP on the overall required rate change is 0.9% lower. The 50-basis point increase in interest rates in 2019/20 results in a higher MCT ratio at fiscal year-end 2019/20 (compared to (b)) due to higher capital available. This means that a lower net CMP is required.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (a) Appendix 1

PF.1 STATEMENT OF OPERATIONS – 1.6% Rate Increase with Interest Rate Increase of +0.25% in Q4 2018/19

Multi-year - Statement of Operations

Line 2019 GRA - 2019/20 Basic Premium Rate Increase of 1.6% with Interest Rate Increase of +25bps in 2018/19 Q4 No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Motor Vehicles 955,941 1,018,965 1,019,281 1,078,513 1,123,282 1,169,110 1,217,086 4 Drivers 49,946 69,148 68,902 70,903 72,885 74,723 76,565 5 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 6 Total Net Premiums Written 994,593 1,076,138 1,076,987 1,137,996 1,184,519 1,231,952 1,281,532

7 Net Premiums Earned 8 Motor Vehicles 922,617 988,774 991,058 1,051,113 1,102,572 1,147,910 1,194,893 9 Drivers 48,819 59,391 59,546 69,896 71,887 73,798 75,638 10 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 11 Total Net Premiums Earned 960,142 1,036,190 1,039,408 1,109,589 1,162,811 1,209,827 1,258,412 12 Service Fees & Other Revenues 22,849 23,322 23,840 25,764 27,569 29,520 31,660 13 Total Earned Revenues 982,991 1,059,512 1,063,248 1,135,353 1,190,380 1,239,347 1,290,072

14 Claims Incurred 783,040 870,564 853,862 895,964 942,530 991,533 1,043,710 15 DPAC \ Premium Deficiency Adjustment - (15,750) (30,514) (2,625) (4,342) 3,949 7,871 16 (a) Claims Incurred - Interest Rate Impact (15,801) (23,797) (44,157) 7,827 9,801 8,469 7,751 17 Total Claims Incurred 767,239 831,017 779,191 901,166 947,989 1,003,951 1,059,332

18 Claims Expense 143,337 136,975 137,168 135,259 139,047 144,162 146,625 19 Road Safety/Loss Prevention 13,146 13,843 13,606 12,676 12,801 12,986 13,263 20 Total Claims Costs 923,722 981,835 929,965 1,049,101 1,099,837 1,161,099 1,219,220

21 Expenses 22 Operating 70,201 73,799 75,060 73,525 76,230 79,914 82,830 23 Commissions 37,378 40,407 40,338 42,599 44,617 46,383 48,208 24 Premium Taxes 29,143 31,445 31,518 33,630 35,234 36,651 38,116 25 Regulatory/Appeal 4,443 4,666 4,669 4,839 4,998 5,114 5,233 26 Total Expenses 141,165 150,317 151,585 154,593 161,079 168,062 174,387

27 Underwriting Income (Loss) (81,896) (72,640) (18,302) (68,341) (70,536) (89,814) (103,535)

28 Investment Income 111,731 82,203 191,799 85,449 89,305 92,932 96,134 29 (b) Investment Income - Interest Rate Impact 4,589 - (27,683) 15 6 5 (4) 30 Net Investment Income 116,320 82,203 164,116 85,464 89,311 92,937 96,130

31 Net Income (Loss) 34,424 9,563 145,814 17,123 18,775 3,123 (7,405)

32 Total net Impact due to interest rate change (b) - (a) 20,390 23,797 16,474 (7,812) (9,795) (8,464) (7,755)

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (a) Appendix 1

PF.2 STATEMENT OF FINANCIAL POSITION – 1.6% Rate Increase with Interest Rate Increase of +0.25% in Q4 2018/19

Multi-year - Statement of Financial Position

2019 GRA - 2019/20 Basic Premium Rate Increase of 1.6% with Interest Rate Increase of +25bps in 2018/19 Q4 Line No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Assets 4 Cash and cash equivalents 72,998 11,929 28,841 60,961 69,418 72,870 62,744 5 Investments 2,272,545 2,451,402 2,480,227 2,571,603 2,681,871 2,796,743 2,913,743 6 Investment property 34,720 35,916 13,906 13,548 13,553 13,760 15,246 7 Due from other insurance companies 2 ------8 Accounts receivable 389,186 357,114 354,564 373,655 388,439 403,559 419,374 9 Prepaid expenses 714 ------10 Deferred policy acquisition costs - 9,628 19,103 23,442 29,079 26,456 19,973 11 Reinsurers' share of unpaid claims 1,269 ------12 Property and equipment 89,280 86,710 89,855 91,050 88,996 88,335 90,227 13 Deferred development costs 55,423 72,551 43,654 47,120 59,177 61,192 63,225 14 2,916,137 3,025,250 3,030,150 3,181,379 3,330,533 3,462,915 3,584,532

15 Liabilities 16 Due to other insurance companies 141 2,642 144 144 144 144 144 17 Accounts payable and accrued liabilites 39,327 31,906 40,996 40,602 41,678 43,356 44,182 18 Financing lease obligation 3,125 2,931 2,925 2,843 2,743 2,634 2,518 19 Unearned premiums and fees 508,089 548,406 547,303 579,087 604,451 630,534 657,942 20 Provision for employee current benefits 16,633 16,953 17,155 17,865 18,583 19,310 20,046 21 Provision for employee future benefits 331,910 316,773 341,796 358,175 374,325 390,478 406,937 22 Provision for unpaid claims 1,806,067 1,920,634 1,815,152 1,892,899 1,970,851 2,045,723 2,118,222 23 2,705,292 2,840,245 2,765,471 2,891,615 3,012,775 3,132,179 3,249,991

24 Equity 25 Retained Earnings 170,975 134,734 316,790 333,912 352,688 355,809 348,405 26 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,149) (34,930) (25,072) (13,863) 27 Total Equity 210,845 185,005 264,678 289,763 317,758 330,738 334,542

28 Total Liabilities & Equity 2,916,137 3,025,250 3,030,149 3,181,378 3,330,533 3,462,917 3,584,533

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (a) Appendix 1

PF.3 STATEMENT OF CHANGES IN EQUITY – 1.6% Rate Increase with Interest Rate Increase of +0.25% in Q4 2018/19

Multi-year - Statement of Changes in Equity

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Total Equity 4 Retained Earnings 5 Beginning Balance 99,251 125,171 170,975 316,790 333,912 352,688 355,809 6 Net Income (Loss) from annual operations 34,424 9,563 145,815 17,123 18,776 3,121 (7,405) 7 Transfer (to) / from Non-Basic Retained Earnings 37,300 ------8 Total Retained Earnings 170,975 134,734 316,790 333,912 352,688 355,809 348,405

9 Total Accumulated Other Comprehensive Income 10 Beginning Balance 81,749 49,148 39,870 (52,111) (44,149) (34,930) (25,072) 11 Other Comprehensive Income for the Year (41,879) 1,123 (91,981) 7,962 9,219 9,858 11,209 12 Total Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,149) (34,930) (25,072) (13,863) 13 Total Equity Balance 210,845 185,005 264,678 289,763 317,758 330,738 334,542

14 Total Equity 15 Rate Stabilization Reserve 16 Retained Earnings 170,975 134,734 316,790 333,912 352,688 355,809 348,405 17 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,149) (34,930) (25,072) (13,863) 18 Total Rate Stabilization Reserve 210,845 185,005 264,678 289,763 317,758 330,738 334,542

19 Retained Earnings ------20 Total Equity Balance 210,845 185,005 264,678 289,763 317,758 330,738 334,542

21 RATE STABILIZATION RESERVE TARGETS 22 PUB RSR Target 180,000 180,000 180,000 180,000 180,000 180,000 180,000 23 DCAT Total Equity Lower Target (*@34% MCT Ratio) 201,000 201,000 143,000* 155,000* 172,000* 180,000* 188,000* 24 DCAT Total Equity Upper Target (**@85% MCT Ratio) 442,000 442,000 305,000* 334,000* 361,000* 378,000* 396,000*

25 MCT RATIO (%) 44% 28% 73% 73% 74% 73% 70%

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (b) Appendix 2

PF.1 STATEMENT OF OPERATIONS – 1.0% Rate Increase with Interest Rate Increase of +0.50% in Q4 2018/19

Multi-year - Statement of Operations

Line 2019 GRA - 2019/20 Basic Premium Rate Increase of 1.0% with Interest Rate Increase of +50bps in 2018/19 Q4 No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Motor Vehicles 955,941 1,018,965 1,019,281 1,072,099 1,116,604 1,162,162 1,209,855 4 Drivers 49,946 69,148 68,902 70,903 72,885 74,723 76,565 5 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 6 Total Net Premiums Written 994,593 1,076,138 1,076,987 1,131,582 1,177,841 1,225,004 1,274,301

7 Net Premiums Earned 8 Motor Vehicles 922,617 988,774 991,058 1,047,666 1,096,017 1,141,087 1,187,792 9 Drivers 48,819 59,391 59,546 69,896 71,887 73,798 75,638 10 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 11 Total Net Premiums Earned 960,142 1,036,190 1,039,408 1,106,142 1,156,256 1,203,004 1,251,311 12 Service Fees & Other Revenues 22,849 23,322 23,847 25,690 27,526 29,514 31,701 13 Total Earned Revenues 982,991 1,059,512 1,063,255 1,131,832 1,183,782 1,232,518 1,283,012

14 Claims Incurred 783,040 870,564 853,862 894,991 941,599 990,632 1,042,829 15 DPAC \ Premium Deficiency Adjustment - (15,750) (32,413) 64 (4,441) 3,882 7,826 16 (a) Claims Incurred - Interest Rate Impact (15,801) (23,797) (78,284) 6,992 8,071 6,382 7,017 17 Total Claims Incurred 767,239 831,017 743,165 902,047 945,229 1,000,896 1,057,672

18 Claims Expense 143,337 136,975 137,168 135,090 138,892 143,996 146,460 19 Road Safety/Loss Prevention 13,146 13,843 13,606 12,660 12,785 12,969 13,246 20 Total Claims Costs 923,722 981,835 893,939 1,049,797 1,096,906 1,157,861 1,217,378

21 Expenses 22 Operating 70,201 73,799 75,060 73,444 76,153 79,831 82,745 23 Commissions 37,378 40,407 40,338 42,510 44,405 46,162 47,978 24 Premium Taxes 29,143 31,445 31,518 33,527 35,037 36,447 37,903 25 Regulatory/Appeal 4,443 4,666 4,669 4,839 4,998 5,114 5,233 26 Total Expenses 141,165 150,317 151,585 154,320 160,593 167,554 173,859

27 Underwriting Income (Loss) (81,896) (72,640) 17,731 (72,285) (73,717) (92,897) (108,225)

28 Investment Income 111,731 82,203 191,786 88,485 93,424 97,772 101,986 29 (b) Investment Income - Interest Rate Impact 4,589 - (53,663) 30 11 10 15 30 Net Investment Income 116,320 82,203 138,123 88,515 93,435 97,782 102,001

31 Net Income (Loss) 34,424 9,563 155,854 16,230 19,718 4,885 (6,224)

32 Total net Impact due to interest rate change (b) - (a) 20,390 23,797 24,622 (6,962) (8,060) (6,373) (7,001)

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (b) Appendix 2

PF.2 STATEMENT OF FINANCIAL POSITION – 1.0% Rate Increase with Interest Rate Increase of +0.50% in Q4 2018/19

Multi-year - Statement of Financial Position

2019 GRA - 2019/20 Basic Premium Rate Increase of 1.0% with Interest Rate Increase of +50bps in 2018/19 Q4 Line No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Assets 4 Cash and cash equivalents 72,998 11,929 29,463 58,311 61,891 60,051 44,796 5 Investments 2,272,545 2,451,402 2,453,618 2,547,450 2,661,063 2,780,632 2,902,650 6 Investment property 34,720 35,916 13,906 13,548 13,553 13,760 15,246 7 Due from other insurance companies 2 ------8 Accounts receivable 389,186 357,114 354,564 371,954 386,668 401,716 417,456 9 Prepaid expenses 714 ------10 Deferred policy acquisition costs - 9,628 21,002 22,466 28,194 25,630 19,184 11 Reinsurers' share of unpaid claims 1,269 ------12 Property and equipment 89,280 86,710 89,855 91,050 88,996 88,335 90,227 13 Deferred development costs 55,423 72,551 43,654 47,134 59,202 61,223 63,259 14 2,916,137 3,025,250 3,006,062 3,151,913 3,299,567 3,431,347 3,552,818

15 Liabilities 16 Due to other insurance companies 141 2,642 144 144 144 144 144 17 Accounts payable and accrued liabilites 39,327 31,906 40,996 40,602 41,678 43,356 44,182 18 Financing lease obligation 3,125 2,931 2,925 2,843 2,743 2,634 2,518 19 Unearned premiums and fees 508,089 548,406 547,303 576,120 601,361 627,320 654,597 20 Provision for employee current benefits 16,633 16,953 17,155 17,865 18,583 19,310 20,046 21 Provision for employee future benefits 331,910 316,773 341,796 358,358 374,734 391,096 407,743 22 Provision for unpaid claims 1,806,067 1,920,634 1,781,025 1,856,964 1,932,255 2,004,138 2,075,023 23 2,705,292 2,840,245 2,731,344 2,852,896 2,971,498 3,087,998 3,204,253

24 Equity 25 Retained Earnings 170,975 134,734 326,829 343,058 362,775 367,661 361,437 26 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,040) (34,707) (24,311) (12,871) 27 Total Equity 210,845 185,005 274,717 299,018 328,068 343,350 348,566

28 Total Liabilities & Equity 2,916,137 3,025,250 3,006,061 3,151,914 3,299,566 3,431,348 3,552,819

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (b) Appendix 2

PF.3 STATEMENT OF CHANGES IN EQUITY – 1.0% Rate Increase with Interest Rate Increase of +0.50% in Q4 2018/19

Multi-year - Statement of Changes in Equity

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Total Equity 4 Retained Earnings 5 Beginning Balance 99,251 125,171 170,975 326,829 343,058 362,775 367,661 6 Net Income (Loss) from annual operations 34,424 9,563 155,854 16,230 19,717 4,886 (6,224) 7 Transfer (to) / from Non-Basic Retained Earnings 37,300 ------8 Total Retained Earnings 170,975 134,734 326,829 343,058 362,775 367,661 361,437

9 Total Accumulated Other Comprehensive Income 10 Beginning Balance 81,749 49,148 39,870 (52,111) (44,040) (34,707) (24,311) 11 Other Comprehensive Income for the Year (41,879) 1,123 (91,981) 8,071 9,334 10,396 11,440 12 Total Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,040) (34,707) (24,311) (12,871) 13 Total Equity Balance 210,845 185,005 274,717 299,018 328,068 343,350 348,566

14 Total Equity 15 Rate Stabilization Reserve 16 Retained Earnings 170,975 134,734 326,829 343,058 362,775 367,661 361,437 17 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,040) (34,707) (24,311) (12,871) 18 Total Rate Stabilization Reserve 210,845 185,005 274,717 299,018 328,068 343,350 348,566

19 Retained Earnings ------20 Total Equity Balance 210,845 185,005 274,717 299,018 328,068 343,350 348,566

21 RATE STABILIZATION RESERVE TARGETS 22 PUB RSR Target 180,000 180,000 180,000 180,000 180,000 180,000 180,000 23 DCAT Total Equity Lower Target (*@34% MCT Ratio) 201,000 201,000 143,000* 154,000* 172,000* 180,000* 188,000* 24 DCAT Total Equity Upper Target (**@85% MCT Ratio) 442,000 442,000 305,000* 332,000* 359,000* 377,000* 395,000*

25 MCT RATIO (%) 44% 28% 76% 76% 77% 77% 74%

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (c) Appendix 3

PF.1 STATEMENT OF OPERATIONS – 0.1% Rate Increase with Interest Rate Increase of +0.50% in Q4 2018/19 and +0.50% in Q4 2019/20

Multi-year - Statement of Operations

Line 2019 GRA - 2019/20 Basic Premium Rate Increase of 0.1% with Interest Rate Increases of +50bps in 2018/19 Q4 and +50bps in 2019/20 Q4 No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Motor Vehicles 955,941 1,018,965 1,019,281 1,062,587 1,106,700 1,151,857 1,199,129 4 Drivers 49,946 69,148 68,902 70,903 72,885 74,723 76,565 5 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 6 Total Net Premiums Written 994,593 1,076,138 1,076,987 1,122,070 1,167,937 1,214,699 1,263,575

7 Net Premiums Earned 8 Motor Vehicles 922,617 988,774 991,058 1,042,554 1,086,294 1,130,968 1,177,262 9 Drivers 48,819 59,391 59,546 69,896 71,887 73,798 75,638 10 Reinsurance Ceded (11,294) (11,975) (11,196) (11,420) (11,648) (11,881) (12,119) 11 Total Net Premiums Earned 960,142 1,036,190 1,039,408 1,101,030 1,146,533 1,192,885 1,240,781 12 Service Fees & Other Revenues 22,849 23,322 23,847 25,535 27,428 29,492 31,771 13 Total Earned Revenues 982,991 1,059,512 1,063,255 1,126,565 1,173,961 1,222,377 1,272,552

14 Claims Incurred 783,040 870,564 853,862 894,991 939,819 988,938 1,041,196 15 DPAC \ Premium Deficiency Adjustment - (15,750) (32,413) 411 (4,588) 3,742 7,732 16 (a) Claims Incurred - Interest Rate Impact (15,801) (23,797) (78,284) (60,997) 6,140 3,539 6,312 17 Total Claims Incurred 767,239 831,017 743,165 834,405 941,371 996,219 1,055,240

18 Claims Expense 143,337 136,975 137,168 135,090 138,568 143,687 146,152 19 Road Safety/Loss Prevention 13,146 13,843 13,606 12,660 12,753 12,937 13,214 20 Total Claims Costs 923,722 981,835 893,939 982,155 1,092,692 1,152,843 1,214,606

21 Expenses 22 Operating 70,201 73,799 75,060 73,444 75,994 79,678 82,590 23 Commissions 37,378 40,407 40,338 42,379 44,090 45,834 47,637 24 Premium Taxes 29,143 31,445 31,518 33,373 34,745 36,143 37,587 25 Regulatory/Appeal 4,443 4,666 4,669 4,839 4,998 5,113 5,233 26 Total Expenses 141,165 150,317 151,585 154,035 159,827 166,768 173,047

27 Underwriting Income (Loss) (81,896) (72,640) 17,731 (9,625) (78,558) (97,234) (115,101)

28 Investment Income 111,731 82,203 191,786 88,208 100,049 106,542 112,073 29 (b) Investment Income - Interest Rate Impact 4,589 - (53,663) (64,509) 21 19 35 30 Net Investment Income 116,320 82,203 138,123 23,699 100,070 106,561 112,108

31 Net Income (Loss) 34,424 9,563 155,854 14,074 21,512 9,327 (2,993)

32 Total net Impact due to interest rate change (b) - (a) 20,390 23,797 24,622 (3,512) (6,119) (3,519) (6,277)

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (c) Appendix 3

PF.2 STATEMENT OF FINANCIAL POSITION – 0.1% Rate Increase with Interest Rate Increase of +0.50% in Q4 2018/19 and +0.50% in Q4 2019/20

Multi-year - Statement of Financial Position

2019 GRA - 2019/20 Basic Premium Rate Increase of 0.1% with Interest Rate Increases of +50bps in 2018/19 Q4 and +50bps in 2019/20 Q4 Line No. (C$ 000s, rounding may affect totals) For the Years Ended February, 1 2018A 2019B 2019FB 2020F 2021F 2022F 2023F

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Assets 4 Cash and cash equivalents 72,998 11,929 29,463 53,334 50,247 41,038 17,908 5 Investments 2,272,545 2,451,402 2,453,618 2,477,003 2,595,325 2,722,319 2,853,836 6 Investment property 34,720 35,916 13,906 13,548 13,553 13,760 15,246 7 Due from other insurance companies 2 ------8 Accounts receivable 389,186 357,114 354,564 369,431 384,041 398,983 414,611 9 Prepaid expenses 714 ------10 Deferred policy acquisition costs - 9,628 21,002 21,844 27,708 25,273 18,908 11 Reinsurers' share of unpaid claims 1,269 ------12 Property and equipment 89,280 86,710 89,855 91,050 88,996 88,335 90,227 13 Deferred development costs 55,423 72,551 43,654 47,134 59,225 61,259 63,299 14 2,916,137 3,025,250 3,006,062 3,073,344 3,219,095 3,350,967 3,474,035

15 Liabilities 16 Due to other insurance companies 141 2,642 144 144 144 144 144 17 Accounts payable and accrued liabilites 39,327 31,906 40,996 40,602 41,678 43,356 44,182 18 Financing lease obligation 3,125 2,931 2,925 2,843 2,743 2,634 2,518 19 Unearned premiums and fees 508,089 548,406 547,303 571,720 596,780 622,553 649,635 20 Provision for employee current benefits 16,633 16,953 17,155 17,865 18,583 19,310 20,046 21 Provision for employee future benefits 331,910 316,773 341,796 354,449 371,141 387,770 404,641 22 Provision for unpaid claims 1,806,067 1,920,634 1,781,025 1,788,975 1,860,554 1,927,900 1,996,446 23 2,705,292 2,840,245 2,731,344 2,776,598 2,891,623 3,003,667 3,117,612

24 Equity 25 Retained Earnings 170,975 134,734 326,829 340,902 362,413 371,739 368,745 26 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,155) (34,941) (24,439) (12,323) 27 Total Equity 210,845 185,005 274,717 296,747 327,473 347,301 356,423

28 Total Liabilities & Equity 2,916,137 3,025,250 3,006,061 3,073,345 3,219,096 3,350,968 3,474,035

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-10 (c) Appendix 3

PF.3 STATEMENT OF CHANGES IN EQUITY – 0.1% Rate Increase with Interest Rate Increase of +0.50% in Q4 2018/19 and +0.50% in Q4 2019/20

Multi-year - Statement of Changes in Equity

2 BASI C 2017/18A 2018/19B 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F 3 Total Equity 4 Retained Earnings 5 Beginning Balance 99,251 125,171 170,975 326,829 340,902 362,413 371,739 6 Net Income (Loss) from annual operations 34,424 9,563 155,854 14,073 21,511 9,326 (2,994) 7 Transfer (to) / from Non-Basic Retained Earnings 37,300 ------8 Total Retained Earnings 170,975 134,734 326,829 340,902 362,413 371,739 368,745

9 Total Accumulated Other Comprehensive Income 10 Beginning Balance 81,749 49,148 39,870 (52,111) (44,155) (34,941) (24,439) 11 Other Comprehensive Income for the Year (41,879) 1,123 (91,981) 7,956 9,215 10,502 12,116 12 Total Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,155) (34,941) (24,439) (12,323) 13 Total Equity Balance 210,845 185,005 274,717 296,747 327,473 347,301 356,423

14 Total Equity 15 Rate Stabilization Reserve 16 Retained Earnings 170,975 134,734 326,829 340,902 362,413 371,739 368,745 17 Accumulated Other Comprehensive Income 39,870 50,271 (52,111) (44,155) (34,941) (24,439) (12,323) 18 Total Rate Stabilization Reserve 210,845 185,005 274,717 296,747 327,473 347,301 356,423

19 Retained Earnings ------20 Total Equity Balance 210,845 185,005 274,717 296,747 327,473 347,301 356,423

21 RATE STABILIZATION RESERVE TARGETS 22 PUB RSR Target 180,000 180,000 180,000 180,000 180,000 180,000 180,000 23 DCAT Total Equity Lower Target (*@34% MCT Ratio) 201,000 201,000 143,000* 154,000* 170,000* 178,000* 187,000* 24 DCAT Total Equity Upper Target (**@85% MCT Ratio) 442,000 442,000 305,000* 330,000* 354,000* 372,000* 392,000*

25 MCT RATIO (%) 44% 28% 76% 76% 78% 79% 77%

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-11

PUB (MPI) 1-11

Part and VI INV Page No.: 27-31 Chapter: PUB Approved 4.d. Financial Forecast – Justification for the use of Naïve Issue No: Forecast Topic: Interest Rate Forecasting Sub Topic: Use of Naïve Interest Rate Forecast

Preamble to IR (If Any):

With respect to interest rate forecasting, in Board Order 130/17 the PUB stated: The Board accepts the evidence of Dr. Simpson that the 50/50 interest rate forecast is the appropriate approach for rate-setting and target capital purposes at this time. The Board acknowledges that this is a departure from its findings in Order 162/16, and grounds its decision in this regard on the recent change in interest rates, the lack of accuracy in the SIRF, and the evidence of Dr. Simpson and Mr. Steski. [p. 69]

In the current Application, the Corporation states: MPI is required to base its rate application on best estimates, and for the 2019 GRA, MPI’s management and Board of Directors continue to maintain that the naïve forecast is the best estimate. [INV.2.3]

Question: a) Please discuss the statistical significance of the cited improvement in standard error from using a Naïve Forecast (0.15%) over using a 50/50 Forecast (0.16%). [INV.2.3.1 Figure INV-11] b) Please provide any other new evidence the Corporation has in support of its position that the Naïve Forecast represents a best estimate? c) In his External Review Report of the prior Basic DCAT, Mr. Joe S. Cheng stated: In my opinion, a naïve interest rate assumption is appropriate for the base scenario. Notwithstanding the two recent rate hikes by the Bank of Canada, I do not see any material risk in assuming a naïve interest rate as a base case. My initial guess is

Manitoba Public Insurance Page 1 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-11

an increase in interest rates should strengthen the financial position of Basic. [DCAT Attachment A, p. 7] Please confirm that Mr. Cheng’s opinion in this regard is provided in the context of a DCAT investigation of Basic’s satisfactory financial condition, and specifically not in a Basic rate-setting context. d) In reference back to PUB (MPI) 2-7 from the 2018 GRA, the Corporation notes that Mr. Cheng: reviews over 30 DCAT reports annually, and a naïve forecast is the most common for the base scenario. With respect to those 30 DCAT reports reviewed in 2017, please have Mr. Cheng provide a high level summary of the basis of interest rate forecast, the approximate annual written premium, and the approximate size of the fixed income investment portfolio for the five insurers reviewed with the largest fixed income investment portfolios. e) Does the Corporation anticipate amending its Application to reflect an updated interest rate forecast reflecting market activity up to 30 September 2018 or thereabouts?

Rationale for Question:

To clarify the strength of the Corporation’s position on interest rate forecasting.

RESPONSE: a) The actuarial standards of practice establish that a best estimate should be unbiased.

Another useful attribute of an estimate is its efficiency, and for an estimate to be efficient it should have a low standard error. The standard error of a forecast does not measure how biased the forecast is, but how variable the forecast is relative to actual.

For example, a forecast that always produces an estimate that is 50 basis points higher than the true rate will have a very low standard error and therefore be efficient, but very biased. The Naïve forecast produces an estimate that is both efficient and less biased than the 50/50 forecast.

Manitoba Public Insurance Page 2 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-11

To determine if there is bias, a paired sample t-test on the sample mean was performed, which tested if the 50/50 forecast or the Naïve forecast produce statistically significant results from each other.

The test showed that the Naïve forecast produces a statistically significant forecast from the 50/50 forecast with less error (bias) at a 99% confidence level. See Figure 1 below.

Figure 1: T-Test - Paired Two Sample for Means

50/50 Naïve Mean 0.0034 0.0015 Variance 3.58E-05 3.18E-05 Observations 14 14 Pearson Correlation 0.9743 Hypothesized Mean Difference 0 df 13 t Stat 5.2635 P ( T <=t ) o ne - t a il 0.0001 t Critic al one-tail 2.6503 P(T<=t) two-tail 0.0002 t Critic al two-tail 3.0123

b) See the response to Part a), which indicates that the Naïve forecast produces a statistically significant forecast with less bias than the 50/50 forecast at the 99th confidence level. c) Refer to Attachment A, letter from Joe S. Cheng, FCIA. d) Refer to Attachment A, letter from Joe S. Cheng, FCIA. e) The Corporation does not anticipate filing an Amendment to its Application at this time. The Corporation would consider doing so if a material change in circumstances required immediate action to rectify the present Application.

Manitoba Public Insurance Page 3 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-11

In deciding whether to amend, the Corporation must also consider the impact it could have on the regulatory process (particularly the possibility of publishing public notice, standing being granted to other interested parties, and additional round(s) of information requests). Given that the existing schedule leaves little room for delay in order to meet the requirement for an early December order, amending the Application will have procedural and financial costs, which require careful consideration.

As has been conventional practice for the last number of years, the Corporation responds to information requests, and/or gives undertakings at the Hearing, which require it to update the rate indication in consideration of the most current interest rate forecast. The Corporation will continue to provide this information to ensure the PUB has the means to assess the reasonableness of the Application.

However, the Corporation notes that re-running a rate indication is not a trivial amount of work and that it has already sensitivity analysis of the rate indication to interest rates.

The Corporation is cognizant of the PUB’s preference for use of the most current information available, but notes that the PUB declined to adopt its proposed interest rate update (and final approval of rates) through an Order approving the compliance filing. Given that the rate setting methodology is identical in both approaches, the only technical difference is the timing of the forecast.

The Corporation prefers to set rates by adopting the correct methodology, based on current best estimate forecasts, rather than by choosing the preferred rates from a menu of varying approaches, across many points time.

Manitoba Public Insurance Page 4 of 4 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-11 Attachment A

July 20, 2018

Mr. Luke Johnston Chief Actuary & Vice-President, Risk Management Manitoba Public Insurance 234 Donald Street, Winnipeg, MB R3C 4A4

Dear Mr. Johnston,

RE: PUB (MPI) 1-11 Interest Rate Forecasting (Use of Naïve Interest Rate Forecast)

Per your e-mail from July 16, 2018, these are my responses to questions c) and d) posed by the Public Utility Board:

PUB: c) In his External Review Report of the prior Basic DCAT, Mr. Joe S. Cheng stated: In my opinion, a naïve interest rate assumption is appropriate for the base scenario. Notwithstanding the two recent rate hikes by the Bank of Canada, I do not see any material risk in assuming a naïve interest rate as a base case. My initial guess is an increase in interest rates should strengthen the financial position of Basic. [DCAT Attachment A, p. 7] Please confirm that Mr. Cheng’s opinion in this regard is provided in the context of a DCAT investigation of Basic’s satisfactory financial condition, and specifically not in a Basic rate-setting context.

JSCP: I can confirm that my above opinion was provided solely in the context of a DCAT investigation of Basic’s satisfactory financial condition—not in a Basic rate-setting context.

Page 1 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-11 Attachment A

Any forecast other than a 0% change in interest rates (i.e. a naïve interest rate assumption) would require more work without necessarily providing any benefit. First, one would have to determine the change in accumulated other comprehensive income (AOCI); this would require a re-pricing of every bond in the portfolio. Most insurers do not forecast AOCI in their business plan and therefore implicitly use the naïve interest rate assumption. Second, one would have to accept that an incorrect estimate of the AOCI would understate or overstate the equity in each scenario, and could exacerbate any rate forecasting error. As I stated in the sentence immediately preceding that paragraph on p.7 of the DCAT external peer review: “Previous increasing rate assumptions have proved to be incorrect, compounding forecasting errors.”

Depending on the timing of the DCAT, one can always—and it is a common practice—bring the yield curve to the latest one so that the naïve yield curve is most up to date. If the report should become stale, a disclosure (in the subsequent event section) can quantify the impact on equity if it is material.

PUB: d) In reference back to PUB (MPI) 2-7 from the 2018 GRA, the Corporation notes that Mr. Cheng: reviews over 30 DCAT reports annually, and a naïve forecast is the most common for the base scenario. With respect to those 30 DCAT reports reviewed in 2017, please have Mr. Cheng provide a high level summary of the basis of interest rate forecast, the approximate annual written premium, and the approximate size of the fixed income investment portfolio for the five insurers reviewed with the largest fixed income investment portfolios.

JSCP: Most insurers review what the large chartered banks and the Conference Board of Canada are forecasting in terms of future interest rates and make a subjective judgment. We note that most DCATs show a 5-year forecast, but insurers rarely forecast interest rates past 1 plus the stub-year (the year in which the DCAT is done).

Page 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-11 Attachment A JSCP® ACTUI.Rl£S Who Car,O!! J S C!Htt6 g PARUIUS l•C

We ranked the five largest, unrelated insurers that we reviewed in the order of their fixed income investment portfolios. The five insurers conducted their respective 2016 DCAT reports in different quarters as noted in the following table. Therefore some were able to bring the implied yield curve in their DCAT model to the one after the Bank of Canada made a rate change (see footnote).

DCAT Annual Fixed Income Insurer Interest Rate Forecast Date Premiums Portfolio

1 2017: +0.25%( ) 1 04 2017 $3 billion $4+ billion 2018: +0.25%

2017: +0.50% 2 02 2017 $2 billion $2+ billion 2018: +0.50%

2017: no change 3 03 2017 $1 billion $1+ billion 2018: no change

1 2017: +0.25%( ) 4 04 2017 <$1 billion $1 billion 2018: no change

1 2017: +0.25%( ) 5 04 2017 <$1 billion <$1 billion 2018: no change

<1 )The Bank of Canada raised the key interest rate by 25 basis points on July 12, 2017. Therefore a 0.25% increase in 2017 was a known fact-rather than a forecast-by the time these DCATs were done. Although the BoC made another 25 bps increase on September 6, 2017, it was probably too late to change the DCATs due to each insurer's respective deadline to present their report to their Board of Directors.

I would be happy to elaborate on or clarify any points made in my responses.

Yours truly, ;;-:-;) Joe S. Cheng, FCIA JSC/sc

Page 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-12

PUB (MPI) 1-12

Part and VIII AR Appendix 1 Page No.: 20-21 Chapter: PUB Approved 4. Financial Forecast Issue No: Topic: Financial Forecast Sub Topic: Interest Rate Impacts

Preamble to IR (If Any):

IFRS 9 Financial Instruments was issued in July 2014 and is intended to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is a three part standard aimed at reducing complexity in reporting financial instruments. The project has been divided into three phases: Phase 1 Classification and measurement, Phase 2 Impairment and Phase 3 Hedge accounting.

IFRS 9 is effective for annual periods beginning on or after January 1, 2021. The Corporation is currently evaluating the impact that this standard will have on its financial statements.

IFRS 17 is also going to be implemented at the same time. This change in accounting standard impacts the determination of the claims liability by requiring the use of a risk free discount rate plus a liquidity premium. The current approach is based on the discount rate inherent in the investment portfolio return.

Question: a) Please file an update on the analysis of the Corporation’s evaluation of the impact of the proposed accounting standard changes on its financial reporting. b) Please file an update on the impact of the new standards on the risk of changes in interest rates on reported forecast net income.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-12

Rationale for Question:

To understand the impact of changes in accounting standards on rate-setting.

RESPONSE:

a) and b)

MPI’s evaluation of the proposed changes to IFRS 17 and 9 is still in progress, and the status report provided in the Annual Financial Statements remains unchanged. MPI is still collecting information on this topic with the intention of receiving an external opinion on the expected impact of IFRS 17.

At this time, the Corporation cannot commit to filing an external impact analysis of IFRS 17 with the PUB in the 2019 GRA proceeding.

Please note that IFRS 17 will have to be applied for reporting periods starting on or after January 1, 2021. MPI will apply IFRS 17 for the fiscal year beginning March 1, 2021.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-13

PUB (MPI) 1-13

Part and V EXP.6.1 Page No.: 59 Chapter: PUB Approved 6. Changes to Cost Allocation Methodology Issue No: Topic: Cost Allocation Sub Topic:

Preamble to IR (If Any):

Question:

a) Please indicate who undertakes the independent review of initiatives to determine how the cost is to be allocated among the Corporation's lines of business. b) Please provide the criteria utilized to determine the allocation of initiative costs among lines of business. c) How has the Corporation differentiated between core and non-core business functions in determining spending on deferred development? d) Please provide an example of what projects are considered non-core, and why.

Rationale for Question:

To understand the allocation of costs, including the write-off of IT project costs among lines of business.

RESPONSE:

a) Members of the Budget-Project Accounting Team determine how initiatives are allocated among the Corporation’s lines of business. The Audit, Finance and Risk Committee reviews and approves the recommendations of this team on an annual basis.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-13

b) Implementation initiatives can be specific to one or apply to many lines of business. The Budget-Project Accounting Team determines allocations on an initiative-by-initiative basis, based on similar past initiatives and utilizing the approved criteria identified in the Cost Allocation – AI-16-Attachment D, found in the 2013 GRA Application. An example would be the customer self-service project which is split between Insurance & Non-insurance based on WCCCCR then to Line of Business based on Claims Incurred then to Claims & Operating expenses based on FTE percentage (this is because the project benefits all lines of business). c) The term “core project” refers to a project that is focused on insurance-activity capital projects rather than on other value added initiatives. The Executive, in consultation with the Board of Directors, determines which projects are core projects, as part of their strategic planning responsibilities. d) Non-core projects are non-Basic projects.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-14

PUB (MPI) 1-14

Part and V EXP Appendix 13; Page No.: 47 Chapter: Appendix 12 (2018 GRA) PUB Approved 6. Changes to Cost Allocation Methodology Issue No: Topic: Cost Allocation Sub Topic: Changes to Cost Allocation

Preamble to IR (If Any):

The listing of physical properties allocated in Cost Category L has changed from the 2018 GRA. MPI has indicated that accounting unit 185 Brandon Testing Service Outlet has been discontinued.

Question:

a) Please indicate what properties that were included in the 2018 GRA for accounting units 117 and 187 do not appear in this year's schedule. b) Please describe how the properties have been disposed of and the accounting for their disposal.

Rationale for Question:

To understand changes in Cost Allocation Methodology.

RESPONSE: a) Accounting unit 117 was for the Pacific Avenue Service Centre and accounting unit 187 was for the Portage la Prairie Testing Centre. Pacific Avenue Service Centre was sold in early 2018 and the Portage la Prairie Testing Centre merged with the Portage la Prairie Service Centre in 2015.

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b) Properties owned by the Corporation are disposed of using real estate agents and external legal counsel. Upon disposition, the sales price was offset by costs associated with sale and the asset value remaining to determine gain/loss on sale of property. For non-owned properties, when the Corporation determines that it no longer requires their use, it vacates and ceases to use the property, based on the terms associated with the lease.

Please refer to CAC (MPI) 1-29 for additional information on the accounting for the disposal of Pacific Service Centre and Flin Flon Claims Centre.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-15

PUB (MPI) 1-15

Part and V EXP Appendix 19; Page No.: 2 Chapter: Figure EXP App 19-2 PUB Approved 6. Changes to Cost Allocation Methodology Issue No: Topic: IT Expenses Sub Topic: Total IT Expenses

Preamble to IR (If Any):

Question:

a) Please provide an explanation for the forecasted increase in External Labour for AOL and CARS in 2018/19 for Data Processing. b) Please explain the forecasted external labour increase of $1.5M under Implementation Expenses in 2018/19. c) Please provide details of the agreement supporting the expense for the IBM Security Operations Centre.

Rationale for Question:

To assess the reasonableness of the change in allocation in expenses assigned to Basic.

RESPONSE: a) The original budget for 2017/18 was $4.0M, but actual spend was lower than budget due to refocusing efforts on initiative work that required resources normally assigned to operational work. This year, the Corporation has reduced the budget from $4.0M to $3.6M as it resumes normal operations.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-15

b) The approximate $1.5 million increase is primarily due to $2.0 million of external labour expenses related to the Legacy Modernization project in 2018/19. These expenses were previously classified as deferred development; however, upon further review they were determined to be in year expenses. c) The service improves MPI’s Cyber Security posture by providing better situational awareness and matures processes required to detect and respond to potential Cyber threat against Manitoban’s data. The IBM Security Operations Centre agreement provides 24x7 Tier 1 (Threat Analyst Event Monitoring) and Tier 2 (Event Triage and Incident Classification) Cyber Security services. These services also include management of our Security Incident and Event Monitoring (SIEM) infrastructure and an automated ticketing bridge system between IBM’s ticketing system and MPI’s ticketing system. The service handles security alerts from MPI devices both at the IBM data centre and within the MPI Manitoba network, correlating security events which are investigated and escalated for potential mitigation or remediation.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-16

PUB (MPI) 1-16

Part and VI RSR Page No.: 4 Chapter: PUB Approved 7. Update of DCAT Issue No: Topic: Basic Total Equity Target Range Thresholds Sub Topic: 2018 GRA Board Approved Methodology

Preamble to IR (If Any):

The methodology ordered by the PUB in the 2018 GRA produces a 2019 lower RSR target of $120 million …

Question: a) Please provide the usual scenario statement exhibits resulting from the Board approved lower threshold iterative methodology as cited here for each of the base scenario, the modified base scenario, and the selected adverse scenario (before and after routine management / regulatory actions). Please include a summary of the adverse scenario assumed routine management / regulatory actions. b) Please provide the usual scenario statement exhibits resulting from the Board approved upper threshold iterative methodology relative to the lower threshold as cited here for each of the base scenario, the modified base scenario, and the selected adverse scenario (before and after routine management / regulatory rate change actions, i.e. excluding such RSR rebuilding fee actions). Please include a summary of the adverse scenario assumed routine management / regulatory rate change actions. c) In reference to its approved iterative methodology, in Board Order 130/17 the PUB stated: The Board agrees that such transfers are not best estimate expectations, but rather sees these transfers as a theoretical means to an end, that “end” being the testing of Basic’s resilience to adverse circumstances when operating at about

Manitoba Public Insurance Page 1 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-16

the proposed threshold level. [p. 78] In this context, what specific concerns does the Corporation have with respect to the Board approved iterative methodology?

Rationale for Question:

To assess the Corporation’s decision to deviate from the Board approved methodology.

RESPONSE:

a) Please see Appendix 1 and Appendix 2. The assumed routine management/regulatory rate changes are outlined in Figure 20 of Part VI DCAT.5.1, which has been reproduced below for convenience.

Figure DCAT- 20: Assumed Management and Regulatory Action for Combined Scenarios

Line No. Combined Scenarios 2019/20 2020/21 2021/22 2022/23 1 Base 0.1% Rate / 0% RSR 2 1 year 0.1% Rate / 0% RSR n/a n/a n/a 3 2 year 0.1% Rate / 0% RSR 0% Rate / 2% RSR n/a n/a 4 3 year 0.1% Rate / 0% RSR 0% Rate / 2% RSR 2% Rate / 2% RSR n/a 5 4 year 0.1% Rate / 0% RSR 0% Rate / 2% RSR 3% Rate / 2% RSR 3% Rate / 2% RSR b) Please see Appendix 3 and Appendix 4.

c) In Part VI RSR.4, the Corporation articulates its justification for the use of a different lower RSR target methodology than the one in PUB Order 130/17. The Corporation elaborates on these points below:

First, the Corporation cannot support a lower RSR target that is below the minimum amount required to maintain the future satisfactory financial condition of Basic, as calculated using accepted actuarial practice in Canada. For the fiscal year 2018/19, the Board of Directors (BoD) transferred $37.3 million from the Extension line of business to Basic, increasing the RSR balance from $173.5 million

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to $210.8 million. This transfer exceeded the amount required for satisfactory financial condition of Basic ($201 million) by $9.8 million.

In Order 130/17, the PUB approved $180 million as the lower RSR target for 2018/19. Basic would have an unsatisfactory financial condition had the MPI Board of Directors been unwilling or unable to transfer funds from Extension as noted above. Further, under the present RSR framework, the Corporation could not have sought the full amount of RSR rebuilding fees to achieve satisfactory financial condition, as the lower RSR target was less than and the minimum capital required for satisfactory financial condition of Basic. The timing of a request for regulatory approval of an RSR rebuilding fee would have also been deeply problematic had the MPI Board not intervened.

The intent of the lower RSR target is to establish the level of total equity (measured as a Minimum Capital Target percentage) below which a rebuilding fee is required. From the Corporation’s perspective, a lower RSR target that is below the minimum percentage required for satisfactory financial condition could compromise the financial standing of Basic. Equally important is the fact that operating with an RSR balance at or near the minimum RSR target defeats the purpose of the RSR (i.e. stable rates) and increases the likelihood that the Corporation will face the difficult regulatory scenario identified above. To prevent the occurrence of this scenario, the Corporation will bring forward a Capital Management Plan in the 2020 GRA. The Corporation anticipates that this Plan will include build/release provisions designed to ensure that Basic would operate within the limits of the established RSR range.

Second, the Corporation does not support the use of an RSR target methodology that uses improper/inaccurate forecasting assumptions (i.e. not best estimate assumptions). The Corporation has directed its collaborative efforts to date towards developing a universally acceptable lower RSR target methodology. RSR target methodologies must be based on best estimates, which the PUB recognized in Order 162/16, stating:

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“The Board continues to favour the use of scenario testing adapted from the annual Basic DCAT investigation for purposes of setting Basic target capital levels, expressed in terms of Basic total equity. This approach is consistent with the objective of setting Basic target capital levels to be specific to the risk profile of the Corporation’s Basic insurance operations.

…

It is the Board’s expectation, and for that matter a requirement of accepted actuarial practice in Canada, that the Corporation’s Basic Application, including the rate indications, the Basic DCAT investigation and the target capital analysis, be prepared on a best estimate basis. Doing otherwise complicates the regulatory review process.” [emphasis added]

In Order 130/17, the PUB reversed its position, stating that the modelling approach did not reflect best estimate expectations, but provided no clear reasons for this conclusion The PUB did state however that it:

“…sees these transfers as a theoretical means to an end, that “end” being the testing of Basic’s resilience to adverse circumstances when operating at about the proposed threshold level”

With respect, it is inappropriate to view the establishment and maintenance of Basic’s satisfactory financial condition as a theoretical exercise. Further, the PUB’s interest in setting a lower RSR target (in the context of testing Basic to adverse circumstances when operating around the lower RSR target) ignores the purpose of the RSR (in essence, to stabilize rates and protect ratepayers from rebuilding fees). The Corporation does not understand why the PUB now believes the purpose of the RSR should be something other than what it identified its purpose as in Section 5.1 of Order 162/16.

Third, the lower RSR target methodology set out in Order 130/17 relies on a 50/50 interest rate forecast methodology. The Corporation cannot demonstrate that this interest rate forecast methodology is a best estimate, given the evidence available. The Corporation cannot support the use of an RSR methodology based on biased forecasting assumptions.

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The RSR methodology in Order 130/17 produces a lower RSR target of $120 million for the 2019 GRA. This amount is well below the $143 million required to maintain satisfactory financial condition for Basic. For this reason and the reasons above, the Corporation cannot employ this methodology. The Corporation has opted instead to seek MCT based lower and upper RSR targets, based on DCAT modeling, using best estimate assumptions.

For 2019, The Corporation requests a lower RSR target of 34% MCT ($143 million based on current forecasts) for the 2019/20 fiscal year, as this target represents the absolute minimum MCT ratio required to maintain the financial condition of Basic.

Manitoba Public Insurance Page 5 of 5 August 8 , 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1a Base Scenario with 27% MCT Statement of Operations

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC Motor Vehicles 854,170 886,998 955,941 1,019,281 1,062,418 1,106,525 1,151,674 1,198,939 Drivers 46,619 48,426 49,946 68,902 70,903 72,885 74,723 76,565 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Written 888,366 923,789 994,593 1,076,987 1,121,901 1,167,761 1,214,516 1,263,385

Net Premiums Earned Motor Vehicles 827,703 871,173 922,617 991,058 1,042,463 1,086,122 1,130,789 1,177,075 Drivers 45,787 47,606 48,819 59,546 69,896 71,887 73,798 75,638 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Earned 861,066 907,144 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 Service Fees & Other Revenues 20,351 20,749 22,849 23, 832 25,432 27,166 29,036 31,083 Total Earned Revenues 881,417 927,893 982,992 1,063,240 1,126,371 1,173,526 1,221,741 1,271,677

Net Claims Incurred 742,604 869,023 783,040 824,008 899,722 937,489 995,156 1,051,173 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (37,865) (12,793) (253) 7,286 5,425 Total Claims Incurred 666,404 860,035 767,239 786,143 886,928 937,237 1,002,442 1,056,598

Claims Expense 118,614 120,972 143,337 137,168 135,289 139,019 144,093 146,543 Road Safety/Loss Prevention 13,027 12,530 13,146 13,606 12,679 12,798 12,979 13,255 Total Claims Costs 798,045 993,537 923,722 936,917 1,034,896 1,089,054 1,159,514 1,216,396

Expenses Operating 71,641 72,785 70,201 75,060 73,539 76,216 79,880 82,788 Commissions 33,862 35,086 37,378 40,338 42,377 44, 084 45,829 47,630 Premium Taxes 26,205 27,563 29,143 31,518 33,371 34,740 36,138 37,581 Regulatory/Appeal 3,675 4,889 4,443 4,669 4,839 4,998 5,114 5,233 Total Expenses 135,383 140,323 141,165 151,585 154,126 160,038 166,959 173,233

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (62,651) (75,566) (104,733) (117,952)

Investment Income 48,476 101,645 111,731 192,404 81,154 85,870 89,787 93,096 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) (18,782) (8,734) 282 (1,854) Net Investment Income (4,038) 82,897 116,320 169,377 62,372 77,136 90,068 91,242

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (279) 1,570 (14,665) (26,710)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 14,839 (5,989) (8,482) (7,004) (7,279)

Manitoba Public Insurance Page 1 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1b Base Scenario with 27% MCT Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 172,481 175,851 184,653 183,152 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (279) 1,570 (14,665) (26,710) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (142,610) 3,649 7,232 13,164 24,352 Total Retained Earnings 194,498 99,251 170,975 172,481 175,851 184,653 183,152 180,794

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (45,984) (38,846) (30,891) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) 6,127 7,138 7,955 9,076 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (45,984) (38,846) (30,891) (21,814) Total Equity Balance 231,002 181,000 210,845 120,369 129,867 145,807 152,261 158,980

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 172,481 175,851 184,653 183,152 180,794 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (45,984) (38,846) (30,891) (21,814) Total Rate Stabilization Reserve 231,002 181,000 210,845 120,369 129,867 145,807 152,261 158,980

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 120,369 129,867 145,807 152,261 158,980

Manitoba Public Insurance Page 2 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1c Base Scenario with 27% MCT Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,820 54,575 56,948 59,488 59,192 Equity investments 2,083,349 2,189,534 2,272,545 2,342,890 2,407,098 2,499,891 2,607,612 2,714,791 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 383,995 398,935 414,561 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 16,113 22,064 19,174 12,521 Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,176 61,194 63,228 2,683,473 2,805,484 2,916,137 2,892,133 2,998,887 3,124,622 3,248,497 3,369,767

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 596,699 622,468 649,547 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,175 372,686 388,927 405,335 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,878,750 1,946,282 2,019,398 2,089,014 2,452,472 2,624,484 2,705,292 2,771,763 2,869,020 2,978,814 3,096,236 3,210,787

Equity Retained earnings 194,499 99,251 170,975 172,481 175,851 184,653 183,152 180,794 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (45,984) (38,846) (30,891) (21,814) Total Equity 231,003 181,000 210,845 120,369 129,867 145,807 152,261 158,980

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 2,892,133 2,998,887 3,124,622 3,248,497 3,369,767

Manitoba Public Insurance Page 3 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1d Base Scenario with 27% MCT Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 76,715 82,749 86,632 91,067 95,752 Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 76,715 82,749 86,632 91,067 95,752

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,579 102,581 106,660 110,921 Unpaid claims 22 191,890 198,316 205,744 213,771 221,493 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 296,895 308,325 320,431 332,414 Market Risk: Interest rate risk 30 1,664 13,360 16,964 20,514 24,121 Foreign exchange risk 32 13,054 12,559 13,380 14,690 17,146 Equity risk 34 56,385 53,767 57,371 63,727 70,553 Real estate risk 36 23,110 23,850 24,368 25,108 26,407 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 94,213 103,536 112,083 124,039 138,227 Credit Risk: Counterparty default risk for balance sheet assets 40 38,826 55,967 58,106 59,538 60,571 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 38,826 55,967 58,106 59,538 60,571 Operational risk margin 50 62,590 66,842 69,868 73,204 76,738 Less: Diversification credit 52 48,196 55,220 58,393 62,193 66,343 Total Capital (Margin) Required at Target 59 433,982 468,020 489,989 515,019 541,607 Minimum Capital (Margin) Required (line 59 / 1.5) 60 289,321 312,014 326,660 343,346 361,071 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 289,321 312,014 326,660 343,346 361,071 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (212,606) (229,265) (240,028) (252,279) (265,319) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 26.52% 26.52% 26.52% 26.52% 26.52%

Manitoba Public Insurance Page 4 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1e Base Scenario with 27% MCT Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Collision 415,906 438,817 469,648 502,881 538,527 576,737 Comprehensive 69,497 99,940 105,465 111,606 118,143 124,991 Property Damage 48,647 46,844 48,480 50,174 51,939 53,774 Public Liability - BI 4,680 5,025 5,162 5,243 5,333 5,400 PIPP 187,022 174,815 198,431 211,633 220,359 221,390

Total 726,240 765,440 827,186 881,536 934,300 982,292

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 3,793 5,455 6,409 6,077 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 3,578 (4,675) 4,196 8,020

Total Net Claims Incurred 767,240 786,142 886,928 937,237 1,002,443 1,056,598

Manitoba Public Insurance Page 5 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1f Base Scenario with 27% MCT Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 72.76% 73.57% 74.51% 75.51% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9361 0.9456 0.9596 0.9960 1.0114 2020 0.9458 0.9602 0.9970 1.0128 1.0115 2021 0.9700 1.0056 1.0199 1.0169 1.0132 2022 1.0118 1.0257 1.0222 1.0180 1.0134 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 76.55% 76.91% 71.57% 72.96% 73.59% 74.37% 78.78% 2020 76.93% 71.62% 73.03% 73.70% 74.42% 73.72% 78.09% 2021 72.35% 73.66% 74.21% 74.82% 75.49% 74.23% 78.69% 2022 74.12% 74.63% 75.21% 75.84% 76.53% 75.23% 79.78%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.20% 8.21% 8.16% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.73% 2.74% 2.72% Selected 3.16% 2.99% 2.88% 2.75% 2.74% 2.73% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 548,556 570,367 593,159 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 410,710 423,738 444,042 468,415 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 14,896 15,438 16,025 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 75,571 77,968 81,704 86,188 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 16,113 22,064 19,174 12,521 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,013 33,319 34,687 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 14,624 9,949 14,145 22,165 Change 2,363 (21,009) 3,578 (4,675) 4,196 8,020 18. Premium Deficiency [c] 8,845 - - - - - Change 2,001 (8,845) - - - -

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 6 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 1

Appendix 1g Base Scenario with 27% MCT Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted Interest Income During Period Cash/Short Term Investments 255 53 0 (0) (2) Marketable Bonds 44,346 55,326 63,149 69,269 74,562 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 79,741 85,214 89,121 92,253

Dividend and other Income Canadian Equities 9,646 5,845 4,556 5,313 6,131 Global 4,213 6,010 4,886 5,620 6,409 Global LV - 2,888 3,228 3,725 4,255 Private Debt - 3,853 10,278 10,262 10,249 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,658 26,643 28,621 30,674

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) (33,881) (8,968) (900) (2,836) Marketable Bonds Realized Gains/(Loss) 13,622 13,774 (442) 1,198 822 MUSH - - - - - Canadian Equities Realized Gains 69,208 2,837 0 0 0 Global Equities Realized Gains 66,310 3,816 0 0 1,945 Global LV Realized Gains - 459 - - 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 (2,947) 1,070 11,389 11,667 Other Investment Fees Paid (5,201) (4,728) (4,575) (4,859) (5,117) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 5,248 6,712 7,049 7,044 Investment Write-Down - - - - - Total (24,851) (13,352) (12,176) (12,567) (13,280) Total Corporate Investment Income 197,519 84,351 99,648 116,597 121,133

Total Basic Investment Income 169,377 62,372 77,136 90,068 91,242 % - Basic to Total Investment Income 85.75% 74% 77% 77% 75%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 6,926 4,821 5,622 6,842 US Equities Unrealized Gains/(Losses) 7,529 9,368 7,292 8,387 9,564 Global LV Unrealized Gains/(Losses) - 4,203 4,408 5,086 5,809 Total Corporate Unrealized Gains/(Losses) 19,628 16,294 12,112 14,009 16,406

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,718.2 1,859.4 2,001.4 2,154.5 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 128.7 147.9 172.3 196.9 Global Equities 166.7 168.0 190.8 219.4 229.6 Global LV Equities 96.6 115.0 130.8 150.9 170.6 Private Debt - 188.0 186.9 186.9 186.8 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,061.6 3,224.1 3,406.3 3,583.9

Total Basic Assets 2,385.6 2,475.2 2,570.4 2,680.9 2,789.2

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 56.1% 57.7% 58.8% 60.1% MUSH 19.5% 17.1% 14.8% 12.7% 10.8% Canadian Equities 4.2% 4.2% 4.6% 5.1% 5.5% US Equities 5.7% 5.5% 5.9% 6.4% 6.4% Global LV 3.3% 3.8% 4.1% 4.4% 4.8% Private Debt 0.0% 6.1% 5.8% 5.5% 5.2% Real Estate 4.6% 4.5% 4.5% 4.4% 4.5% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.7% Total 100.0% 100.0% 100.0% 100.0% 100.0%

Manitoba Public Insurance Page 7 August 8 , 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2a Combined Scenario with 27% MCT before Management Action Statement of Operations

Net Premiums Earned Motor Vehicles 827,703 871,173 922,617 991,058 1,042,463 1,086,122 1,130,789 1,177,075 Drivers 45,787 47,606 48,819 59,546 69,896 71,887 73,798 75,638 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Earned 861,066 907,144 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 Service Fees & Other Revenues 20,351 20,749 22,849 23,832 25,432 27,169 29,040 31,088 Total Earned Revenues 881,417 927,893 982,992 1,063,240 1,126,371 1,173,530 1,221,745 1,271,681

Net Claims Incurred 742,604 869,023 783,040 794,345 1,195,335 1,012,296 1,000,298 1,058,398 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (8,203) (159,043) 12,390 4,224 6,035 Total Claims Incurred 666,404 860,035 767,239 786,143 1,036,292 1,024,686 1,004,523 1,064,433

Claims Expense 118,614 120,972 143,337 137,168 135,289 139,692 145,109 147,485 Road Safety/Loss Prevention 13,027 12,530 13,146 13,606 12,679 12,865 13,083 13,354 Total Claims Costs 798,045 993,537 923,722 936,917 1,184,260 1,177,243 1,162,715 1,225,272

Expenses Operating 71,641 72,785 70,201 75,060 73,539 76,548 80,388 83,268 Commissions 33,862 35,086 37,378 40,338 42,377 44,084 45,829 47,630 Premium Taxes 26,205 27,563 29,143 31,518 33,371 34,740 36,138 37,581 Regulatory/Appeal 3,675 4,889 4,443 4,669 4,839 4,999 5,114 5,233 Total Expenses 135,383 140,323 141,165 151,585 154,126 160,372 167,469 173,713

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (212,015) (164,085) (108,438) (127,304)

Investment Income 48,476 101,645 111,731 192,404 73,816 71,741 76,191 76,897 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) 37,888 39,403 304 (2,137) Net Investment Income (4,038) 82,897 116,320 169,377 111,704 111,144 76,495 74,760

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (100,311) (52,941) (31,943) (52,544)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 (14,824) 196,930 27,013 (3,920) (8,172)

Manitoba Public Insurance Page 1 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2b Combined Scenario with 27% MCT before Management Action Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 172,495 75,802 30,094 11,281 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (100,311) (52,941) (31,943) (52,544) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (142,596) 3,618 7,232 13,130 24,389 Total Retained Earnings 194,498 99,251 170,975 172,495 75,802 30,094 11,281 (16,874)

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (54,603) (51,920) (45,402) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) (2,492) 2,684 6,518 7,085 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,603) (51,920) (45,402) (38,317) Total Equity Balance 231,002 181,000 210,845 120,384 21,199 (21,826) (34,121) (55,191)

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 172,495 75,802 30,094 11,281 (16,874) Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,603) (51,920) (45,402) (38,317) Total Rate Stabilization Reserve 231,002 181,000 210,845 120,384 21,199 (21,826) (34,121) (55,191)

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 120,384 21,199 (21,826) (34,121) (55,191)

Manitoba Public Insurance Page 2 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2c Combined Scenario with 27% MCT before Management Action Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,820 25,634 6,841 2,556 - Equity investments 2,083,349 2,189,534 2,272,545 2,342,905 2,442,261 2,564,017 2,655,165 2,741,931 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 383,995 398,935 414,561 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 - - 2,326 - Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,129 61,107 63,126 2,683,473 2,805,484 2,916,137 2,892,147 2,988,996 3,116,529 3,222,183 3,325,091

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 596,699 622,468 649,547 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,994 373,911 389,852 406,113 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,976,708 2,104,598 2,178,541 2,257,733 2,452,472 2,624,484 2,705,292 2,771,763 2,967,798 3,138,355 3,256,304 3,380,283

Equity Retained earnings 194,499 99,251 170,975 172,495 75,802 30,094 11,281 (16,874) Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,603) (51,920) (45,402) (38,317) Total Equity 231,003 181,000 210,845 120,384 21,199 (21,826) (34,121) (55,191)

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 2,892,147 2,988,996 3,116,529 3,222,183 3,325,091

Manitoba Public Insurance Page 3 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2d Combined Scenario with 27% MCT before Management Action Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 76,729 (25,919) (80,954) (95,228) (118,318) Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 76,729 (25,919) (80,954) (95,228) (118,318)

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,628 102,740 106,660 111,936 Unpaid claims 22 191,890 208,689 221,679 229,774 237,882 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 307,317 324,419 336,434 349,818 Market Risk: Interest rate risk 30 1,663 3,213 2,705 12,029 14,856 Foreign exchange risk 32 13,055 13,613 13,271 12,988 13,484 Equity risk 34 56,386 60,991 58,553 55,844 59,606 Real estate risk 36 23,110 23,851 24,369 25,109 26,407 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 94,214 101,668 98,898 105,970 114,353 Credit Risk: Counterparty default risk for balance sheet assets 40 38,826 54,231 56,568 58,639 60,017 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 38,826 54,231 56,568 58,639 60,017 Operational risk margin 50 62,590 67,421 69,984 72,952 76,141 Less: Diversification credit 52 48,196 54,977 55,794 58,704 61,830 Total Capital (Margin) Required at Target 59 433,983 475,660 494,075 515,291 538,499 Minimum Capital (Margin) Required (line 59 / 1.5) 60 289,322 317,107 329,383 343,527 359,000 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 289,322 317,107 329,383 343,527 359,000 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (212,593) (343,026) (410,337) (438,755) (477,318) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 26.52% -8.17% -24.58% -27.72% -32.96%

Manitoba Public Insurance Page 4 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2e Combined Scenario with 27% MCT before Management Action Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Collision 415,906 438,817 502,295 489,509 538,731 576,791 Comprehensive 69,497 99,940 112,592 131,640 117,910 124,970 Property Damage 48,647 46,844 49,742 49,423 51,954 53,781 Public Liability - BI 4,680 5,025 8,428 3,965 5,332 5,385 PIPP 187,022 174,815 274,358 279,057 228,579 227,837

Total 726,240 765,440 947,414 953,595 942,507 988,764

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 16,554 14,302 6,353 6,337 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 19,953 1,868 (1,874) 9,123

Total Net Claims Incurred 767,240 786,142 1,036,292 1,024,686 1,004,523 1,064,433

Manitoba Public Insurance Page 5 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2f Combined Scenario with 27% MCT before Management Action Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 79.09% 75.30% 74.51% 75.51% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9529 0.9589 0.9695 1.0025 1.0143 2020 0.9645 0.9751 1.0083 1.0201 1.0146 2021 0.9842 1.0172 1.0285 1.0224 1.0155 2022 1.0219 1.0338 1.0282 1.0217 1.0150 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 77.91% 78.00% 72.31% 73.43% 80.21% 76.45% 81.43% 2020 78.45% 72.73% 73.86% 80.68% 76.41% 76.24% 81.65% 2021 73.41% 74.51% 81.34% 76.99% 75.66% 75.72% 81.20% 2022 74.86% 81.76% 77.42% 76.12% 76.65% 76.73% 82.35%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.24% 8.27% 8.21% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.75% 2.76% 2.74% Selected 3.16% 2.99% 2.88% 2.75% 2.75% 2.75% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 548,556 570,367 593,159 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 424,540 443,068 458,203 483,494 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 14,927 15,519 16,121 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 78,115 81,525 84,309 88,963 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 (262) (854) 2,326 (5,429) 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,013 33,319 34,687 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 30,737 32,013 30,993 34,687 Change 2,363 (21,009) 19,691 1,276 (1,020) 3,694 18. Premium Deficiency [c] 8,845 - 262 854 - 5,429 Change 2,001 (8,845) 262 592 (854) 5,429

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 6 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2g Combined Scenario with 27% MCT before Management Action Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted

Interest Income During Period Cash/Short Term Investments 255 58 3 0 (3) Marketable Bonds 44,346 53,591 57,390 60,818 64,314 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 78,011 79,458 80,669 82,004

Dividend and other Income Canadian Equities 9,646 5,891 4,574 4,850 5,375 Global 4,213 6,011 4,657 4,894 5,400 Global LV - 2,895 2,903 3,067 3,383 Private Debt - 3,745 10,006 10,022 10,034 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,604 25,835 26,534 27,823

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) 19,721 29,268 (5,537) (1,581) Marketable Bonds Realized Gains/(Loss) 13,622 21,634 12,698 5,862 (674) MUSH - - - - - Canadian Equities Realized Gains 69,208 (2,676) (4,339) 88 0 Global Equities Realized Gains 66,310 (634) (6,516) 111 0 Global LV Realized Gains - (99) (4,086) 76 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 47,995 37,506 11,691 9,480

Other Investment Fees Paid (5,201) (4,744) (4,547) (4,721) (4,905) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 2,478 (732) (1,528) (1,862) Investment Write-Down - - - - - Total (24,851) (16,138) (19,592) (21,006) (21,974)

Total Corporate Investment Income 197,519 131,472 127,932 97,923 97,146

Total Basic Investment Income 169,377 111,704 111,144 76,495 74,760 % - Basic to Total Investment Income 85.75% 85% 87% 78% 77%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 (3,158) (3,858) 5,132 5,999 US Equities Unrealized Gains/(Losses) 7,529 (3,435) (3,714) 7,304 8,059 Global LV Unrealized Gains/(Losses) - (1,894) (2,291) 4,187 4,619 Total Corporate Unrealized Gains/(Losses) 19,628 (6,593) (7,572) 12,436 14,057

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,701.8 1,879.8 2,042.7 2,169.0 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 139.7 145.3 153.5 171.9 Global Equities 166.7 171.9 177.0 187.3 208.4 Global LV Equities 96.6 111.1 115.8 121.6 135.5 Private Debt - 188.8 193.5 193.5 193.3 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,056.9 3,219.7 3,373.9 3,523.6

Total Basic Assets 2,385.6 2,481.4 2,584.4 2,671.5 2,757.2

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 55.7% 58.4% 60.5% 61.6% MUSH 19.5% 17.1% 14.8% 12.8% 11.0% Canadian Equities 4.2% 4.6% 4.5% 4.5% 4.9% US Equities 5.7% 5.6% 5.5% 5.6% 5.9% Global LV 3.3% 3.6% 3.6% 3.6% 3.8% Private Debt 0.0% 6.2% 6.0% 5.7% 5.5% Real Estate 4.6% 4.5% 4.5% 4.5% 4.6% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.8% Total 100.0% 100.0% 100.0% 100.0% 100.0% Manitoba Public Insurance Page 7 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2h Combined Scenario with 27% MCT after Management Action Statement of Operations

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC Motor Vehicles 854,170 886,998 955,941 1,019,281 1,062,418 1,129,020 1,175,080 1,223,300 Drivers 46,619 48,426 49,946 68,902 70,903 72,885 74,723 76,565 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Written 888,366 923,789 994,593 1,076,987 1,121,901 1,190,257 1,237,922 1,287,746

Net Premiums Earned Motor Vehicles 827,703 871,173 922,617 991,058 1,042,463 1,098,211 1,153,773 1,200,994 Drivers 45,787 47,606 48,819 59,546 69,896 71,887 73,798 75,638 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Earned 861,066 907,144 960,142 1,039,407 1,100,939 1,158,450 1,215,690 1,264,513 Service Fees & Other Revenues 20,351 20,749 22,849 23,832 25,432 27,593 29,504 31,595 Total Earned Revenues 881,417 927,893 982,992 1,063,240 1,126,371 1,186,042 1,245,194 1,296,108

Net Claims Incurred 742,604 869,023 783,040 794,345 1,195,335 1,002,333 1,000,082 1,057,974 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (8,203) (159,043) 12,390 4,224 6,035 Total Claims Incurred 666,404 860,035 767,239 786,143 1,036,292 1,014,723 1,004,307 1,064,009

Claims Expense 118,614 120,972 143,337 137,168 135,289 139,692 145,067 147,443 Road Safety/Loss Prevention 13,027 12,530 13,146 13,606 12,679 12,865 13,079 13,349 Total Claims Costs 798,045 993,537 923,722 936,917 1,184,260 1,167,280 1,162,453 1,224,801

Expenses Operating 71,641 72,785 70,201 75,060 73,539 76,548 80,367 83,247 Commissions 33,862 35,086 37,378 40,338 42,377 44,394 46,573 48,405 Premium Taxes 26,205 27,563 29,143 31,518 33,371 35,103 36,827 38,299 Regulatory/Appeal 3,675 4,889 4,443 4,669 4,839 4,999 5,114 5,233 Total Expenses 135,383 140,323 141,165 151,585 154,126 161,045 168,882 175,184

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (212,015) (142,283) (86,141) (103,877)

Investment Income 48,476 101,645 111,731 192,404 73,797 71,751 76,241 78,013 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) 37,884 39,399 302 (2,139) Net Investment Income (4,038) 82,897 116,320 169,377 111,681 111,150 76,543 75,874

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (100,334) (31,133) (9,598) (28,003)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 (14,824) 196,927 27,009 (3,922) (8,173)

Manitoba Public Insurance Page 8 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2i Combined Scenario with 27% MCT after Management Action Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 171,873 75,157 51,257 54,789 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (100,334) (31,133) (9,598) (28,003) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (143,217) 3,618 7,232 13,130 24,389 Total Retained Earnings 194,498 99,251 170,975 171,873 75,157 51,257 54,789 51,175

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (54,599) (51,920) (45,336) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) (2,488) 2,680 6,584 6,198 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,599) (51,920) (45,336) (39,138) Total Equity Balance 231,002 181,000 210,845 119,762 20,558 (663) 9,453 12,036

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 171,873 75,157 51,257 54,789 51,175 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,599) (51,920) (45,336) (39,138) Total Rate Stabilization Reserve 231,002 181,000 210,845 119,762 20,558 (663) 9,453 12,036

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 119,762 20,558 (663) 9,453 12,036

Manitoba Public Insurance Page 9 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2j Combined Scenario with 27% MCT after Management Action Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,820 25,632 20,485 35,129 51,158 Equity investments 2,083,349 2,189,534 2,272,545 2,342,283 2,441,623 2,565,361 2,659,927 2,751,499 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 389,961 405,143 421,022 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 - 9,763 13,139 5,895 Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,129 61,109 63,129 2,683,473 2,805,484 2,916,137 2,891,525 2,988,356 3,147,248 3,276,541 3,398,176

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 607,105 633,296 660,816 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,994 373,911 389,852 406,113 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,976,708 2,103,748 2,178,498 2,252,321 2,452,472 2,624,484 2,705,292 2,771,763 2,967,798 3,147,911 3,267,089 3,386,139

Equity Retained earnings 194,499 99,251 170,975 171,873 75,157 51,257 54,789 51,175 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,599) (51,920) (45,336) (39,138) Total Equity 231,003 181,000 210,845 119,762 20,558 (663) 9,453 12,036

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 2,891,525 2,988,356 3,147,248 3,276,541 3,398,176

Manitoba Public Insurance Page 10 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2k Combined Scenario with 27% MCT after Management Action Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 76,107 (26,559) (59,791) (51,656) (51,092) Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 76,107 (26,559) (59,791) (51,656) (51,092)

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,628 104,527 108,684 113,029 Unpaid claims 22 191,890 208,689 221,680 229,770 237,884 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 307,317 326,207 338,454 350,913 Market Risk: Interest rate risk 30 1,696 3,180 2,997 12,406 17,783 Foreign exchange risk 32 13,043 13,599 13,265 13,048 13,117 Equity risk 34 56,330 60,927 58,541 56,217 56,338 Real estate risk 36 23,098 23,838 24,355 25,094 26,392 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 94,167 101,544 99,158 106,765 113,630 Credit Risk: Counterparty default risk for balance sheet assets 40 38,824 54,211 57,839 60,046 60,979 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 38,824 54,211 57,839 60,046 60,979 Operational risk margin 50 62,586 67,409 70,829 73,896 76,863 Less: Diversification credit 52 48,184 54,943 56,270 59,356 61,948 Total Capital (Margin) Required at Target 59 433,942 475,538 497,763 519,805 540,437 Minimum Capital (Margin) Required (line 59 / 1.5) 60 289,294 317,025 331,842 346,537 360,291 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 289,294 317,025 331,842 346,537 360,291 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (213,187) (343,584) (391,633) (398,193) (411,383) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 26.31% -8.38% -18.02% -14.91% -14.18%

Manitoba Public Insurance Page 11 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2l Combined Scenario with 27% MCT after Management Action Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Total 726,240 765,440 947,414 953,598 942,467 988,815

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 16,554 14,302 6,346 6,345 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 19,953 (8,099) (2,043) 8,639

Total Net Claims Incurred 767,240 786,142 1,036,292 1,014,723 1,004,307 1,064,009

Manitoba Public Insurance Page 12 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2m Combined Scenario with 27% MCT after Management Action Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 79.09% 74.52% 73.10% 74.08% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9529 0.9589 0.9695 1.0025 1.0143 2020 0.9456 0.9560 0.9885 1.0002 1.0053 2021 0.9656 0.9979 1.0091 1.0136 1.0155 2022 1.0026 1.0143 1.0194 1.0217 1.0150 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 77.91% 78.00% 72.31% 73.43% 80.21% 76.45% 81.43% 2020 76.91% 71.31% 72.41% 79.10% 74.91% 74.75% 80.05% 2021 72.02% 73.10% 79.80% 75.53% 74.23% 74.29% 79.66% 2022 73.44% 80.21% 75.96% 74.68% 75.20% 75.28% 80.80%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,158,450 1,215,690 1,264,513 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.15% 8.11% 8.05% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.72% 2.70% 2.68% Selected 3.16% 2.99% 2.88% 2.74% 2.71% 2.69% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 558,962 581,194 604,428 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 424,540 442,715 458,161 483,452 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 15,135 15,583 16,116 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 78,115 81,459 84,302 88,955 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 (262) 9,763 13,139 5,895 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,664 33,996 35,391 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 30,737 22,901 20,857 29,496 Change 2,363 (21,009) 19,691 (7,836) (2,043) 8,639 18. Premium Deficiency [c] 8,845 - 262 - - - Change 2,001 (8,845) 262 (262) - -

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 13 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2n Combined Scenario with 27% MCT after Management Action Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted Interest Income During Period Cash/Short Term Investments 255 58 3 0 (3) Marketable Bonds 44,346 53,591 57,454 61,065 64,855 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 78,010 79,522 80,916 82,545

Dividend and other Income Canadian Equities 9,646 5,892 4,603 4,986 5,648 Global 4,213 6,011 4,682 5,014 5,642 Global LV - 2,895 2,922 3,156 3,562 Private Debt - 3,745 10,006 10,022 10,034 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,605 25,908 26,879 28,518

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) 19,767 29,339 (5,174) (1,592) Marketable Bonds Realized Gains/(Loss) 13,622 21,587 12,628 5,500 (693) MUSH - - - - - Canadian Equities Realized Gains 69,208 (2,678) (4,338) 83 618 Global Equities Realized Gains 66,310 (634) (6,515) 105 341 Global LV Realized Gains - (99) (4,086) 71 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 47,993 37,508 11,675 10,410

Other Investment Fees Paid (5,201) (4,744) (4,555) (4,753) (4,973) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 2,478 (741) (1,568) (1,948) Investment Write-Down - - - - - Total (24,851) (16,138) (19,609) (21,078) (22,128)

Total Corporate Investment Income 197,519 131,470 128,054 98,426 99,158

Total Basic Investment Income 169,377 111,681 111,150 76,543 75,874 % - Basic to Total Investment Income 85.75% 85% 87% 78% 77%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 (3,158) (3,858) 5,275 6,303 US Equities Unrealized Gains/(Losses) 7,529 (3,435) (3,714) 7,483 8,420 Global LV Unrealized Gains/(Losses) - (1,894) (2,291) 4,309 4,864 Total Corporate Unrealized Gains/(Losses) 19,628 (6,593) (7,572) 12,758 14,724

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,701.8 1,886.7 2,060.0 2,211.1 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 139.7 147.5 160.1 174.6 Global Equities 166.7 171.9 179.4 194.4 215.9 Global LV Equities 96.6 111.1 117.7 127.0 144.4 Private Debt - 188.8 193.5 193.5 193.3 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,056.9 3,233.1 3,410.2 3,584.8

Total Basic Assets 2,385.0 2,480.8 2,599.4 2,708.8 2,817.9

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 55.7% 58.4% 60.4% 61.7% MUSH 19.5% 17.1% 14.8% 12.7% 10.8% Canadian Equities 4.2% 4.6% 4.6% 4.7% 4.9% US Equities 5.7% 5.6% 5.5% 5.7% 6.0% Global LV 3.3% 3.6% 3.6% 3.7% 4.0% Private Debt 0.0% 6.2% 6.0% 5.7% 5.4% Real Estate 4.6% 4.5% 4.5% 4.4% 4.5% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.7% Total 100.0% 100.0% 100.0% 100.0% 100.0% Manitoba Public Insurance Page 14 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2o Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Statement of Operations

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC Motor Vehicles 854,170 886,998 955,941 1,019,281 1,062,418 1,129,020 1,175,080 1,223,300 Drivers 46,619 48,426 49,946 68,902 70,903 72,885 74,723 76,565 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Written 888,366 923,789 994,593 1,076,987 1,121,901 1,190,257 1,237,922 1,287,746

Net Claims Incurred 742,604 869,023 783,040 794,345 1,195,335 1,002,333 1,000,082 1,057,929 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (8,203) (159,043) 12,390 4,224 6,035 Total Claims Incurred 666,404 860,035 767,239 786,143 1,036,292 1,014,723 1,004,307 1,063,964

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (212,015) (142,283) (86,141) (103,832)

Investment Income 48,476 101,645 111,731 192,404 73,816 71,766 76,262 77,088 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) 37,888 39,402 302 (2,150) Net Investment Income (4,038) 82,897 116,320 169,377 111,704 111,168 76,565 74,939

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (100,311) (31,115) (9,576) (28,893)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 (14,824) 196,930 27,012 (3,922) (8,184)

Manitoba Public Insurance Page 15 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2p Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 172,495 75,802 51,920 55,473 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (100,311) (31,115) (9,576) (28,893) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (142,596) 3,618 7,232 13,130 24,389 Total Retained Earnings 194,498 99,251 170,975 172,495 75,802 51,920 55,473 50,968

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (54,603) (51,920) (45,326) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) (2,492) 2,684 6,594 7,167 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,603) (51,920) (45,326) (38,158) Total Equity Balance 231,002 181,000 210,845 120,384 21,199 0 10,147 12,810

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 172,495 75,802 51,920 55,473 50,968 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,603) (51,920) (45,326) (38,158) Total Rate Stabilization Reserve 231,002 181,000 210,845 120,384 21,199 0 10,147 12,810

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 120,384 21,199 0 10,147 12,810

Manitoba Public Insurance Page 16 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2q Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,820 25,634 20,480 35,124 51,151 Equity investments 2,083,349 2,189,534 2,272,545 2,342,905 2,442,261 2,566,030 2,660,627 2,752,234 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 389,961 405,143 421,022 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 - 9,763 13,139 5,898 Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,129 61,109 63,129 2,683,473 2,805,484 2,916,137 2,892,147 2,988,996 3,147,911 3,277,236 3,398,906

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 607,105 633,296 660,816 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,994 373,911 389,852 406,113 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,976,708 2,103,748 2,178,498 2,252,277 2,452,472 2,624,484 2,705,292 2,771,763 2,967,798 3,147,911 3,267,089 3,386,096

Equity Retained earnings 194,499 99,251 170,975 172,495 75,802 51,920 55,473 50,968 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (54,603) (51,920) (45,326) (38,158) Total Equity 231,003 181,000 210,845 120,384 21,199 0 10,147 12,810

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 2,892,147 2,988,996 3,147,911 3,277,236 3,398,906

Manitoba Public Insurance Page 17 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2r Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 76,729 (25,919) (59,129) (50,962) (50,318) Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 76,729 (25,919) (59,129) (50,962) (50,318)

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,628 104,527 108,684 113,029 Unpaid claims 22 191,890 208,689 221,680 229,770 237,879 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 307,317 326,207 338,454 350,908 Market Risk: Interest rate risk 30 1,663 3,213 3,031 12,442 16,384 Foreign exchange risk 32 13,055 13,613 13,279 13,063 13,572 Equity risk 34 56,386 60,991 58,608 56,290 60,084 Real estate risk 36 23,110 23,851 24,369 25,109 26,407 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 94,214 101,668 99,287 106,904 116,447 Credit Risk: Counterparty default risk for balance sheet assets 40 38,826 54,231 57,859 60,066 60,999 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 38,826 54,231 57,859 60,066 60,999 Operational risk margin 50 62,590 67,421 70,842 73,909 77,104 Less: Diversification credit 52 48,196 54,977 56,307 59,395 62,639 Total Capital (Margin) Required at Target 59 433,983 475,660 497,888 519,938 542,819 Minimum Capital (Margin) Required (line 59 / 1.5) 60 289,322 317,107 331,925 346,626 361,880 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 289,322 317,107 331,925 346,626 361,880 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (212,593) (343,026) (391,054) (397,588) (412,198) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 26.52% -8.17% -17.81% -14.70% -13.90%

Manitoba Public Insurance Page 18 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2s Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Total 726,240 765,440 947,414 953,598 942,467 988,778

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 16,554 14,302 6,346 6,339 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 19,953 (8,099) (2,043) 8,637

Total Net Claims Incurred 767,240 786,142 1,036,292 1,014,723 1,004,307 1,063,963

Manitoba Public Insurance Page 19 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2t Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 79.09% 74.52% 73.10% 74.08% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9529 0.9589 0.9695 1.0025 1.0143 2020 0.9456 0.9560 0.9885 1.0002 1.0053 2021 0.9656 0.9979 1.0091 1.0136 1.0155 2022 1.0026 1.0143 1.0194 1.0217 1.0150 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 77.91% 78.00% 72.31% 73.43% 80.21% 76.45% 81.43% 2020 76.91% 71.31% 72.41% 79.10% 74.91% 74.75% 80.05% 2021 72.02% 73.10% 79.80% 75.53% 74.23% 74.29% 79.66% 2022 73.44% 80.21% 75.96% 74.68% 75.20% 75.28% 80.79%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,158,450 1,215,690 1,264,513 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.15% 8.11% 8.05% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.72% 2.70% 2.68% Selected 3.16% 2.99% 2.88% 2.74% 2.71% 2.69% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 558,962 581,194 604,428 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 424,540 442,715 458,161 483,450 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 15,135 15,583 16,116 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 78,115 81,459 84,302 88,955 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 (262) 9,763 13,139 5,898 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,664 33,996 35,391 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 30,737 22,901 20,857 29,494 Change 2,363 (21,009) 19,691 (7,836) (2,043) 8,637 18. Premium Deficiency [c] 8,845 - 262 - - - Change 2,001 (8,845) 262 (262) - -

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 20 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (a) Appendix 2

Appendix 2u Combined Scenario with 27% MCT after Management Action - Minimum Total Equity Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted Interest Income During Period Cash/Short Term Investments 255 58 3 0 (3) Marketable Bonds 44,346 53,591 57,454 61,064 64,854 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 78,011 79,522 80,916 82,545

Dividend and other Income Canadian Equities 9,646 5,891 4,603 4,986 5,648 Global 4,213 6,011 4,683 5,015 5,643 Global LV - 2,895 2,922 3,156 3,563 Private Debt - 3,745 10,006 10,022 10,034 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,604 25,908 26,880 28,519

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) 19,721 29,335 (5,177) (1,592) Marketable Bonds Realized Gains/(Loss) 13,622 21,634 12,632 5,503 (693) MUSH - - - - - Canadian Equities Realized Gains 69,208 (2,676) (4,339) 83 0 Global Equities Realized Gains 66,310 (634) (6,516) 105 0 Global LV Realized Gains - (99) (4,086) 71 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 47,995 37,506 11,675 9,452

Other Investment Fees Paid (5,201) (4,744) (4,554) (4,754) (4,974) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 2,478 (740) (1,568) (1,948) Investment Write-Down - - - - - Total (24,851) (16,138) (19,607) (21,079) (22,129)

Total Corporate Investment Income 197,519 131,472 128,053 98,425 98,199

Total Basic Investment Income 169,377 111,704 111,168 76,565 74,939 % - Basic to Total Investment Income 85.75% 85% 87% 78% 76%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 (3,158) (3,858) 5,275 6,304 US Equities Unrealized Gains/(Losses) 7,529 (3,435) (3,714) 7,484 8,421 Global LV Unrealized Gains/(Losses) - (1,894) (2,291) 4,310 4,864 Total Corporate Unrealized Gains/(Losses) 19,628 (6,593) (7,572) 12,759 14,725

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,701.8 1,886.7 2,060.0 2,198.8 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 139.7 147.5 160.1 182.7 Global Equities 166.7 171.9 179.4 194.4 220.0 Global LV Equities 96.6 111.1 117.7 127.0 144.4 Private Debt - 188.8 193.5 193.5 193.3 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,056.9 3,233.1 3,410.2 3,584.8

Total Basic Assets 2,385.6 2,481.4 2,600.1 2,709.5 2,818.6

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 55.7% 58.4% 60.4% 61.3% MUSH 19.5% 17.1% 14.8% 12.7% 10.8% Canadian Equities 4.2% 4.6% 4.6% 4.7% 5.1% US Equities 5.7% 5.6% 5.5% 5.7% 6.1% Global LV 3.3% 3.6% 3.6% 3.7% 4.0% Private Debt 0.0% 6.2% 6.0% 5.7% 5.4% Real Estate 4.6% 4.5% 4.5% 4.4% 4.5% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.7% Total 100.0% 100.0% 100.0% 100.0% 100.0%

Manitoba Public Insurance Page 21 August 8 , 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3a Base Scenario with 69% MCT Statement of Operations

Net Premiums Earned Motor Vehicles 827,703 871,173 922,617 991,058 1,042,463 1,086,122 1,130,789 1,177,075 Drivers 45,787 47,606 48,819 59,546 69,896 71,887 73,798 75,638 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Earned 861,066 907,144 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 Service Fees & Other Revenues 20,351 20,749 22,849 23,832 25,432 27,166 29,036 31,083 Total Earned Revenues 881,417 927,893 982,992 1,063,240 1,126,371 1,173,526 1,221,741 1,271,677

Net Claims Incurred 742,604 869,023 783,040 824,008 899,721 937,490 995,156 1,051,174 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (37,865) (12,794) (252) 7,286 5,421 Total Claims Incurred 666,404 860,035 767,239 786,143 886,927 937,238 1,002,442 1,056,595

Expenses Operating 71,641 72,785 70,201 75,060 73,539 76,216 79,880 82,788 Commissions 33,862 35,086 37,378 40,338 42,377 44,084 45,829 47,630 Premium Taxes 26,205 27,563 29,143 31,518 33,371 34,740 36,138 37,581 Regulatory/Appeal 3,675 4,889 4,443 4,669 4,839 4,998 5,114 5,233 Total Expenses 135,383 140,323 141,165 151,585 154,126 160,038 166,959 173,233

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (62,650) (75,567) (104,733) (117,949)

Investment Income 48,476 101,645 111,731 192,404 85,943 90,826 95,109 98,608 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) (19,091) (8,872) 288 (1,883) Net Investment Income (4,038) 82,897 116,320 169,377 66,852 81,954 95,397 96,726

Net Income (Loss) (56,049) (123,071) 34,424 144,115 4,202 6,387 (9,336) (21,223)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 14,839 (6,297) (8,620) (6,999) (7,304)

Manitoba Public Insurance Page 1 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3b Base Scenario with 69% MCT Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 302,865 317,820 331,573 335,860 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 4,202 6,387 (9,336) (21,223) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (12,225) 10,753 7,366 13,623 25,182 Total Retained Earnings 194,498 99,251 170,975 302,865 317,820 331,573 335,860 339,818

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (44,340) (35,337) (25,388) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) 7,771 9,003 9,949 11,246 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (44,340) (35,337) (25,388) (14,143) Total Equity Balance 231,002 181,000 210,845 250,754 273,480 296,236 310,471 325,675

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 302,865 317,820 331,573 335,860 339,818 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (44,340) (35,337) (25,388) (14,143) Total Rate Stabilization Reserve 231,002 181,000 210,845 250,754 273,480 296,236 310,471 325,675

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 250,754 273,480 296,236 310,471 325,675

Manitoba Public Insurance Page 2 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3c Base Scenario with 69% MCT Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,821 62,136 64,758 67,772 68,309 Equity investments 2,083,349 2,189,534 2,272,545 2,473,275 2,543,147 2,642,506 2,757,533 2,872,350 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 383,995 398,935 414,561 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 16,113 22,064 19,174 12,521 Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,176 61,194 63,228 2,683,473 2,805,484 2,916,137 3,022,517 3,142,497 3,275,046 3,406,701 3,536,443

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 596,699 622,468 649,547 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,172 372,682 388,921 405,320 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,878,749 1,946,282 2,019,398 2,089,010 2,452,472 2,624,484 2,705,292 2,771,763 2,869,017 2,978,811 3,096,230 3,210,768

Equity Retained earnings 194,499 99,251 170,975 302,865 317,820 331,573 335,860 339,818 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (44,340) (35,337) (25,388) (14,143) Total Equity 231,003 181,000 210,845 250,754 273,480 296,236 310,471 325,675

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 3,022,517 3,142,497 3,275,046 3,406,701 3,536,443

Manitoba Public Insurance Page 3 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3d Base Scenario with 69% MCT Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 207,099 226,363 237,060 249,277 262,447 Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 207,099 226,363 237,060 249,277 262,447

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,579 102,581 106,660 110,921 Unpaid claims 22 191,890 198,315 205,744 213,771 221,492 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 296,894 308,325 320,431 332,413 Market Risk: Interest rate risk 30 5,120 20,747 24,603 28,487 32,431 Foreign exchange risk 32 15,401 15,016 16,001 17,486 20,329 Equity risk 34 68,119 66,037 70,481 77,733 85,529 Real estate risk 36 25,718 26,617 27,301 28,217 29,702 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 114,358 128,417 138,386 151,923 167,991 Credit Risk: Counterparty default risk for balance sheet assets 40 39,308 60,228 62,378 63,847 64,913 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 39,308 60,228 62,378 63,847 64,913 Operational risk margin 50 64,343 69,319 72,467 75,940 79,637 Less: Diversification credit 52 53,231 61,581 64,937 68,898 73,216 Total Capital (Margin) Required at Target 59 451,327 493,277 516,619 543,243 571,738 Minimum Capital (Margin) Required (line 59 / 1.5) 60 300,885 328,852 344,413 362,162 381,159 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 300,885 328,852 344,413 362,162 381,159 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (93,786) (102,489) (107,353) (112,885) (118,712) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 68.83% 68.83% 68.83% 68.83% 68.86%

Manitoba Public Insurance Page 4 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3e Base Scenario with 69% MCT Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Total 726,240 765,440 827,185 881,537 934,300 982,288

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 3,792 5,455 6,409 6,077 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 3,578 (4,675) 4,196 8,020

Total Net Claims Incurred 767,240 786,142 886,927 937,238 1,002,443 1,056,594

Manitoba Public Insurance Page 5 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3f Base Scenario with 69% MCT Deferred Policy Acquisition Expenses and Premium Deficiency

C. Equity in Unearned Premium

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 6 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 3

Appendix 3g Base Scenario with 69% MCT Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted Interest Income During Period Cash/Short Term Investments 255 89 0 (0) 0 Marketable Bonds 44,346 55,415 63,167 69,331 75,162 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 79,865 85,232 89,182 92,855

Dividend and other Income Canadian Equities 9,646 5,693 4,546 5,285 5,884 Global 4,213 5,968 4,877 5,595 6,117 Global LV - 2,886 3,218 3,702 4,139 Private Debt - 3,853 10,278 10,262 10,249 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,462 26,614 28,545 30,020

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) (45,121) (8,969) (901) (2,884) Marketable Bonds Realized Gains/(Loss) 13,622 24,996 (442) 1,199 810 MUSH - - - - - Canadian Equities Realized Gains 69,208 2,665 0 0 823 Global Equities Realized Gains 66,310 3,754 0 0 968 Global LV Realized Gains - 459 - - 999 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 (3,199) 1,069 11,389 12,452

Other Investment Fees Paid (5,201) (4,715) (4,574) (4,852) (5,075) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 5,258 6,714 7,058 7,124 Investment Write-Down - - - - - Total (24,851) (13,329) (12,173) (12,551) (13,158)

Total Corporate Investment Income 197,519 84,050 99,640 116,598 121,988

Total Basic Investment Income 169,377 66,852 81,954 95,397 96,726 % - Basic to Total Investment Income 85.75% 80% 82% 82% 79%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 6,746 4,810 5,592 6,566 US Equities Unrealized Gains/(Losses) 7,529 9,304 7,278 8,350 9,129 Global LV Unrealized Gains/(Losses) - 4,200 4,394 5,055 5,652 Total Corporate Unrealized Gains/(Losses) 19,628 16,050 12,088 13,942 15,695

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,718.3 1,861.0 2,004.6 2,151.8 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 128.6 147.3 171.1 191.4 Global Equities 166.7 167.9 190.1 218.1 242.9 Global LV Equities 96.6 114.8 130.2 149.7 163.9 Private Debt - 188.0 186.9 186.9 186.8 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,061.2 3,223.8 3,405.8 3,582.3

Total Basic Assets 2,516.0 2,618.8 2,720.8 2,839.1 2,955.9

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 56.1% 57.7% 58.9% 60.1% MUSH 19.5% 17.1% 14.8% 12.7% 10.8% Canadian Equities 4.2% 4.2% 4.6% 5.0% 5.3% US Equities 5.7% 5.5% 5.9% 6.4% 6.8% Global LV 3.3% 3.7% 4.0% 4.4% 4.6% Private Debt 0.0% 6.1% 5.8% 5.5% 5.2% Real Estate 4.6% 4.5% 4.5% 4.4% 4.5% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.7% Total 100.0% 100.0% 100.0% 100.0% 100.0%

Manitoba Public Insurance Page 7 August 8 , 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4a Combined Scenario with 69% MCT before Management Action Statement of Operations

Net Premiums Earned Motor Vehicles 827,703 871,173 922,617 991,058 1,042,463 1,086,122 1,130,789 1,177,075 Drivers 45,787 47,606 48,819 59,546 69,896 71,887 73,798 75,638 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Earned 861,066 907,144 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 Service Fees & Other Revenues 20,351 20,749 22,849 23,832 25,432 27,169 29,040 31,088 Total Earned Revenues 881,417 927,893 982,992 1,063,240 1,126,371 1,173,530 1,221,745 1,271,681

Net Claims Incurred 742,604 869,023 783,040 794,345 1,195,334 1,012,342 1,000,392 1,058,307 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (8,203) (159,043) 12,390 4,224 6,035 Total Claims Incurred 666,404 860,035 767,239 786,143 1,036,291 1,024,732 1,004,616 1,064,342

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (212,014) (164,131) (108,531) (127,212)

Investment Income 48,476 101,645 111,731 192,404 77,808 74,664 81,651 81,335 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) 38,644 39,926 324 (2,174) Net Investment Income (4,038) 82,897 116,320 169,377 116,451 114,590 81,975 79,160

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (95,562) (49,541) (26,556) (48,052)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 (14,824) 197,686 27,536 (3,900) (8,209)

Manitoba Public Insurance Page 1 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4b Combined Scenario with 69% MCT before Management Action Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 299,589 214,574 172,406 159,475 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (95,562) (49,541) (26,556) (48,052) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (15,502) 10,548 7,373 13,625 25,152 Total Retained Earnings 194,498 99,251 170,975 299,589 214,574 172,406 159,475 136,575

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (55,474) (51,920) (44,775) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) (3,362) 3,554 7,145 8,144 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,474) (51,920) (44,775) (36,630) Total Equity Balance 231,002 181,000 210,845 247,478 159,101 120,487 114,701 99,945

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 299,589 214,574 172,406 159,475 136,575 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,474) (51,920) (44,775) (36,630) Total Rate Stabilization Reserve 231,002 181,000 210,845 247,478 159,101 120,487 114,701 99,945

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 247,478 159,101 120,487 114,701 99,945

Manitoba Public Insurance Page 2 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4c Combined Scenario with 69% MCT before Management Action Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,820 32,994 17,373 13,588 10,655 Equity investments 2,083,349 2,189,534 2,272,545 2,469,999 2,572,802 2,695,841 2,793,092 2,886,458 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 383,995 398,935 414,561 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 - - 2,320 - Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,129 61,107 63,126 2,683,473 2,805,484 2,916,137 3,019,241 3,126,898 3,258,887 3,371,136 3,480,273

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 596,699 622,468 649,547 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,994 373,911 389,852 406,113 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,976,707 2,104,643 2,178,672 2,257,778 2,452,472 2,624,484 2,705,292 2,771,763 2,967,797 3,138,400 3,256,435 3,380,328

Equity Retained earnings 194,499 99,251 170,975 299,589 214,574 172,406 159,475 136,575 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,474) (51,920) (44,775) (36,630) Total Equity 231,003 181,000 210,845 247,478 159,101 120,487 114,701 99,945

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 3,019,241 3,126,898 3,258,887 3,371,136 3,480,273

Manitoba Public Insurance Page 3 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4d Combined Scenario with 69% MCT before Management Action Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 203,823 111,983 61,358 53,594 36,819 Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 203,823 111,983 61,358 53,594 36,819

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,628 102,740 106,660 111,937 Unpaid claims 22 191,890 208,689 221,683 229,787 237,886 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 307,317 324,423 336,447 349,823 Market Risk: Interest rate risk 30 4,950 10,033 10,729 23,029 23,599 Foreign exchange risk 32 15,342 16,371 15,805 14,953 15,713 Equity risk 34 67,825 73,963 69,823 61,260 72,219 Real estate risk 36 25,652 26,548 27,228 28,139 29,619 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 113,769 126,915 123,585 127,381 141,150 Credit Risk: Counterparty default risk for balance sheet assets 40 39,296 58,347 61,138 63,240 64,375 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 39,296 58,347 61,138 63,240 64,375 Operational risk margin 50 64,292 69,917 72,471 75,164 78,790 Less: Diversification credit 52 53,091 61,650 62,714 64,827 69,021 Total Capital (Margin) Required at Target 59 450,815 500,846 518,903 537,405 565,117 Minimum Capital (Margin) Required (line 59 / 1.5) 60 300,543 333,898 345,935 358,270 376,745 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 300,543 333,898 345,935 358,270 376,745 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (96,720) (221,915) (284,577) (304,676) (339,926) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 67.82% 33.54% 17.74% 14.96% 9.77%

Manitoba Public Insurance Page 4 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4e Combined Scenario with 69% MCT before Management Action Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Collision 415,906 438,817 502,295 489,510 538,731 576,791 Comprehensive 69,497 99,940 112,592 131,640 117,910 124,970 Property Damage 48,647 46,844 49,742 49,423 51,954 53,781 Public Liability - BI 4,680 5,025 8,428 3,965 5,333 5,385 PIPP 187,022 174,815 274,357 279,094 228,654 227,763

Total 726,240 765,440 947,413 953,633 942,583 988,689

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 16,554 14,308 6,366 6,324 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 19,953 1,870 (1,870) 9,119

Total Net Claims Incurred 767,240 786,142 1,036,291 1,024,732 1,004,616 1,064,341

Manitoba Public Insurance Page 5 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4f Combined Scenario with 69% MCT before Management Action Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 79.09% 75.30% 74.51% 75.51% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9529 0.9589 0.9695 1.0025 1.0143 2020 0.9645 0.9751 1.0083 1.0201 1.0146 2021 0.9842 1.0172 1.0285 1.0224 1.0155 2022 1.0219 1.0338 1.0282 1.0217 1.0150 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 77.91% 78.00% 72.31% 73.43% 80.21% 76.45% 81.43% 2020 78.45% 72.73% 73.86% 80.68% 76.41% 76.24% 81.65% 2021 73.41% 74.51% 81.34% 76.99% 75.66% 75.72% 81.20% 2022 74.86% 81.76% 77.42% 76.12% 76.65% 76.73% 82.35%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,146,360 1,192,705 1,240,594 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.24% 8.27% 8.21% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.75% 2.76% 2.74% Selected 3.16% 2.99% 2.88% 2.75% 2.75% 2.75% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 548,556 570,367 593,159 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 424,540 443,070 458,208 483,496 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 14,927 15,519 16,121 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 78,115 81,525 84,310 88,963 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 (262) (856) 2,320 (5,431) 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,013 33,319 34,687 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 30,737 32,013 30,999 34,687 Change 2,363 (21,009) 19,691 1,276 (1,014) 3,687 18. Premium Deficiency [c] 8,845 - 262 856 - 5,431 Change 2,001 (8,845) 262 594 (856) 5,431

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 6 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4g Combined Scenario with 69% MCT before Management Action Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted

Interest Income During Period Cash/Short Term Investments 255 91 0 (0) (1) Marketable Bonds 44,346 53,671 57,368 60,981 64,836 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 78,123 79,433 80,832 82,529

Dividend and other Income Canadian Equities 9,646 5,746 4,536 4,704 4,884 Global 4,213 5,975 4,738 4,905 5,188 Global LV - 2,894 2,874 2,966 3,265 Private Debt - 3,745 10,006 10,022 10,034 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,422 25,849 26,298 27,002

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) 9,758 28,817 (6,517) (4,759) Marketable Bonds Realized Gains/(Loss) 13,622 31,597 13,100 6,843 2,508 MUSH - - - - - Canadian Equities Realized Gains 69,208 (2,375) (4,637) 709 0 Global Equities Realized Gains 66,310 (606) (6,625) 453 0 Global LV Realized Gains - (99) (4,081) 76 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 48,323 37,053 12,654 9,485

Other Investment Fees Paid (5,201) (4,734) (4,559) (4,722) (4,839) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 2,476 (724) (1,525) (1,968) Investment Write-Down - - - - - Total (24,851) (16,130) (19,596) (21,004) (22,014)

Total Corporate Investment Income 197,519 131,738 127,464 98,816 96,814

Total Basic Investment Income 169,377 116,451 114,590 81,975 79,160 % - Basic to Total Investment Income 85.75% 88% 90% 83% 82%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 (3,158) (3,855) 4,977 5,451 US Equities Unrealized Gains/(Losses) 7,529 (3,435) (3,796) 7,321 7,742 Global LV Unrealized Gains/(Losses) - (1,894) (2,286) 4,049 4,457 Total Corporate Unrealized Gains/(Losses) 19,628 (6,593) (7,651) 12,297 13,193

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,698.2 1,883.6 2,070.2 2,175.8 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 139.6 141.2 134.0 173.3 Global Equities 166.7 175.7 177.6 180.0 200.1 Global LV Equities 96.6 110.9 112.3 117.4 130.6 Private Debt - 188.8 193.5 193.5 193.3 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,056.8 3,216.6 3,370.4 3,518.7

Total Basic Assets 2,512.7 2,619.3 2,726.8 2,820.4 2,912.4

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 55.6% 58.6% 61.4% 61.8% MUSH 19.5% 17.1% 14.8% 12.8% 11.0% Canadian Equities 4.2% 4.6% 4.4% 4.0% 4.9% US Equities 5.7% 5.7% 5.5% 5.3% 5.7% Global LV 3.3% 3.6% 3.5% 3.5% 3.7% Private Debt 0.0% 6.2% 6.0% 5.7% 5.5% Real Estate 4.6% 4.5% 4.5% 4.5% 4.6% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.8% Total 100.0% 100.0% 100.0% 100.0% 100.0%

Manitoba Public Insurance Page 7 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4h Combined Scenario with 69% MCT after Management Action Statement of Operations

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC Motor Vehicles 854,170 886,998 955,941 1,019,281 1,062,418 1,129,020 1,175,080 1,223,300 Drivers 46,619 48,426 49,946 68,902 70,903 72,885 74,723 76,565 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Written 888,366 923,789 994,593 1,076,987 1,121,901 1,190,257 1,237,922 1,287,746

Net Claims Incurred 742,604 869,023 783,040 794,345 1,195,334 1,002,380 1,000,082 1,057,973 (a) Claims Incurred - Interest Rate Impact (76,200) (8,988) (15,801) (8,203) (159,043) 12,390 4,224 6,035 Total Claims Incurred 666,404 860,035 767,239 786,143 1,036,291 1,014,770 1,004,307 1,064,008

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (212,014) (142,330) (86,141) (103,876)

Investment Income 48,476 101,645 111,731 192,404 77,808 74,689 80,776 81,745 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) 38,644 39,925 305 (2,184) Net Investment Income (4,038) 82,897 116,320 169,377 116,451 114,613 81,081 79,561

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (95,562) (27,716) (5,060) (24,315)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 (14,824) 197,686 27,534 (3,920) (8,219)

Manitoba Public Insurance Page 8 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4i Combined Scenario with 69% MCT after Management Action Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 299,589 214,574 194,231 202,797 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (95,562) (27,716) (5,060) (24,315) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (15,502) 10,548 7,373 13,625 25,152 Total Retained Earnings 194,498 99,251 170,975 299,589 214,574 194,231 202,797 203,634

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (55,474) (51,920) (43,735) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) (3,362) 3,554 8,184 8,895 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,474) (51,920) (43,735) (34,840) Total Equity Balance 231,002 181,000 210,845 247,478 159,101 142,312 159,061 168,794

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 299,589 214,574 194,231 202,797 203,634 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,474) (51,920) (43,735) (34,840) Total Rate Stabilization Reserve 231,002 181,000 210,845 247,478 159,101 142,312 159,061 168,794

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 247,478 159,101 142,312 159,061 168,794

Manitoba Public Insurance Page 9 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4j Combined Scenario with 69% MCT after Management Action Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,820 32,994 31,022 46,164 62,967 Equity investments 2,083,349 2,189,534 2,272,545 2,469,999 2,572,802 2,697,844 2,798,546 2,896,491 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 389,961 405,143 421,022 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 - 9,761 13,137 5,893 Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,129 61,109 63,129 2,683,473 2,805,484 2,916,137 3,019,241 3,126,898 3,290,266 3,426,193 3,554,976

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 607,105 633,296 660,816 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,994 373,911 389,852 406,113 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,976,707 2,103,791 2,178,542 2,252,363 2,452,472 2,624,484 2,705,292 2,771,763 2,967,797 3,147,955 3,267,132 3,386,182

Equity Retained earnings 194,499 99,251 170,975 299,589 214,574 194,231 202,797 203,634 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,474) (51,920) (43,735) (34,840) Total Equity 231,003 181,000 210,845 247,478 159,101 142,312 159,061 168,794

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 3,019,241 3,126,898 3,290,266 3,426,193 3,554,976

Manitoba Public Insurance Page 10 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4k Combined Scenario with 69% MCT after Management Action Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 203,823 111,983 83,183 97,953 105,665 Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 203,823 111,983 83,183 97,953 105,665

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,628 104,527 108,684 113,029 Unpaid claims 22 191,890 208,689 221,684 229,774 237,888 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 307,317 326,211 338,458 350,917 Market Risk: Interest rate risk 30 4,950 10,033 11,050 20,883 25,130 Foreign exchange risk 32 15,342 16,371 15,815 15,767 16,648 Equity risk 34 67,825 73,963 69,882 68,324 72,946 Real estate risk 36 25,652 26,548 27,228 28,139 29,619 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 113,769 126,915 123,975 133,113 144,343 Credit Risk: Counterparty default risk for balance sheet assets 40 39,296 58,347 62,429 64,668 65,628 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 39,296 58,347 62,429 64,668 65,628 Operational risk margin 50 64,292 69,917 73,329 76,528 79,870 Less: Diversification credit 52 53,091 61,650 63,208 66,546 70,059 Total Capital (Margin) Required at Target 59 450,815 500,846 522,736 546,221 570,699 Minimum Capital (Margin) Required (line 59 / 1.5) 60 300,543 333,898 348,491 364,147 380,466 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 300,543 333,898 348,491 364,147 380,466 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (96,720) (221,915) (265,308) (266,194) (274,801) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 67.82% 33.54% 23.87% 26.90% 27.77%

Manitoba Public Insurance Page 11 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4l Combined Scenario with 69% MCT after Management Action Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Collision 415,906 438,817 502,295 489,510 538,731 576,791 Comprehensive 69,497 99,940 112,592 131,640 117,910 124,970 Property Damage 48,647 46,844 49,742 49,423 51,954 53,781 Public Liability - BI 4,680 5,025 8,428 3,965 5,332 5,385 PIPP 187,022 174,815 274,357 279,099 228,539 227,887

Total 726,240 765,440 947,413 953,637 942,467 988,815

Unallocated Loss Adjustment Expenses 42,252 50,135 52,371 54,921 57,537 60,210 Change in Internal Loss Adjustment Expense Provision (2,219) 421 16,554 14,309 6,346 6,345 Change in Reinsurance Ceded Provision (676) 0 0 0 0 0 Other Financial Adjustments (2,722) 0 0 0 0 0 Change in DPAC / Premium Deficiency Provision 4,364 (29,854) 19,953 (8,097) (2,043) 8,639

Total Net Claims Incurred 767,240 786,142 1,036,291 1,014,770 1,004,307 1,064,008

Manitoba Public Insurance Page 12 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4m Combined Scenario with 69% MCT after Management Action Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 79.09% 74.52% 73.10% 74.08% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9529 0.9589 0.9695 1.0025 1.0143 2020 0.9456 0.9560 0.9885 1.0002 1.0053 2021 0.9656 0.9979 1.0091 1.0136 1.0155 2022 1.0026 1.0143 1.0194 1.0217 1.0150 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 77.91% 78.00% 72.31% 73.43% 80.21% 76.45% 81.43% 2020 76.91% 71.31% 72.41% 79.10% 74.91% 74.75% 80.05% 2021 72.02% 73.10% 79.80% 75.53% 74.23% 74.29% 79.66% 2022 73.44% 80.21% 75.96% 74.68% 75.20% 75.28% 80.80%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,158,450 1,215,690 1,264,513 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.15% 8.11% 8.05% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.72% 2.70% 2.68% Selected 3.16% 2.99% 2.88% 2.74% 2.71% 2.69% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 558,962 581,194 604,428 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 424,540 442,716 458,163 483,454 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 15,135 15,583 16,116 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 78,115 81,460 84,302 88,955 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 (262) 9,761 13,137 5,893 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,664 33,996 35,391 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 30,737 22,903 20,859 29,498 Change 2,363 (21,009) 19,691 (7,834) (2,043) 8,639 18. Premium Deficiency [c] 8,845 - 262 - - - Change 2,001 (8,845) 262 (262) - -

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 13 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4n Combined Scenario with 69% MCT after Management Action Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted

Interest Income During Period Cash/Short Term Investments 255 91 0 0 (1) Marketable Bonds 44,346 53,671 57,433 61,227 65,052 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 78,123 79,497 81,078 82,744

Dividend and other Income Canadian Equities 9,646 5,746 4,565 4,839 5,475 Global 4,213 5,975 4,764 5,026 5,641 Global LV - 2,894 2,893 3,055 3,444 Private Debt - 3,745 10,006 10,022 10,034 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,422 25,922 26,644 28,225

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) 9,758 28,888 (6,102) (1,596) Marketable Bonds Realized Gains/(Loss) 13,622 31,597 13,029 6,428 (694) MUSH - - - - - Canadian Equities Realized Gains 69,208 (2,375) (4,637) 83 0 Global Equities Realized Gains 66,310 (606) (6,625) 105 703 Global LV Realized Gains - (99) (4,081) 71 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 48,323 37,053 11,675 10,149

Other Investment Fees Paid (5,201) (4,734) (4,566) (4,758) (4,972) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 2,476 (733) (1,565) (1,947) Investment Write-Down - - - - - Total (24,851) (16,130) (19,612) (21,080) (22,126)

Total Corporate Investment Income 197,519 131,738 127,586 98,352 98,805

Total Basic Investment Income 169,377 116,451 114,613 81,081 79,561 % - Basic to Total Investment Income 85.75% 88% 90% 82% 81%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 (3,158) (3,855) 5,120 6,110 US Equities Unrealized Gains/(Losses) 7,529 (3,435) (3,796) 7,501 8,418 Global LV Unrealized Gains/(Losses) - (1,894) (2,286) 4,172 4,703 Total Corporate Unrealized Gains/(Losses) 19,628 (6,593) (7,651) 12,621 14,528

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,698.2 1,890.6 2,065.4 2,218.5 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 139.6 143.4 155.2 177.1 Global Equities 166.7 175.7 180.0 194.5 206.9 Global LV Equities 96.6 110.9 114.1 122.9 139.5 Private Debt - 188.8 193.5 193.5 193.3 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,056.8 3,229.9 3,406.7 3,580.9

Total Basic Assets 2,512.7 2,619.3 2,742.4 2,858.5 2,974.7

Ending Rebalanced Allocations (%) Cash/Short Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% Canadian Fixed Income 60.1% 55.6% 58.5% 60.6% 62.0% MUSH 19.5% 17.1% 14.8% 12.7% 10.8% Canadian Equities 4.2% 4.6% 4.4% 4.6% 4.9% US Equities 5.7% 5.7% 5.6% 5.7% 5.8% Global LV 3.3% 3.6% 3.5% 3.6% 3.9% Private Debt 0.0% 6.2% 6.0% 5.7% 5.4% Real Estate 4.6% 4.5% 4.5% 4.4% 4.5% Infrastructure & Venture Capital 2.7% 2.7% 2.7% 2.7% 2.7% Total 100.0% 100.0% 100.0% 100.0% 100.0%

Manitoba Public Insurance Page 14 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4o Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Statement of Operations

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC Motor Vehicles 854,170 886,998 955,941 1,019,281 1,062,418 1,129,020 1,175,080 1,223,300 Drivers 46,619 48,426 49,946 68,902 70,903 72,885 74,723 76,565 Reinsurance Ceded (12,423) (11,635) (11,294) (11,196) (11,420) (11,648) (11,881) (12,119) Total Net Premiums Written 888,366 923,789 994,593 1,076,987 1,121,901 1,190,257 1,237,922 1,287,746

Underwriting Income (Loss) (52,011) (205,968) (81,896) (25,262) (212,014) (142,330) (86,141) (103,876)

Investment Income 48,476 101,645 111,731 192,404 77,911 74,766 80,893 81,866 (b) Investment Income - Interest Rate Impact (52,515) (18,748) 4,589 (23,026) 38,663 39,938 305 (2,185) Net Investment Income (4,038) 82,897 116,320 169,377 116,574 114,704 81,198 79,681

Net Income (Loss) (56,049) (123,071) 34,424 144,115 (95,440) (27,626) (4,943) (24,195)

Total net Impact due to interest rate change (b) - (a) 23,685 (9,760) 20,390 (14,824) 197,706 27,548 (3,920) (8,219)

Manitoba Public Insurance Page 15 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4p Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Statement of Changes in Equity

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P

Retained Earnings Beginning Balance 177,818 194,498 99,251 170,975 302,872 217,979 197,727 206,409 Net Income (Loss) from annual operations (56,049) (123,071) 34,424 144,115 (95,440) (27,626) (4,943) (24,195) Premium Rebate ------Transfer (to) / from Non-Basic Retained Earnings 72,729 27,824 37,300 (12,219) 10,548 7,373 13,625 25,152 Total Retained Earnings 194,498 99,251 170,975 302,872 217,979 197,727 206,409 207,367

Total Accumulated Other Comprehensive Income Beginning Balance 35,262 36,504 81,748 39,870 (52,111) (55,496) (51,920) (43,685) Other Comprehensive Income for the Year 1,242 45,245 (41,878) (91,981) (3,385) 3,576 8,235 8,950 Total Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,496) (51,920) (43,685) (34,735) Total Equity Balance 231,002 181,000 210,845 250,761 162,483 145,807 162,724 172,632

Total Equity Rate Stabilization Reserve Retained Earnings 194,498 99,251 170,975 302,872 217,979 197,727 206,409 207,367 Accumululated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,496) (51,920) (43,685) (34,735) Total Rate Stabilization Reserve 231,002 181,000 210,845 250,761 162,483 145,807 162,724 172,632

Retained Earnings in excess of Rate Stabilization Reserve ------Total Equity Balance 231,002 181,000 210,845 250,761 162,483 145,807 162,724 172,632

Manitoba Public Insurance Page 16 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4q Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Balance Sheet

(C$ 000s, except where noted) For the Years Ended February, 2016A 2017A 2018A 2019P 2020P 2021P 2022P 2023P BASIC

Assets Cash and investments 29,114 61,606 72,998 28,821 33,004 31,035 46,177 62,981 Equity investments 2,083,349 2,189,534 2,272,545 2,473,281 2,576,174 2,701,327 2,802,197 2,900,316 Investment property 35,789 35,615 34,720 13,906 13,548 13,553 13,760 15,246 Due from other insurance companies 25 16 2 - - - - - Accounts receivable 375,262 355,389 389,900 354,564 369,386 389,961 405,143 421,022 Prepaid expenses ------Deferred policy acquisition costs 4,782 - - 18,443 - 9,761 13,137 5,893 Reinsurers' share of unearned premiums ------Reinsurers' share of unearned claims 998 611 1,269 - - - - - Property and equipment 88,740 89,847 89,280 89,855 91,050 88,996 88,335 90,227 Deferred development costs 65,414 72,866 55,423 43,654 47,118 59,129 61,109 63,129 2,683,473 2,805,484 2,916,137 3,022,524 3,130,280 3,293,762 3,429,856 3,558,814

Liabilities Due to other insurance companies 152 147 141 144 144 144 144 144 Accounts payable and accrued liabilites 38,860 40,443 39,327 40,996 40,602 41,678 43,356 44,182 Financing lease obligation 3,278 3,239 3,125 2,925 2,843 2,743 2,634 2,518 Unearned premiums and fees 453,389 472,041 508,089 547,303 571,642 607,105 633,296 660,816 Provision for employee current benefits 16,871 16,919 16,633 17,155 17,865 18,583 19,310 20,046 Provision for employee future benefits 281,209 301,245 331,910 341,796 357,994 373,911 389,852 406,113 Provision for unpaid claims 1,658,713 1,790,450 1,806,067 1,821,444 1,976,707 2,103,791 2,178,542 2,252,363 2,452,472 2,624,484 2,705,292 2,771,763 2,967,797 3,147,955 3,267,132 3,386,182

Equity Retained earnings 194,499 99,251 170,975 302,872 217,979 197,727 206,409 207,367 Accumulated Other Comprehensive Income 36,504 81,749 39,870 (52,111) (55,496) (51,920) (43,685) (34,735) Total Equity 231,003 181,000 210,845 250,761 162,483 145,807 162,724 172,632

Total Liabilities & Equity 2,683,475 2,805,484 2,916,137 3,022,524 3,130,280 3,293,762 3,429,856 3,558,814

Manitoba Public Insurance Page 17 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4r Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Current Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 207,106 115,366 86,679 101,616 109,503 Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 207,106 115,366 86,679 101,616 109,503

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,628 104,527 108,684 113,029 Unpaid claims 22 191,890 208,689 221,684 229,774 237,888 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 286,549 307,317 326,211 338,458 350,917 Market Risk: Interest rate risk 30 5,120 10,210 11,239 21,081 25,336 Foreign exchange risk 32 15,401 16,442 15,887 15,844 16,736 Equity risk 34 68,120 74,298 70,222 68,687 73,335 Real estate risk 36 25,718 26,617 27,301 28,217 29,702 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 114,359 127,567 124,649 133,829 145,109 Credit Risk: Counterparty default risk for balance sheet assets 40 39,308 58,454 62,539 64,779 65,739 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 39,308 58,454 62,539 64,779 65,739 Operational risk margin 50 64,343 69,982 73,396 76,599 79,944 Less: Diversification credit 52 53,232 61,812 63,381 66,726 70,247 Total Capital (Margin) Required at Target 59 451,327 501,508 523,414 546,939 571,462 Minimum Capital (Margin) Required (line 59 / 1.5) 60 300,885 334,338 348,943 364,626 380,975 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 300,885 334,338 348,943 364,626 380,975 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (93,779) (218,972) (262,264) (263,010) (271,472) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 68.83% 34.51% 24.84% 27.87% 28.74%

Manitoba Public Insurance Page 18 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4s Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Net Claims Incurred Summary

(C$ 000s, except where noted) 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Claims Incurred before Financial Provisions

Collision 415,906 438,817 502,295 489,510 538,731 576,791 Comprehensive 69,497 99,940 112,592 131,640 117,910 124,970 Property Damage 48,647 46,844 49,742 49,423 51,954 53,781 Public Liability - BI 4,680 5,025 8,428 3,965 5,332 5,385 PIPP 187,022 174,815 274,357 279,099 228,539 227,887

Total 726,240 765,440 947,413 953,637 942,467 988,815

Total Net Claims Incurred 767,240 786,142 1,036,291 1,014,770 1,004,307 1,064,008

Manitoba Public Insurance Page 19 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4t Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Deferred Policy Acquisition Expenses and Premium Deficiency

A. Claims (Including External Adjustment Expense) Data Accident Year Selected Selected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undisc Disc 1. Ultimate Loss Ratio - Total All Coverage 83.09% 72.79% 81.77% 81.34% 74.59% 73.25% 79.09% 74.52% 73.10% 74.08% 2. Trend/Rate Adjustment for Fiscal Year 2017 0.9142 0.9259 0.9555 0.9697 0.9888 2018 0.9151 0.9384 0.9464 0.9589 0.9937 2019 0.9529 0.9589 0.9695 1.0025 1.0143 2020 0.9456 0.9560 0.9885 1.0002 1.0053 2021 0.9656 0.9979 1.0091 1.0136 1.0155 2022 1.0026 1.0143 1.0194 1.0217 1.0150 3. Adjusted Loss Ratio for Fiscal Year [(1) x (2)] 2017 75.96% 67.39% 78.12% 78.88% 73.76% 75.95% 80.85% 2018 66.61% 76.73% 76.98% 71.52% 72.79% 73.68% 78.15% 2019 77.91% 78.00% 72.31% 73.43% 80.21% 76.45% 81.43% 2020 76.91% 71.31% 72.41% 79.10% 74.91% 74.75% 80.05% 2021 72.02% 73.10% 79.80% 75.53% 74.23% 74.29% 79.66% 2022 73.44% 80.21% 75.96% 74.68% 75.20% 75.28% 80.80%

B. Actual Data Other Than Losses Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4. Net Earned Premium 764,671 803,881 861,065 907,145 960,142 1,039,407 1,100,939 1,158,450 1,215,690 1,264,513 5. Operating Expenses as % of Earned Premium 11.06% 11.14% 10.26% 9.94% 8.99% 8.98% 8.27% 8.15% 8.11% 8.05% 6. Maintenance Expense Rate [(5) x 1/3] 3.69% 3.71% 3.42% 3.31% 3.00% 2.99% 2.76% 2.72% 2.70% 2.68% Selected 3.16% 2.99% 2.88% 2.74% 2.71% 2.69% 7. ILAE Ratio to Losses - Selected 18.40% 18.40% 18.40% 18.40% 18.40% 18.40%

C. Equity in Unearned Premium

8. Net Unearned Premium 468,613 506,193 527,155 558,962 581,194 604,428 9. Additional Expected Cost of Non-Proportional Reinsurance 5,598 5,710 5,824 5,941 6,059 6,059 10. Expected Claims (Including Ext Adj Expenses) [((8) - (9)) x (3)] 383,468 391,133 424,540 442,716 458,163 483,454 11. Reinsurance PFAD 10 - - - - - 12. Maintenance Expense [a] 13,837 14,989 14,988 15,135 15,583 16,116 13. Internal Loss Adjustment Expense [Sheet 1, Row 11] 70,595 71,968 78,115 81,460 84,302 88,955 14. Expected Claims (Including Ext Adj Expenses) - PIPP Enhancement 3,950 3,950 3,950 3,950 3,950 3,950 15. Equity in Unearned Premium [(8) - Sum((9) to (14))] (8,845) 18,443 (262) 9,761 13,137 5,893 16. Carried Deferred Policy Acquisition Expenses 32,055 29,489 30,737 32,664 33,996 35,391 17. Write Down Deferred Policy Acquisition Expenses [b] 32,055 11,046 30,737 22,903 20,859 29,498 Change 2,363 (21,009) 19,691 (7,834) (2,043) 8,639 18. Premium Deficiency [c] 8,845 - 262 - - - Change 2,001 (8,845) 262 (262) - -

Notes: [a] ((8) - (9)) x (6) x Discount to Valuation Date Without Margin [b] Min((16) - (15), (16)) if greater than 0, otherwise 0 [c] Negative of (15) if greater than 0, otherwise 0

Manitoba Public Insurance Page 20 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-16 (b) Appendix 4

Appendix 4u Combined Scenario with 69% MCT after Management Action - Minimum Total Equity Summary of Corporate Investment Income

2018/19 2019/20 2020/21 2021/22 2022/23 Forecasted

Interest Income During Period Cash/Short Term Investments 255 91 0 0 (1) Marketable Bonds 44,346 53,673 57,430 61,226 65,052 MUSH 26,759 24,361 22,065 19,852 17,693 Total 71,361 78,125 79,495 81,077 82,744

Dividend and other Income Canadian Equities 9,646 5,743 4,565 4,839 5,474 Global 4,213 5,975 4,766 5,029 5,643 Global LV - 2,894 2,893 3,055 3,443 Private Debt - 3,745 10,006 10,022 10,034 Investment Properties (Cityplace) 4,940 1,926 2,512 2,452 2,312 Infrastructure 1,472 1,136 1,183 1,249 1,319 Total 20,271 21,418 25,925 26,645 28,225

Gains During Period - Profit & Loss Marketable Bonds Unrealized Gains/(Loss) (40,474) 9,454 28,890 (6,099) (1,596) Marketable Bonds Realized Gains/(Loss) 13,622 31,900 13,025 6,425 (694) MUSH - - - - - Canadian Equities Realized Gains 69,208 (2,368) (4,645) 83 0 Global Equities Realized Gains 66,310 (606) (6,628) 105 698 Global LV Realized Gains - (99) (4,081) 71 0 Real Estate (Pooled Fund) 16,307 5,601 5,845 6,196 6,568 Infrastructure 5,765 4,448 4,635 4,894 5,168 Total 130,739 48,332 37,042 11,675 10,144

Other Investment Fees Paid (5,201) (4,733) (4,565) (4,758) (4,973) Pension Expense (13,441) (13,872) (14,313) (14,757) (15,207) Amortization on Marketable Bonds (Prem) / Discount (6,209) 2,476 (733) (1,565) (1,947) Investment Write-Down - - - - - Total (24,851) (16,129) (19,611) (21,080) (22,127)

Total Corporate Investment Income 197,519 131,745 127,576 98,352 98,799

Total Basic Investment Income 169,377 116,574 114,704 81,198 79,681 % - Basic to Total Investment Income 85.75% 88% 90% 83% 81%

Equity Unrealized Gains/(Losses) Canadian Equities Unrealized Gains/(Losses) 12,099 (3,158) (3,855) 5,120 6,109 US Equities Unrealized Gains/(Losses) 7,529 (3,435) (3,798) 7,504 8,421 Global LV Unrealized Gains/(Losses) - (1,894) (2,286) 4,171 4,702 Total Corporate Unrealized Gains/(Losses) 19,628 (6,593) (7,653) 12,624 14,530

Ending Asset Values for Corporate ($Millions) Cash/Short Term Investments - - - - - Canadian Fixed Income 1,758.1 1,698.1 1,890.5 2,065.4 2,218.5 MUSH 569.3 522.8 477.0 432.3 386.3 Canadian Equities 123.3 139.6 143.4 155.2 177.0 Global Equities 166.7 175.8 180.1 194.6 207.0 Global LV Equities 96.6 110.9 114.1 122.8 139.5 Private Debt - 188.8 193.5 193.5 193.3 Real Estate 133.5 138.1 143.9 150.7 161.8 Infrastructure & Venture Capital 78.3 82.8 87.4 92.3 97.5 Total Ending Asset Values 2,925.9 3,056.8 3,229.9 3,406.7 3,580.8

Total Basic Assets 2,516.0 2,622.7 2,745.9 2,862.1 2,978.5

Manitoba Public Insurance Page 21 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-17

PUB (MPI) 1-17

Part and VI RSR Page No.: 10-11 Chapter: PUB Approved 7.1. Update of DCAT Issue No: Topic: DCAT Modified Base Scenario Sub Topic: Treatment of Capital Maintenance Provision (CMP)

Preamble to IR (If Any):

The Corporation has proposed a CMP in their 2019 GRA. However, the methodology and the proposed amount of this provision (+2.1%) have not yet been approved by the PUB. For the purposes of the DCAT analysis, MPI has assessed the satisfactory financial condition of Basic Insurance excluding the CMP. [RSR.4.5.1.1]

Question: a) The Corporation states: … the DCAT modeling assumption is that the maximum RSR rebuilding fee in response to an adverse event is 2.0% per year; however, this assumption would likely be eliminated (or reduced significantly) if the CMP was included in the base forecast. Please explain. b) The Corporation states: … it is MPI’s position that including the CMP in the calculation of the PUB’s lower and upper RSR targets is not appropriate. If a standard approach to determining a CMP is approved by the PUB, why would it not be appropriate to include a CMP in each year of the forecast period to reflect a best estimate forecast of Basic Insurance operations? c) The Corporation states: The inclusion of the CMP, or a future capital build and release provision, should not impact the calculation of the actual RSR targets. Does the Corporation agree that the decision to include or exclude the CMP in the financial forecast used in the calculation of the lower and upper Basic Total Equity target range thresholds is of little significance when using the Board approved iterative methodology?

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-17

d) The Corporation states: The exclusion of any proposed capital adjustments in the calculation of the required RSR targets will also result in more consistent year-to- year assessments of the capital targets. Considering the Board approved iterative methodology, please explain.

Rationale for Question:

To assess the Corporation’s position on excluding the CMP for DCAT purposes.

RESPONSE: a) Under the previous approach to rate setting and capital management (i.e. 2017 GRA and prior), the Corporation’s Basic rates were forecasted to essentially produce a net income of zero over the rating period. This approach, on average, would result in an RSR (capital) balance that was forecasted by design to remain constant in absolute dollar terms over time and declining in relative terms (as measured by the MCT ratio or by the size of the business in general). If the RSR balance fell below the minimum RSR target, it was then assumed in the DCAT that the Corporation would charge a maximum 2.0% additional RSR rebuilding fee each year until the minimum RSR balance was restored.

Under the Corporation’s proposed approach to rate setting and capital management in the 2019/20 GRA, it has applied for Basic rates assuming zero profit (as in the 2018/19 GRA), but has also applied to for a capital maintenance provision to ensure that the capitalization rate of Basic does not decline over time. By proactively maintaining capital in each GRA (rather than allowing capitalization to decline), the need to reactively respond to adverse events with successive 2.0% surcharges and/or rate increases is reduced. Also, the policyholders contribution to maintaining capital is collected each year, rather than collecting monies from policyholders who happen to have policies in the year(s) after an adverse event occurs.

b) A capital maintenance provision and/or the capital build and release provision should not reduce/change the RSR capital targets. The lower and upper RSR

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-17

targets should be calculated based upon a best-estimate methodology before the application of any capital adjustments. The Corporation would then use its capital management plan to determine how to adjust capital given these RSR targets. Including the capital adjustments in the RSR target calculation exercise would result in a circular calculation. c) The Corporation cannot support the Board approved RSR methodology for the reasons provided in PUB(MPI) 1-16b and Part VI RSR.4. The Board is asking the Corporation to accept a lower RSR target that is less than the minimum amount required for satisfactory future financial condition. The methodology that MPI has submitted does not suffer from this shortcoming. The inclusion of a capital maintenance provision will significantly lower the RSR capital targets in the Board approved RSR methodology. d) See part c).

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-18

PUB (MPI) 1-18

Part and VI DCAT Page No.: 34-54 Chapter: PUB Approved 7. Update of DCAT Issue No: Topic: DCAT Adverse Scenarios Sub Topic: Combined Scenario

Preamble to IR (If Any):

Question:

Please summarize the differences (and rationale for these differences) between modeling assumptions used in the Combined Scenario vs. those used in each of the Decline in Equity Markets Scenario, the High Loss Ratio Scenario, and the Interest Rate Decline Scenario.

Rationale for Question:

To assess the reasonableness of the DCAT and Target Capital Analysis scenario assumptions.

RESPONSE:

The assumptions used in the Combined Scenario are the same assumptions as used in each of the Decline in Equity Markets Scenario, the High Loss Ratio Scenario, and the Interest Rate Decline Scenario, with the inclusion of a modeled Canadian Corporate Bond default rate as outlined in Part VI DCAT.5.6.

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-19

PUB (MPI) 1-19

Part and VI DCAT Page No.: 65, 68 Chapter: PUB Approved 7. Update of DCAT Issue No: Topic: DCAT Adverse Scenarios Sub Topic: Policy Liabilities Risk and Inflation Risk Scenarios

Preamble to IR (If Any):

Question: a) The Corporation states: … the risk of unfavourable variations in policy liabilities does exist. The Corporation will conduct further research on this topic for the 2019 DCAT. Please outline the direction and nature of the planned research in this regard, and indicate whether this will include consideration of the DCAT prepared for Saskatchewan Auto Fund, if made available. b) With respect to Inflation Risk, the Corporation states: We assumed that (i) the severity of all new claims in these periods would increase by the additional (compounded) inflation amount, (ii) PIPP claims from prior years would be indexed at the observed inflation, and (iii) the long term inflation projection of 2.0% would not change. i. What is meant by “observed inflation”? ii. What is the significance to the modeling results of assuming no change in the long term inflation projection? iii. Please summarize the assumed impact on Basic costs other than claims?

Rationale for Question:

To assess the reasonableness of the DCAT and Target Capital Analysis scenario assumptions.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-19

RESPONSE: a) The Corporation intends to:

i. Build a policy liability mis-estimation model based on historical 1, 2, 3, and 4 year percentage changes to policy liabilities relative to original booked/forecasted amounts, with appropriate adjustments for unique circumstances/outliers;

ii. Build a policy liability stochastic model based on the variability in the underlying loss experience assuming centralized reserving was in-place in all prior loss years (i.e. adjust prior loss years to reflect centralized reserving assumptions); and

iii. Use information from the above two analyses to create a single model for DCAT purposes.

While the Corporation is, open to having discussions with the Saskatchewan Auto Fund, it notes that the Saskatchewan Auto Fund will ultimately decide whether to share this potentially confidential information with the Corporation. b) i. The Corporation is referring to the observed inflation resulting from the sustained increase in inflation of 2.8% from 2019/20 to 2022/23;

ii. For forecasting purposes, the Corporation would continue to assume that claim liabilities would be discounted at the real rate assuming the long-run inflation expectation of 2.0%; and

iii. The Corporation assumed no other impacts beyond the impact to claims.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-20

PUB (MPI) 1-20

Part and VI DCAT Page No.: 8-26 Chapter: Appendix 6 PUB Approved 7. Update of DCAT Issue No: Topic: DCAT Adverse Scenarios Sub Topic: Stochastic Modeling

Preamble to IR (If Any):

Question:

For each coverage (and all Basic coverages combined), please add information for the simulated mean values into the tables showing Cumulative Simulated Ultimate Losses and Cumulative Simulated Ultimate Losses minus Base Forecast.

Rationale for Question:

To assess the reasonableness of the DCAT and Target Capital Analysis scenario assumptions.

RESPONSE:

Please see Appendix 1 for the updated tables.

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1a DCAT Appendix 6 -4 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line Property Weekly ABO- Non-Hail No. Range Collision Damage Indemnity ABO-Indexed NonIndexed Comp Public Liability 1 0-10K 92.24% 99.10% 64.38% 94.06% 53.14% 98.13% 44.42% 2 10K-50K 7.73% 0.82% 24.02% 4.84% 37.62% 1.84% 32.34% 3 50K-100K 0.03% 0.05% 4.12% 0.63% 5.87% 0.03% 10.36% 4 100K-250K 0.00% 0.02% 2.84% 0.25% 2.62% 0.00% 10.36% 5 250K-500K 0.00% 0.00% 1.95% 0.12% 0.67% 0.00% 2.40% 6 500K-1M 0.00% 0.00% 2.10% 0.05% 0.07% 0.00% 0.11% 7 1M - 2M 0.00% 0.00% 0.58% 0.02% 0.00% 0.00% 0.00% 8 2M - 3M 0.00% 0.00% 0.01% 0.02% 0.00% 0.00% 0.00% 9 3M - 5M 0.00% 0.00% 0.01% 0.01% 0.00% 0.00% 0.00% 10 Average $3,895 $1,135 $44,102 $5,347 $21,589 $1,353 $41,443 11 Standard Dev. $4,586 $3,460 $154,796 $54,064 $41,355 $3,085 $67,803

Manitoba Public Insurance Page 1 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1b DCAT Appendix 6 -6 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $76,840 $76,953 $77,046 $77,119 $77,171 3 Cumulative $76,840 $153,793 $230,840 $307,959 $385,130

Manitoba Public Insurance Page 2 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1c DCAT Appendix 6 -7 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $77,262 $154,663 $232,106 $309,806 $387,417 3 2.5% $57,595 $126,368 $196,698 $268,032 $340,723 4 5% $60,384 $130,500 $202,178 $274,641 $348,018 5 10% $63,830 $135,462 $208,390 $282,126 $356,382 6 25% $69,765 $144,108 $219,130 $294,744 $370,600 7 50% $76,865 $154,105 $231,560 $309,321 $386,802 8 75% $84,207 $164,737 $244,517 $324,384 $403,718 9 90% $91,278 $174,462 $256,626 $338,106 $419,319 10 95% $95,667 $180,493 $263,934 $346,949 $428,881 11 97.5% $99,639 $186,075 $270,484 $354,341 $437,275

Manitoba Public Insurance Page 3 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1d DCAT Appendix 6 -8 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $421 $870 $1,267 $1,847 $2,287 3 2.5% ($19,245) ($27,425) ($34,141) ($39,927) ($44,407) 4 5% ($16,456) ($23,293) ($28,662) ($33,318) ($37,112) 5 10% ($13,011) ($18,332) ($22,450) ($25,833) ($28,748) 6 25% ($7,076) ($9,685) ($11,709) ($13,215) ($14,530) 7 50% $24 $312 $720 $1,362 $1,672 8 75% $7,367 $10,943 $13,677 $16,425 $18,588 9 90% $14,438 $20,668 $25,786 $30,147 $34,189 10 95% $18,827 $26,699 $33,094 $38,990 $43,751 11 97.5% $22,799 $32,282 $39,644 $46,382 $52,145

Manitoba Public Insurance Page 4 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1e DCAT Appendix 6 -9 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.5% 0.6% 0.5% 0.6% 0.6% 2 2.5% -25.0% -17.8% -14.8% -13.0% -11.5% 3 5% -21.4% -15.1% -12.4% -10.8% -9.6% 4 10% -16.9% -11.9% -9.7% -8.4% -7.5% 5 25% -9.2% -6.3% -5.1% -4.3% -3.8% 6 50% 0.0% 0.2% 0.3% 0.4% 0.4% 7 75% 9.6% 7.1% 5.9% 5.3% 4.8% 8 90% 18.8% 13.4% 11.2% 9.8% 8.9% 9 95% 24.5% 17.4% 14.3% 12.7% 11.4% 10 97.5% 29.7% 21.0% 17.2% 15.1% 13.5%

Manitoba Public Insurance Page 5 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1f DCAT Appendix 6 -10 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $63,849 $64,567 $65,294 $66,028 $66,770 3 Cumulative $63,849 $128,416 $193,710 $259,738 $326,508

Manitoba Public Insurance Page 6 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1g DCAT Appendix 6 -11 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $64,287 $129,356 $195,112 $261,561 $328,832 3 2.5% $50,843 $109,850 $170,733 $232,971 $296,619 4 5% $52,743 $112,708 $174,247 $237,281 $301,415 5 10% $54,974 $116,019 $178,658 $242,377 $307,079 6 25% $58,919 $121,897 $185,964 $251,000 $316,925 7 50% $63,852 $128,908 $194,662 $261,027 $328,274 8 75% $69,151 $136,330 $203,660 $271,592 $340,237 9 90% $74,138 $143,321 $212,216 $281,447 $351,256 10 95% $77,326 $147,738 $217,370 $287,438 $358,021 11 97.5% $80,118 $151,445 $221,964 $292,972 $364,025

Manitoba Public Insurance Page 7 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1h DCAT Appendix 6 -12 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $438 $940 $1,402 $1,823 $2,324 3 2.5% ($13,006) ($18,566) ($22,977) ($26,767) ($29,889) 4 5% ($11,106) ($15,708) ($19,463) ($22,457) ($25,093) 5 10% ($8,875) ($12,398) ($15,052) ($17,361) ($19,430) 6 25% ($4,930) ($6,520) ($7,746) ($8,738) ($9,583) 7 50% $3 $492 $952 $1,289 $1,765 8 75% $5,302 $7,914 $9,950 $11,854 $13,728 9 90% $10,289 $14,905 $18,505 $21,709 $24,748 10 95% $13,478 $19,321 $23,660 $27,700 $31,513 11 97.5% $16,269 $23,029 $28,254 $33,234 $37,516

Manitoba Public Insurance Page 8 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1i DCAT Appendix 6 -13 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.7% 0.7% 0.7% 0.7% 0.7% 2 2.5% -20.4% -14.5% -11.9% -10.3% -9.2% 3 5% -17.4% -12.2% -10.0% -8.6% -7.7% 4 10% -13.9% -9.7% -7.8% -6.7% -6.0% 5 25% -7.7% -5.1% -4.0% -3.4% -2.9% 6 50% 0.0% 0.4% 0.5% 0.5% 0.5% 7 75% 8.3% 6.2% 5.1% 4.6% 4.2% 8 90% 16.1% 11.6% 9.6% 8.4% 7.6% 9 95% 21.1% 15.0% 12.2% 10.7% 9.7% 10 97.5% 25.5% 17.9% 14.6% 12.8% 11.5%

Manitoba Public Insurance Page 9 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1j DCAT Appendix 6 -14 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $30,911 $31,350 $31,796 $32,249 $32,707 3 Cumulative $30,911 $62,261 $94,058 $126,306 $159,014

Manitoba Public Insurance Page 10 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1k DCAT Appendix 6 -15 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $30,954 $62,342 $94,170 $126,454 $159,217 3 2.5% $24,692 $53,333 $83,027 $113,530 $144,684 4 5% $25,694 $54,767 $84,776 $115,539 $147,004 5 10% $26,805 $56,401 $86,853 $117,959 $149,572 6 25% $28,716 $59,164 $90,268 $121,909 $154,086 7 50% $30,900 $62,290 $94,108 $126,388 $159,177 8 75% $33,115 $65,476 $98,011 $130,924 $164,246 9 90% $35,167 $68,357 $101,619 $135,057 $168,899 10 95% $36,450 $70,143 $103,734 $137,610 $171,697 11 97.5% $37,554 $71,693 $105,615 $139,775 $174,096

Manitoba Public Insurance Page 11 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1l DCAT Appendix 6 -16 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $43 $81 $112 $148 $203 3 2.5% ($6,219) ($8,928) ($11,030) ($12,777) ($14,329) 4 5% ($5,217) ($7,495) ($9,281) ($10,767) ($12,010) 5 10% ($4,106) ($5,860) ($7,204) ($8,347) ($9,442) 6 25% ($2,195) ($3,098) ($3,789) ($4,398) ($4,928) 7 50% ($10) $29 $51 $82 $163 8 75% $2,204 $3,215 $3,953 $4,618 $5,232 9 90% $4,257 $6,096 $7,562 $8,751 $9,886 10 95% $5,539 $7,881 $9,677 $11,304 $12,684 11 97.5% $6,643 $9,432 $11,558 $13,469 $15,082

Manitoba Public Insurance Page 12 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1m DCAT Appendix 6 -17 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.1% 0.1% 0.1% 0.1% 0.1% 2 2.5% -20.1% -14.3% -11.7% -10.1% -9.0% 3 5% -16.9% -12.0% -9.9% -8.5% -7.6% 4 10% -13.3% -9.4% -7.7% -6.6% -5.9% 5 25% -7.1% -5.0% -4.0% -3.5% -3.1% 6 50% 0.0% 0.0% 0.1% 0.1% 0.1% 7 75% 7.1% 5.2% 4.2% 3.7% 3.3% 8 90% 13.8% 9.8% 8.0% 6.9% 6.2% 9 95% 17.9% 12.7% 10.3% 8.9% 8.0% 10 97.5% 21.5% 15.1% 12.3% 10.7% 9.5%

Manitoba Public Insurance Page 13 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1n DCAT Appendix 6 -18 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $5,090 $5,159 $5,229 $5,299 $5,371 3 Cumulative $5,090 $10,249 $15,478 $20,777 $26,148

Manitoba Public Insurance Page 14 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1o DCAT Appendix 6 -19 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $5,066 $10,208 $15,407 $20,683 $26,029 3 2.5% $2,497 $6,659 $11,058 $15,669 $20,378 4 5% $3,016 $7,313 $11,810 $16,513 $21,356 5 10% $3,523 $8,002 $12,657 $17,478 $22,428 6 25% $4,297 $9,083 $14,017 $19,063 $24,187 7 50% $5,094 $10,243 $15,441 $20,727 $26,076 8 75% $5,884 $11,371 $16,852 $22,369 $27,928 9 90% $6,595 $12,397 $18,113 $23,832 $29,588 10 95% $7,021 $12,998 $18,858 $24,677 $30,557 11 97.5% $7,396 $13,508 $19,509 $25,447 $31,375

Manitoba Public Insurance Page 15 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1p DCAT Appendix 6 -20 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average ($24) ($41) ($71) ($94) ($119) 3 2.5% ($2,593) ($3,590) ($4,420) ($5,108) ($5,770) 4 5% ($2,074) ($2,936) ($3,668) ($4,264) ($4,792) 5 10% ($1,567) ($2,247) ($2,821) ($3,299) ($3,720) 6 25% ($793) ($1,166) ($1,460) ($1,713) ($1,960) 7 50% $3 ($6) ($36) ($50) ($72) 8 75% $794 $1,122 $1,374 $1,592 $1,780 9 90% $1,505 $2,148 $2,636 $3,055 $3,441 10 95% $1,931 $2,749 $3,381 $3,900 $4,410 11 97.5% $2,306 $3,259 $4,031 $4,670 $5,228

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Appendix PUB 1-20 - Appendix 1q DCAT Appendix 6 -21 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average -0.5% -0.4% -0.5% -0.5% -0.5% 2 2.5% -50.9% -35.0% -28.6% -24.6% -22.1% 3 5% -40.7% -28.6% -23.7% -20.5% -18.3% 4 10% -30.8% -21.9% -18.2% -15.9% -14.2% 5 25% -15.6% -11.4% -9.4% -8.2% -7.5% 6 50% 0.1% -0.1% -0.2% -0.2% -0.3% 7 75% 15.6% 11.0% 8.9% 7.7% 6.8% 8 90% 29.6% 21.0% 17.0% 14.7% 13.2% 9 95% 37.9% 26.8% 21.8% 18.8% 16.9% 10 97.5% 45.3% 31.8% 26.0% 22.5% 20.0%

Manitoba Public Insurance Page 17 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1r DCAT Appendix 6 -22 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $438,325 $469,244 $502,411 $537,993 $576,172 3 Cumulative $438,325 $907,569 $1,409,979 $1,947,972 $2,524,144

Manitoba Public Insurance Page 18 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1s DCAT Appendix 6 -23 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $438,364 $907,309 $1,409,414 $1,946,996 $2,522,998 3 2.5% $390,190 $837,320 $1,320,829 $1,840,654 $2,401,683 4 5% $397,548 $848,008 $1,334,878 $1,857,811 $2,421,106 5 10% $406,462 $860,672 $1,351,266 $1,877,828 $2,443,500 6 25% $421,486 $882,730 $1,378,503 $1,910,461 $2,481,476 7 50% $438,333 $907,055 $1,409,345 $1,947,063 $2,522,864 8 75% $455,165 $931,713 $1,440,207 $1,983,481 $2,564,548 9 90% $470,421 $954,072 $1,467,728 $2,016,090 $2,602,541 10 95% $479,787 $967,374 $1,484,090 $2,035,644 $2,625,566 11 97.5% $487,524 $978,391 $1,498,652 $2,052,422 $2,644,776

Manitoba Public Insurance Page 19 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1t DCAT Appendix 6 -24 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $39 ($260) ($565) ($976) ($1,146) 3 2.5% ($48,135) ($70,249) ($89,151) ($107,318) ($122,462) 4 5% ($40,777) ($59,561) ($75,101) ($90,161) ($103,038) 5 10% ($31,863) ($46,897) ($58,714) ($70,144) ($80,645) 6 25% ($16,839) ($24,839) ($31,477) ($37,511) ($42,668) 7 50% $8 ($514) ($634) ($909) ($1,280) 8 75% $16,841 $24,144 $30,227 $35,509 $40,404 9 90% $32,096 $46,503 $57,749 $68,118 $78,397 10 95% $41,462 $59,805 $74,110 $87,672 $101,422 11 97.5% $49,199 $70,822 $88,672 $104,450 $120,632

Manitoba Public Insurance Page 20 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1u DCAT Appendix 6 -25 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.0% 0.0% 0.0% -0.1% 0.0% 2 2.5% -11.0% -7.7% -6.3% -5.5% -4.9% 3 5% -9.3% -6.6% -5.3% -4.6% -4.1% 4 10% -7.3% -5.2% -4.2% -3.6% -3.2% 5 25% -3.8% -2.7% -2.2% -1.9% -1.7% 6 50% 0.0% -0.1% 0.0% 0.0% -0.1% 7 75% 3.8% 2.7% 2.1% 1.8% 1.6% 8 90% 7.3% 5.1% 4.1% 3.5% 3.1% 9 95% 9.5% 6.6% 5.3% 4.5% 4.0% 10 97.5% 11.2% 7.8% 6.3% 5.4% 4.8%

Manitoba Public Insurance Page 21 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1v DCAT Appendix 6 -26 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $75,812 $80,697 $85,901 $91,430 $97,237 3 Cumulative $75,812 $156,509 $242,410 $333,839 $431,077

Manitoba Public Insurance Page 22 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1x DCAT Appendix 6 -27 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $75,946 $157,218 $244,168 $337,067 $436,272 3 2.5% $67,386 $143,789 $226,773 $316,044 $412,189 4 5% $68,325 $145,462 $229,118 $318,924 $415,392 5 10% $69,502 $147,490 $231,791 $322,251 $419,277 6 25% $71,831 $151,269 $236,710 $328,385 $426,312 7 50% $75,009 $156,173 $243,112 $335,899 $435,039 8 75% $79,004 $161,997 $250,377 $344,528 $444,943 9 90% $83,630 $168,248 $257,984 $353,383 $454,874 10 95% $86,792 $172,712 $263,011 $359,080 $461,062 11 97.5% $89,918 $176,712 $267,738 $364,435 $467,131

Manitoba Public Insurance Page 23 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1y DCAT Appendix 6 -28 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $134 $710 $1,758 $3,228 $5,195 3 2.5% ($8,426) ($12,720) ($15,637) ($17,796) ($18,888) 4 5% ($7,487) ($11,047) ($13,292) ($14,916) ($15,684) 5 10% ($6,310) ($9,018) ($10,619) ($11,588) ($11,800) 6 25% ($3,981) ($5,239) ($5,699) ($5,454) ($4,764) 7 50% ($803) ($336) $702 $2,059 $3,962 8 75% $3,192 $5,488 $7,967 $10,689 $13,866 9 90% $7,818 $11,740 $15,574 $19,543 $23,798 10 95% $10,980 $16,203 $20,601 $25,240 $29,985 11 97.5% $14,106 $20,204 $25,328 $30,596 $36,054

Manitoba Public Insurance Page 24 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1z DCAT Appendix 6 -29 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.2% 0.5% 0.7% 1.0% 1.2% 2 2.5% -11.1% -8.1% -6.5% -5.3% -4.4% 3 5% -9.9% -7.1% -5.5% -4.5% -3.6% 4 10% -8.3% -5.8% -4.4% -3.5% -2.7% 5 25% -5.3% -3.3% -2.4% -1.6% -1.1% 6 50% -1.1% -0.2% 0.3% 0.6% 0.9% 7 75% 4.2% 3.5% 3.3% 3.2% 3.2% 8 90% 10.3% 7.5% 6.4% 5.9% 5.5% 9 95% 14.5% 10.4% 8.5% 7.6% 7.0% 10 97.5% 18.6% 12.9% 10.4% 9.2% 8.4%

Manitoba Public Insurance Page 25 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1aa DCAT Appendix 6 -30 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $23,722 $24,646 $25,606 $26,603 $27,640 3 Cumulative $23,722 $48,368 $73,974 $100,578 $128,217

Manitoba Public Insurance Page 26 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ab DCAT Appendix 6 -31 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $51,952 $105,913 $161,701 $219,950 $280,575 3 2.5% $9,500 $28,036 $52,137 $80,811 $112,830 4 5% $11,055 $32,346 $59,511 $91,132 $126,381 5 10% $13,520 $38,613 $69,895 $105,760 $144,787 6 25% $20,153 $53,684 $93,238 $136,726 $184,319 7 50% $33,730 $81,090 $133,406 $189,072 $247,786 8 75% $60,695 $128,804 $198,116 $268,641 $341,780 9 90% $108,743 $203,102 $291,454 $378,266 $463,274 10 95% $156,937 $270,863 $368,494 $460,330 $551,823 11 97.5% $214,360 $339,957 $438,189 $535,666 $629,993

Manitoba Public Insurance Page 27 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ac DCAT Appendix 6 -32 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $28,230 $57,545 $87,727 $119,372 $152,358 3 2.5% ($14,222) ($20,332) ($21,837) ($19,767) ($15,388) 4 5% ($12,667) ($16,023) ($14,463) ($9,445) ($1,836) 5 10% ($10,202) ($9,755) ($4,080) $5,183 $16,570 6 25% ($3,569) $5,315 $19,263 $36,149 $56,101 7 50% $10,008 $32,722 $59,432 $88,494 $119,569 8 75% $36,973 $80,436 $124,141 $168,063 $213,563 9 90% $85,021 $154,734 $217,480 $277,688 $335,057 10 95% $133,215 $222,494 $294,520 $359,752 $423,606 11 97.5% $190,638 $291,589 $364,215 $435,089 $501,776

Manitoba Public Insurance Page 28 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ad DCAT Appendix 6 -33 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 119.0% 119.0% 118.6% 118.7% 118.8% 2 2.5% -60.0% -42.0% -29.5% -19.7% -12.0% 3 5% -53.4% -33.1% -19.6% -9.4% -1.4% 4 10% -43.0% -20.2% -5.5% 5.2% 12.9% 5 25% -15.0% 11.0% 26.0% 35.9% 43.8% 6 50% 42.2% 67.7% 80.3% 88.0% 93.3% 7 75% 155.9% 166.3% 167.8% 167.1% 166.6% 8 90% 358.4% 319.9% 294.0% 276.1% 261.3% 9 95% 561.6% 460.0% 398.1% 357.7% 330.4% 10 97.5% 803.6% 602.9% 492.4% 432.6% 391.3%

Manitoba Public Insurance Page 29 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ae DCAT Appendix 6 -34 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $25,784 $52,172 $79,179 $107,032 $135,654 3 2.5% $9,500 $27,731 $47,911 $69,906 $92,808 4 5% $11,055 $30,894 $52,307 $74,901 $98,525 5 10% $13,520 $34,772 $57,338 $80,771 $105,341 6 25% $19,103 $41,871 $66,017 $91,079 $116,960 7 50% $24,473 $50,145 $76,157 $103,023 $130,262 8 75% $30,858 $58,841 $86,925 $115,556 $144,795 9 90% $36,436 $67,342 $97,931 $129,216 $161,627 10 95% $40,857 $73,452 $107,347 $143,201 $183,625 11 97.5% $43,247 $82,243 $133,149 $187,795 $245,384

Manitoba Public Insurance Page 30 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1af DCAT Appendix 6 -35 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $2,062 $3,803 $5,205 $6,454 $7,436 3 2.5% ($14,222) ($20,637) ($26,063) ($30,671) ($35,410) 4 5% ($12,667) ($17,475) ($21,667) ($25,676) ($29,692) 5 10% ($10,202) ($13,596) ($16,637) ($19,807) ($22,876) 6 25% ($4,619) ($6,498) ($7,957) ($9,499) ($11,257) 7 50% $751 $1,776 $2,182 $2,445 $2,045 8 75% $7,136 $10,473 $12,950 $14,978 $16,577 9 90% $12,714 $18,974 $23,956 $28,638 $33,410 10 95% $17,135 $25,084 $33,372 $42,623 $55,408 11 97.5% $19,524 $33,874 $59,175 $87,217 $117,167

Manitoba Public Insurance Page 31 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ag DCAT Appendix 6 -36 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 8.7% 7.9% 7.0% 6.4% 5.8% 2 2.5% -60.0% -42.7% -35.2% -30.5% -27.6% 3 5% -53.4% -36.1% -29.3% -25.5% -23.2% 4 10% -43.0% -28.1% -22.5% -19.7% -17.8% 5 25% -19.5% -13.4% -10.8% -9.4% -8.8% 6 50% 3.2% 3.7% 3.0% 2.4% 1.6% 7 75% 30.1% 21.7% 17.5% 14.9% 12.9% 8 90% 53.6% 39.2% 32.4% 28.5% 26.1% 9 95% 72.2% 51.9% 45.1% 42.4% 43.2% 10 97.5% 82.3% 70.0% 80.0% 86.7% 91.4%

Manitoba Public Insurance Page 32 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ah DCAT Appendix 6 -37 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $46,849 $48,465 $50,150 $51,908 $53,743 3 Cumulative $46,849 $95,314 $145,464 $197,372 $251,115

Manitoba Public Insurance Page 33 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ai DCAT Appendix 6 -38 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $46,828 $95,289 $145,431 $197,343 $251,081 3 2.5% $42,366 $88,959 $137,473 $188,118 $240,566 4 5% $43,049 $89,932 $138,777 $189,568 $242,233 5 10% $43,916 $91,096 $140,263 $191,262 $244,248 6 25% $45,264 $93,058 $142,657 $194,138 $247,461 7 50% $46,809 $95,244 $145,409 $197,338 $251,085 8 75% $48,373 $97,512 $148,207 $200,536 $254,687 9 90% $49,785 $99,527 $150,645 $203,432 $257,940 10 95% $50,654 $100,763 $152,124 $205,159 $259,916 11 97.5% $51,384 $101,758 $153,388 $206,613 $261,638

Manitoba Public Insurance Page 34 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1aj DCAT Appendix 6 -39 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average ($21) ($25) ($33) ($29) ($34) 3 2.5% ($4,483) ($6,356) ($7,991) ($9,254) ($10,549) 4 5% ($3,801) ($5,382) ($6,687) ($7,804) ($8,882) 5 10% ($2,933) ($4,219) ($5,201) ($6,110) ($6,868) 6 25% ($1,585) ($2,256) ($2,807) ($3,234) ($3,654) 7 50% ($41) ($70) ($55) ($33) ($31) 8 75% $1,524 $2,198 $2,743 $3,164 $3,572 9 90% $2,935 $4,213 $5,181 $6,060 $6,825 10 95% $3,804 $5,449 $6,661 $7,787 $8,801 11 97.5% $4,535 $6,444 $7,924 $9,241 $10,523

Manitoba Public Insurance Page 35 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ak DCAT Appendix 6 -40 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.0% 0.0% 0.0% 0.0% 0.0% 2 2.5% -9.6% -6.7% -5.5% -4.7% -4.2% 3 5% -8.1% -5.6% -4.6% -4.0% -3.5% 4 10% -6.3% -4.4% -3.6% -3.1% -2.7% 5 25% -3.4% -2.4% -1.9% -1.6% -1.5% 6 50% -0.1% -0.1% 0.0% 0.0% 0.0% 7 75% 3.3% 2.3% 1.9% 1.6% 1.4% 8 90% 6.3% 4.4% 3.6% 3.1% 2.7% 9 95% 8.1% 5.7% 4.6% 3.9% 3.5% 10 97.5% 9.7% 6.8% 5.4% 4.7% 4.2%

Manitoba Public Insurance Page 36 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1al DCAT Appendix 6 -41 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Base Forecast 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Annual $768,995 $808,678 $851,029 $896,226 $944,409 3 Cumulative $768,995 $1,577,673 $2,428,702 $3,324,928 $4,269,337

Manitoba Public Insurance Page 37 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1am DCAT Appendix 6 -42 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $772,087 $1,583,750 $2,437,777 $3,337,330 $4,285,482 3 2.5% $709,369 $1,492,587 $2,323,123 $3,200,848 $4,128,767 4 5% $719,101 $1,506,751 $2,340,218 $3,222,388 $4,153,951 5 10% $730,603 $1,523,759 $2,361,284 $3,246,638 $4,182,159 6 25% $749,689 $1,551,207 $2,396,710 $3,288,473 $4,229,526 7 50% $771,403 $1,582,356 $2,436,170 $3,335,459 $4,283,196 8 75% $793,244 $1,614,420 $2,476,807 $3,383,432 $4,338,419 9 90% $813,588 $1,644,794 $2,514,025 $3,428,526 $4,390,752 10 95% $826,330 $1,663,910 $2,538,530 $3,458,056 $4,424,730 11 97.5% $838,893 $1,682,953 $2,562,337 $3,486,208 $4,455,645

Manitoba Public Insurance Page 38 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1an DCAT Appendix 6 -43 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 ($000) 2 Average $3,092 $6,077 $9,074 $12,401 $16,146 3 2.5% ($59,627) ($85,087) ($105,580) ($124,080) ($140,569) 4 5% ($49,894) ($70,922) ($88,484) ($102,541) ($115,386) 5 10% ($38,392) ($53,914) ($67,418) ($78,290) ($87,178) 6 25% ($19,306) ($26,467) ($31,993) ($36,456) ($39,810) 7 50% $2,408 $4,683 $7,468 $10,531 $13,859 8 75% $24,249 $36,747 $48,105 $58,504 $69,083 9 90% $44,593 $67,120 $85,322 $103,598 $121,415 10 95% $57,335 $86,236 $109,828 $133,128 $155,393 11 97.5% $69,898 $105,280 $133,634 $161,280 $186,309

Manitoba Public Insurance Page 39 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ao DCAT Appendix 6 -44 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Line No. Percentile 2018/19 2019/20 2020/21 2021/22 2022/23 1 Average 0.4% 0.4% 0.4% 0.4% 0.4% 2 2.5% -7.8% -5.4% -4.3% -3.7% -3.3% 3 5% -6.5% -4.5% -3.6% -3.1% -2.7% 4 10% -5.0% -3.4% -2.8% -2.4% -2.0% 5 25% -2.5% -1.7% -1.3% -1.1% -0.9% 6 50% 0.3% 0.3% 0.3% 0.3% 0.3% 7 75% 3.2% 2.3% 2.0% 1.8% 1.6% 8 90% 5.8% 4.3% 3.5% 3.1% 2.8% 9 95% 7.5% 5.5% 4.5% 4.0% 3.6% 10 97.5% 9.1% 6.7% 5.5% 4.9% 4.4%

Manitoba Public Insurance Page 40 August 8, 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-20 Appendix 1

Appendix PUB 1-20 - Appendix 1ap DCAT Appendix 6 -47 Cumulative Simulated Ultimate Losses % Deviation from Base Forecast – All Basic Coverages

Historical Historical Line. Simulation Variability Simulation Variability No. Percentile 1 Year 1 Year 5 Year 5 Year 1 10% -5.0% -3.5% -2.0% -1.8% 2 25% -2.5% -2.1% -0.9% -1.3% 3 50% 0.3% 1.0% 0.3% 0.1% 4 75% 3.2% 3.3% 1.6% 1.1% 5 90% 5.8% 3.7% 2.8% 1.7%

Manitoba Public Insurance Page 41 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-21

PUB (MPI) 1-21

Part and VI INV Investments; Page No.: 14 Chapter: Figure INV-5 PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investment Income Forecast Sub Topic: Major Asset Class

Preamble to IR (If Any):

Question:

Please indicate how the Corporation determined the Global equity returns.

Rationale for Question:

To assess the reasonableness of forecast investment income.

RESPONSE:

The method for determining the equity return ordered by the PUB (as per Order No. 157/12) uses the 5th percentile 20 year annualized return of the S&P/TSX index. For this year’s application, the total return for Canadian, U.S. and Global equities was calculated to be 7.0%.

For comparison, Mercer’s Capital Market Assumptions used in the most recent ALM study used the same 6.5% return for Canadian, U.S. and Global equities.

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-22

PUB (MPI) 1-22

Part and VI INV Investments; Page No.: 14 Chapter: Figure INV-5 PUB Approved 8. (i) Performance of the Investment Portfolio and the Issue No: composition of the Portfolio Topic: Investment Portfolio Sub Topic: Major Asset Class

Preamble to IR (If Any):

Question: a) Please provide details on the fixed income holdings for 2017/18, including issue amount and yield. b) Please indicate the extent to which MPI has invested in Corporate Bonds and indicate the composition of those bonds, by rating. c) Please provide a schedule indicating the actual yields on Corporate Bond investments, a comparison with the GOC 10 year bonds, and the spread.

Rationale for Question:

To assess the reasonableness of forecast investment income.

RESPONSE: a) Please refer to Appendix 1 attached.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-22

b) As of June 30, 2018, the Corporation has invested a total of $116.9 million in corporate bonds, which represents 4.1% of the total investment portfolio. The composition of corporate bonds by credit rating is described in the table below.

Figure 1:

Rating Amount ($) % AAA 2,961,887 2.5% AA+ - 0.0% AA - 0.0% AA- 7,472,701 6.4% A+ 36,675,260 31.4% A 26,539,447 22.7% A- 43,215,329 37.0% Total 116,864,624 100.0%

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-22

c) The table below indicates the actual yields on corporate bond investments and their spreads relative to the Government of Canada 10 year bond as of June 30, 2018.

Figure 2:

As of June 30, 2018 Issuer Rating MV Plus YTM (%) GOC 10 YR (%) Spread (%) Term Accrued (a) (b) (a-b) (in years) Income ($) ACCESS ROADS EDMONTON A 4,305,727 3.64% 2.17% 1.47% 19.3 ALTALINK LP A 2,483,428 3.55% 2.17% 1.38% 25.2 DAIMLER CANADA FINANCE A 2,452,463 2.89% 2.17% 0.72% 3.0 407 INTERNATIONAL INC A 2,769,728 3.56% 2.17% 1.39% 23.8 407 INTERNATIONAL INC A 4,103,703 3.62% 2.17% 1.45% 27.9 HYDRO ONE INC A 2,916,644 3.64% 2.17% 1.47% 25.3 IGM FINANCIAL INC A 4,770,002 3.93% 2.17% 1.76% 12.9 IGM FINANCIAL INC A 2,737,752 3.97% 2.17% 1.80% 14.7 ANHEUSER-BUSCH INBEV FIN A- 5,194,486 2.80% 2.17% 0.63% 4.6 ANHEUSER-BUSCH INBEV FIN A- 4,881,561 3.11% 2.17% 0.94% 5.9 CU INC A- 2,911,109 3.55% 2.17% 1.38% 23.3 CANADIAN WESTERN BANK A- 5,015,411 2.96% 2.17% 0.79% 3.2 CANADIAN WESTERN BANK A- 2,522,799 2.90% 2.17% 0.73% 2.7 CENTRAL 1 CREDIT UNION A- 4,918,789 3.10% 2.17% 0.93% 4.4 ENBRIDGE GAS DISTRIBUTION A- 2,695,817 3.62% 2.17% 1.45% 26.2 ENBRIDGE GAS DISTRIBUTION A- 1,721,778 3.62% 2.17% 1.45% 29.4 MANULIFE FINANCIAL CORP TR REC A- 2,470,157 3.30% 2.17% 1.13% 11.1 MANULIFE FIN DELAWARE A- 7,880,304 4.21% 2.17% 2.04% 23.5 UNION GAS LTD A- 3,003,117 3.59% 2.17% 1.42% 23.0 BMW CANADA INC A+ 2,455,400 2.68% 2.17% 0.51% 2.5 LTI BMO A+ 2,916,622 3.10% 2.17% 0.93% 8.4 LTI BMO A+ 2,974,635 3.00% 2.17% 0.83% 6.2 GREAT WEST LIFECO INC. A+ 3,382,174 3.70% 2.17% 1.53% 14.7 GREAT WEST LIFECO INC. A+ 3,354,123 3.72% 2.17% 1.55% 21.4 WINNIPEG AIRPORT AUTHORITY A+ 10,184,758 3.59% 2.17% 1.42% 22.3 WINNIPEG AIRPORT AUTHORITY A+ 5,709,349 3.44% 2.17% 1.27% 22.4 WINNIPEG AIRPORT AUTHORITY A+ 2,023,749 2.92% 2.17% 0.75% 4.8 WINNIPEG AIRPORT AUTHORITY A+ 3,674,450 3.44% 2.17% 1.27% 29.3 HSBC BANK CANADA AA- 4,852,745 2.96% 2.17% 0.79% 4.0 ROYAL BANK OF CANADA AA- 2,619,956 3.07% 2.17% 0.90% 7.0 CPPIB AAA 2,961,887 2.13% 2.17% -0.04% 1.9 Total 116,864,624

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-22 (a) Appendix 1

CUSIP Investment Description Units Cost Yield Bonds - Non Marketable 1331 Non-Marketable Bonds 617,525,688.31 617,624,220.23 4.570 00433JAA3 Bonds-Corporate ACCESS ROADS EDMONTON 3,671,695.45 3,824,951.96 5.669 02135ZAK2 Bonds-Corporate ALTALINK LP 2,000,000.00 2,506,000.00 4.922 03524BAB2 Bonds-Corporate ANHEUSER-BUSCH INBEV FIN 5,000,000.00 5,205,150.00 3.375 03524BAG1 Bonds-Corporate ANHEUSER-BUSCH INBEV FIN 5,000,000.00 4,953,200.00 2.600 05590HAT4 Bonds-Corporate BMW CANADA INC 2,500,000.00 2,483,250.00 1.880 06368AAA8 Bonds-Corporate LTI BMO 3,000,000.00 3,049,590.00 2.700 06368AAD2 Bonds-Corporate LTI BMO 3,000,000.00 2,999,610.00 2.700 12593CAA9 Bonds-Corporate CPPIB 3,000,000.00 2,994,390.00 1.400 12657ZAW3 Bonds-Corporate CU INC 2,500,000.00 2,949,000.00 4.543 136765AW4 Bonds-Corporate CANADIAN WESTERN BANK 5,000,000.00 5,043,500.00 2.788 136765AZ7 Bonds-Corporate CANADIAN WESTERN BANK 2,500,000.00 2,530,500.00 2.881 154728AN9 Bonds-Corporate CENTRAL 1 CREDIT UNION 5,000,000.00 5,009,500.00 2.600 23384NAV9 Bonds-Corporate DAIMLER CANADA FINANCE 2,500,000.00 2,468,750.00 1.910 29290ZAP5 Bonds-Corporate ENBRIDGE GAS DISTRIBUTION 2,500,000.00 2,729,000.00 4.000 29290ZAS9 Bonds-Corporate ENBRIDGE GAS DISTRIBUTION 1,750,000.00 1,750,000.00 3.510 35085ZBF2 Bonds-Corporate 407 INTERNATIONAL INC 2,500,000.00 2,808,000.00 4.190 35085ZBL9 Bonds-Corporate 407 INTERNATIONAL INC 3,900,000.00 4,107,168.00 3.830 39138CAD8 Bonds-Corporate GREAT WEST LIFECO INC. 2,500,000.00 3,420,250.00 6.670 39138CAF3 Bonds-Corporate GREAT WEST LIFECO INC. 2,500,000.00 3,342,750.00 5.998 40427HTB9 Bonds-Corporate HSBC BANK CANADA 5,000,000.00 4,960,500.00 2.170 44810ZBK5 Bonds-Corporate HYDRO ONE INC 2,500,000.00 2,971,750.00 4.590 46152HAD3 Bonds-Corporate IGM FINANCIAL INC 3,500,000.00 4,830,000.00 7.450 46152HAG6 Bonds-Corporate IGM FINANCIAL INC 2,000,000.00 2,740,000.00 7.110 56501RAF3 Bonds-Corporate MANULIFE FINANCIAL CORP TR REC 2,500,000.00 2,510,500.00 3.049 780085N93 Bonds-Corporate ROYAL BANK OF CANADA 2,300,000.00 2,744,958.00 4.930 89353ZBV9 Bonds-Corporate TRANSCANADA PIPELINES 5,000,000.00 5,536,500.00 4.550 89353ZBZ0 Bonds-Corporate TRANSCANADA PIPELINES 2,000,000.00 2,157,800.00 4.350 90664ZAU4 Bonds-Corporate UNION GAS LTD 2,500,000.00 3,058,500.00 4.880 975014AA9 Bonds-Corporate WINNIPEG AIRPORT AUTHORITY 8,760,510.52 8,760,510.52 5.205 975014AC5 Bonds-Corporate WINNIPEG AIRPORT AUTHORITY 4,484,033.77 4,484,033.77 6.102 975014AD3 Bonds-Corporate WINNIPEG AIRPORT AUTHORITY 2,000,000.00 2,000,000.00 3.039 975014AE1 Bonds-Corporate WINNIPEG AIRPORT AUTHORITY 3,500,000.00 3,500,000.00 3.659 013051DM6 Bonds-Government ALBERTA 6,000,000.00 6,392,520.00 3.100 013051DQ7 Bonds-Government ALBERTA 49,000,000.00 49,116,720.00 2.350 013051DR5 Bonds-Government ALBERTA 9,000,000.00 8,938,022.00 1.250 013051DT1 Bonds-Government ALBERTA 28,700,000.00 28,180,450.00 2.200 013051DW4 Bonds-Government ALBERTA 8,000,000.00 7,845,840.00 2.550 013051DY0 Bonds-Government ALBERTA 34,000,000.00 32,918,270.00 3.050 01306ZCV1 Bonds-Government Alberta TSY 12,800,000.00 12,579,840.00 2.900 01306ZDC2 Bonds-Government Alberta TSY 3,000,000.00 3,285,217.69 3.900 1107098Y1 Bonds-Government PROV OF BRITISH COLUMBIA 10,000,000.00 12,482,000.00 4.300 11070TAG3 Bonds-Government PROV OF BRITISH COLUMBIA 13,000,000.00 12,751,922.38 2.800 11070TAJ7 Bonds-Government PROV OF BRITISH COLUMBIA 4,800,000.00 4,863,264.00 2.300 40649CTR7 Bonds-Government HALTON REGIONAL MUNICIPALITY 2,000,000.00 1,990,360.00 4.050 4488148V8 Bonds-Government QUEBEC HYDRO BOND 5,000,000.00 5,402,050.00 4.000 448814DG5 Bonds-Government QUEBEC HYDRO BOND 2,000,000.00 2,747,323.04 11.000 505443AB7 Bonds-Government CANADA LABRADOR-ISLAND LINK FU 10,000,000.00 10,608,550.00 3.860 56344ZCG2 Bonds-Government PROVINCE OF MANITOBA BOND 5,100,000.00 7,350,630.00 6.300 56344ZEH8 Bonds-Government PROVINCE OF MANITOBA BOND 22,550,000.00 28,691,839.55 6.300 56344ZJM2 Bonds-Government PROVINCE OF MANITOBA BOND 30,000,000.00 38,265,800.00 5.330 56344ZPV5 Bonds-Government PROVINCE OF MANITOBA BOND 20,000,000.00 19,007,400.00 3.150 563469TH8 Bonds-Government PROVINCE OF MANITOBA BOND 10,000,000.00 12,430,000.00 4.700 563469TW5 Bonds-Government PROVINCE OF MANITOBA BOND 8,000,000.00 7,962,240.00 3.350 56346ZKW6 Bonds-Government PROVINCE OF MANITOBA 10,777,000.00 7,329,231.53 - 570344AA9 Bonds-Government MARITIME LINK FINANCING TR 5,000,000.00 4,983,050.00 3.500 614853CC1 Bonds-Government VILLE MONTREAL 5,000,000.00 4,957,400.00 5.000 614853CJ6 Bonds-Government VILLE MONTREAL 2,000,000.00 2,135,140.00 5.450 614853CM9 Bonds-Government VILLE MONTREAL 11,000,000.00 12,128,580.00 4.500 614853CV9 Bonds-Government VILLE MONTREAL 2,400,000.00 2,349,714.49 3.500 628153AC2 Bonds-Government MUSKRAT FALLS 10,000,000.00 11,047,900.00 3.860 6428668Z3 Bonds-Government PROV OF NEW BRUNSWICK BOND 3,500,000.00 3,752,805.00 4.400 642866FW2 Bonds-Government PROV OF NEW BRUNSWICK BOND 10,000,000.00 12,033,600.00 4.650 642866FZ5 Bonds-Government PROV OF NEW BRUNSWICK BOND 10,000,000.00 11,952,400.00 4.550 642866GA9 Bonds-Government PROV OF NEW BRUNSWICK BOND 5,000,000.00 5,043,537.35 4.800 642866GK7 Bonds-Government PROV OF NEW BRUNSWICK BOND 2,000,000.00 1,998,750.00 2.600

Page 1 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-22 (a) Appendix 1

CUSIP Investment Description Units Cost Yield 642866GL5 Bonds-Government PROV OF NEW BRUNSWICK BOND 14,700,000.00 13,769,343.00 3.100 642869AE1 Bonds-Government PROVINCE OF NEW BRUNSWICK 13,000,000.00 12,722,630.00 3.550 651329BE3 Bonds-Government NFLD LABRADOR HYDRO BOND 4,500,000.00 4,259,320.00 3.600 651333EG7 Bonds-Government NEWFOUNDLAND PROV 3,800,000.00 3,954,676.88 6.500 651333EZ5 Bonds-Government NEWFOUNDLAND PROV 10,000,000.00 13,633,700.00 6.550 651333FM3 Bonds-Government NEWFOUNDLAND PROV 10,000,000.00 12,924,300.00 5.600 651333FQ4 Bonds-Government NEWFOUNDLAND PROV 22,000,000.00 26,603,070.00 4.500 651333FS0 Bonds-Government NEWFOUNDLAND PROV 7,700,000.00 7,378,294.00 2.300 651333FT8 Bonds-Government NEWFOUNDLAND PROV 22,500,000.00 21,160,075.00 3.300 651333FY7 Bonds-Government NEWFOUNDLAND PROV 22,300,000.00 22,647,032.15 3.700 65355DZC2 Bonds-Government NIAGARA REG MUNI 1,000,000.00 993,980.00 5.200 669827FL6 Bonds-Government PROVINCE OF NOVA SCOTIA 12,000,000.00 16,574,400.00 5.800 669827FP7 Bonds-Government PROVINCE OF NOVA SCOTIA 15,000,000.00 19,633,500.00 4.900 669827FZ5 Bonds-Government PROVINCE OF NOVA SCOTIA 10,000,000.00 10,681,197.68 3.450 669827GA9 Bonds-Government PROVINCE OF NOVA SCOTIA 10,000,000.00 9,994,200.00 2.100 6832348J0 Bonds-Government PROVINCE OF ONTARIO BOND 10,000,000.00 10,899,500.00 4.200 683234B98 Bonds-Government PROVINCE OF ONTARIO BOND 1,700,000.00 2,205,948.34 4.650 683234NM6 Bonds-Government PROVINCE OF ONTARIO BOND 3,100,000.00 4,115,963.00 6.200 683234YD4 Bonds-Government PROVINCE OF ONTARIO BOND 5,000,000.00 6,109,000.00 4.700 683234ZP6 Bonds-Government PROVINCE OF ONTARIO BOND 1,000,000.00 983,393.33 4.600 68323AAD6 Bonds-Government PROVINCE OF ONTARIO 25,000,000.00 27,473,750.00 4.000 68323AAY0 Bonds-Government PROVINCE OF ONTARIO 18,000,000.00 18,720,000.00 3.500 68323ABN3 Bonds-Government PROVINCE OF ONTARIO 9,800,000.00 10,330,882.09 2.850 68323ADM3 Bonds-Government PROVINCE OF ONTARIO 29,400,000.00 29,683,595.12 2.400 68323AEE0 Bonds-Government PROVINCE OF ONTARIO 107,000,000.00 107,356,250.00 2.600 68323Z4W6 Bonds-Government ONTARIO GENERAL RESIDUALS 4,800,000.00 3,313,872.00 2.992 68323ZUK3 Bonds-Government ONTARIO GENERAL RESIDUALS 12,300,000.00 8,277,900.00 - 689551DE6 Bonds-Government CITY OF OTTAWA 5,000,000.00 4,972,000.00 5.050 689551ED7 Bonds-Government CITY OF OTTAWA 6,935,000.00 7,287,159.00 4.200 689551ER6 Bonds-Government CITY OF OTTAWA 5,000,000.00 4,951,400.00 3.050 705464EQ4 Bonds-Government PEEL REG ONTARIO 5,000,000.00 5,294,150.00 4.250 741666CF6 Bonds-Government PRINCE EDWARD ISLAND 3,123,000.00 4,491,186.30 8.500 741666CN9 Bonds-Government PRINCE EDWARD ISLAND 2,200,000.00 2,189,858.66 6.100 741666CS8 Bonds-Government PRINCE EDWARD ISLAND 9,000,000.00 9,960,780.00 4.650 741666DA6 Bonds-Government PRINCE EDWARD ISLAND 5,000,000.00 4,927,500.00 2.350 74814ZEF6 Bonds-Government PROVINCE OF QUEBEC 5,000,000.00 6,956,250.00 5.000 74814ZEK5 Bonds-Government PROVINCE OF QUEBEC 10,000,000.00 11,873,400.00 4.250 74814ZER0 Bonds-Government PROVINCE OF QUEBEC 18,900,000.00 19,896,384.91 3.500 74814ZEV1 Bonds-Government PROVINCE OF QUEBEC 20,000,000.00 20,369,200.00 2.750 74814ZEW9 Bonds-Government PROVINCE OF QUEBEC 35,000,000.00 37,889,000.00 3.500 74814ZEX7 Bonds-Government PROVINCE OF QUEBEC 28,000,000.00 28,358,500.00 2.500 803854GY8 Bonds-Government PROV OF SASKATCHEWAN BOND 5,000,000.00 6,955,850.00 5.750 803854JH2 Bonds-Government PROV OF SASKATCHEWAN BOND 5,000,000.00 7,254,400.00 5.600 803854JJ8 Bonds-Government PROV OF SASKATCHEWAN BOND 3,000,000.00 3,892,110.00 5.000 803854JL3 Bonds-Government PROV OF SASKATCHEWAN BOND 5,000,000.00 6,750,400.00 4.750 803854JT6 Bonds-Government PROV OF SASKATCHEWAN BOND 16,000,000.00 16,290,680.00 3.400 803854JU3 Bonds-Government PROV OF SASKATCHEWAN BOND 4,500,000.00 5,272,830.00 3.900 803854KA5 Bonds-Government PROV OF SASKATCHEWAN BOND 5,000,000.00 4,789,650.00 2.750 803854KB3 Bonds-Government PROV OF SASKATCHEWAN BOND 7,700,000.00 7,658,346.00 2.550 803854KC1 Bonds-Government PROV OF SASKATCHEWAN BOND 30,000,000.00 30,051,500.00 3.300 891288DJ8 Bonds-Government CITY OF TORONTO 2,500,000.00 2,491,400.00 3.400 921577RE4 Bonds-Government CITY OF VANCOUVER 3,100,000.00 3,097,365.00 3.450 975026HB4 Bonds-Government CITY OF WINNIPEG 11,500,000.00 12,342,461.67 4.300 975026HC2 Bonds-Government CITY OF WINNIPEG 17,350,000.00 18,533,731.50 4.100 98704CQR0 Bonds-Government MUNICIPALITY OF YORK REGION 4,520,000.00 4,828,896.80 4.000 98704CQT6 Bonds-Government MUNICIPALITY OF YORK REGION 5,000,000.00 5,522,500.00 4.000 98704CQZ2 Bonds-Government MUNICIPALITY OF YORK REGION 5,000,000.00 4,740,850.00 2.350 DOFSWAP$1 Bonds-Government PROV OF QUEBEC BOND 13,350,000.00 13,350,000.00 5.760 1,800,796,928.05 1,875,215,711.94

Page 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-23

PUB (MPI) 1-23

Part and VI INV.2.1.1 Page No.: 16 Chapter: PUB Approved 8. Performance of the investment portfolio Issue No: 21. Asset Liability Management Study Topic: Investments Sub Topic: ALM Study Outcomes

Preamble to IR (If Any):

The portfolio backing the Basic claims will consist of 100% fixed income, the portfolios backing Extension, SRE and RSR will be balanced (50% growth assets/50% fixed income assets), and the portfolio backing EFB will have a slightly higher allocation to growth assets at 60%. Currently, the portfolios recommended for RSR, Extension and SRE have the same asset allocations (50/50 growth/fixed income), but because the portfolios are unique (i.e. no assets shared between them) the asset allocations can be changed in the future if necessary.

Question:

Please explain how MPI intends to monitor its portfolio allocations to assess whether changes should be made in the asset allocations in the future.

Rationale for Question:

To understand possible future changes to asset allocations.

RESPONSE:

The process of monitoring the asset allocation will be very similar to the Corporation’s current process. Specifically, the Corporation has a portfolio-rebalancing policy, which will be applied to the new portfolios. Each portfolio has target weights for each asset

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-23

class (as well as minimum and maximum weight). The Corporation will ensure that the asset classes remain within the approved ranges and rebalance as necessary. The Investment Department monitors actual portfolio weights on a monthly basis and provides reports to the Investment Committee Working Group at each meeting, recommending corrective action as necessary. Changes to the target weights are reviewed only when asset-liability management studies are completed.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-24

PUB (MPI) 1-24

Part and VI INV.2.2 Page No.: 23 Chapter: PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investments Sub Topic: Accommodation of Commingled Portfolio

Preamble to IR (If Any):

Manager searches must be conducted and accounting systems and processes must be redesigned to accommodate the separation of the commingled portfolio.

Question:

a) Please provide a progress update on manager searches, redesigning of accounting systems and processes, and any other steps necessary to accommodate the separation of the commingled portfolio. b) Please explain what options were considered to minimize transactional costs related to the portfolio segregation.

Rationale for Question:

To understand the details and impact behind the accommodations of the commingled portfolio.

RESPONSE: a) The Corporation issued a request for proposals seeking a consultant to assist with the manager searches in early July. Responses are due in late July. The Corporation expects the consultant, once selected, to begin working in mid-August.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-24

The Corporation has done the following to redesign its accounting systems and processes in order to accommodate the separation of the commingled portfolio:

a) reviewed existing allocations relating to the accommodation of sub- accounts;

b) completed additional training on the Portfolio Accounting Management (PAM) investment accounting system;

c) determined that PAM can adequately manage the five new portfolios; and

d) identified specific securities for each portfolio.

The Corporation plans to carry out the following in August or September:

a) determine new allocation methodology for balance sheet and investment income;

b) build new portfolios into PAM;

c) test the transfer of investments, interfaces & minimal allocation;

d) create new accounts in Lawson; and

e) obtain a license for a new PAM system module in order to reduce the requirement for manual processing and to allow for more robust testing. b) The Corporation will fund the new asset classes, including private debt purchases, using MUSH bond maturities. MUSH bond maturities will not incur any transaction costs. Redemptions from the Greystone Real Estate Fund will not involve any transaction costs as the redemption will be funded largely by drawdowns from new investors to the fund. The Corporation estimates that these two items will total approximately $395 million or 52% of the withdrawals required to segregate the assets.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-25

PUB (MPI) 1-25

Part and VI INV.2.2.1; Figure Page No.: 24-25 Chapter: INV-8 PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investments Sub Topic: Interest Rate Forecasting

Preamble to IR (If Any):

The projections in this table are based on a Naïve interest rate forecast.

Question:

Instead of using a Naïve interest rate forecast, please refile the Figure INV-8 table under each scenario using: a) 50/50 b) Mercer’s interest rate forecast - standard c) Mercer’s interest rate forecast – forward curve

Rationale for Question:

To understand the change in financial impact to the Basic line of business under different interest rate forecast approaches.

Manitoba Public Insurance Page 1 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-25

RESPONSE: a) See the figure below for the March 50/50 forecast

Figure 1: Financial Impact to Basic Line of Business - March 2018 50/50 Forecast

Line Scenario 2018/19 2019/20 2020/21 2021/22 2022/23 No Ending Asset Values (C$ 000's) 1 Basic Net Income 2 GRA Forecast - ALM 144,582 27,053 28,486 16,615 4,796 3 GRA Forecast - No ALM 49,323 31,077 30,219 25,665 11,695 4 Difference 95,259 (4,024) (1,733) (9,050) (6,899)

5 Basic Investment Income 6 GRA Forecast - ALM 169,379 67,338 82,542 96,140 97,598 7 GRA Forecast - No ALM 63,549 74,837 88,972 99,881 103,049 8 Difference 105,830 (7,499) (6,430) (3,741) (5,451)

9 Basic Total Equity 10 GRA Forecast - ALM 263,445 298,426 336,090 362,943 379,394 11 GRA Forecast - No ALM 266,442 305,727 343,279 376,953 397,088 12 Difference (2,997) (7,301) (7,188) (14,010) (17,693)

13 Basic MCT Ratio 14 GRA Forecast - ALM 73% 75% 79% 82% 82% 15 GRA Forecast - No ALM 57% 60% 63% 68% 69% 16 Difference 16% 16% 16% 14% 12%

Manitoba Public Insurance Page 2 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-25

b) Please see the figure below for INV-8 restated for Mercer’s interest rate forecast – standard as of August 2017.

Figure 2: Financial Impact to Basic Line of Business - Mercer's Interest Rate Forecast - Standard

Line Scenario 2018/19 2019/20 2020/21 2021/22 2022/23 No Ending Asset Values (C$ 000's) 1 Basic Net Income 2 GRA Forecast - ALM 139,865 21,910 22,053 10,854 6,506 3 GRA Forecast - No ALM 44,494 24,167 27,556 28,064 14,788 4 Difference 95,371 (2,257) (5,503) (17,210) (8,282)

5 Basic Investment Income 6 GRA Forecast - ALM 181,760 80,860 80,973 60,837 67,031 7 GRA Forecast - No ALM 75,948 85,826 87,949 74,099 80,954 8 Difference 105,812 (4,966) (6,976) (13,262) (13,923)

9 Basic Total Equity 10 GRA Forecast - ALM 258,728 288,527 319,718 340,345 357,843 11 GRA Forecast - No ALM 261,549 293,989 328,959 363,906 386,160 12 Difference (2,821) (5,462) (9,241) (23,561) (28,317)

13 Basic MCT Ratio 14 GRA Forecast - ALM 71% 72% 74% 76% 77% 15 GRA Forecast - No ALM 55% 57% 60% 65% 67% 16 Difference 16% 16% 15% 11% 10%

Manitoba Public Insurance Page 3 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-25

c) Please see the figure below for INV-8 restated for Mercer’s interest rate forecast – forward curve as of August 2017.

Figure 3: Financial Impact to Basic Line of Business - Mercer's Interest Rate Forecast - Forward Curve

Line Scenario 2018/19 2019/20 2020/21 2021/22 2022/23 No Ending Asset Values (C$ 000's) 1 Basic Net Income 2 GRA Forecast - ALM 136,639 19,482 20,303 5,210 (4,674) 3 GRA Forecast - No ALM 41,279 22,225 25,782 20,185 5,381 4 Difference 95,360 (2,743) (5,479) (14,975) (10,055)

5 Basic Investment Income 6 GRA Forecast - ALM 187,283 78,638 81,615 84,967 88,183 7 GRA Forecast - No ALM 81,402 84,119 88,279 91,753 96,454 8 Difference 105,881 (5,481) (6,664) (6,786) (8,271)

9 Basic Total Equity 10 GRA Forecast - ALM 255,503 282,843 312,259 327,215 333,478 11 GRA Forecast - No ALM 258,383 288,861 322,225 350,100 363,653 12 Difference (2,881) (6,018) (9,967) (22,884) (30,175)

13 Basic MCT Ratio 14 GRA Forecast - ALM 70% 70% 72% 72% 70% 15 GRA Forecast - No ALM 54% 55% 58% 62% 62% 16 Difference 16% 15% 14% 11% 8%

Manitoba Public Insurance Page 4 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-26

PUB (MPI) 1-26

Part and VI INV 10.5; INV Page No.: 59; Appendix 9; 60 Chapter: Appendix 9; Figure INV- 32 PUB Approved 8. Performance of the Investment portfolio Issue No: Topic: Investments Sub Topic: Allocation of Investment Income to Lines of Business

Preamble to IR (If Any):

The 2018-2019 fiscal year applies a methodology consistent to prior year’s forecast; i.e. a net equity allocation formula. The 2019-2020 and subsequent forecast period applies investment income based on the direct proportion of investment assets available to each line of business.

Question:

a) What factors are contributing to Basic’s relative share of corporate investment income declining into the forecast period? b) Please compare and contrast the different methodologies used for the calculations supporting the forecasting of investment income. c) Please provide the detailed calculations, analysis and commentary for the allocation of investment income into the forecast period.

Rationale for Question:

To understand the detailed calculations and analysis behind the allocations of investment income.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-26

RESPONSE: a) The decline of Basic’s relative share of corporate investment income throughout the forecast period is primarily attributable to asset re-allocation, from alternative growth assets (namely Equity, Infrastructure and Real Estate Investments) to lower yielding fixed-income investments. b) The recent ALM study focuses on the shift from the comingling of investment assets to the separation of these assets for the various lines of business. A comparison of the advantages and disadvantages of each approach is provided in Phase 1 of the ALM study which is found at Part VI Investments, Appendix 12, pages 3-6 of the Application. c) Detailed calculations for the investment income allocation of commingled investment assets in 2018/19 are provided at Part VI Investments, Appendix 9 of the Application. Investment income in 2019/20 and subsequent years no longer use the formula as shown in Appendix 9, because investment assets are separated by line of business and any forecasted income is directly accounted for in each respective line of business.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-27

PUB (MPI) 1-27

Part and VI INV 14.1; Figure Page No.: 74-75 Chapter: INV-42 & INV-43 PUB Approved 8. Performance of the Investment portfolio Issue No: Topic: Investments Sub Topic: Interest Rate Forecast

Preamble to IR (If Any):

Question: a) Please provide the actual supporting forecast that was used to populate both INV- 42 and INV-43. b) Please update table INV-42 and INV-43 for the most current date (currently based on February 28, 2018) and also provide the supporting forecasts used for the updated tables.

Rationale for Question:

To understand the details that support the interest rate forecast tables and to obtain a most recent version.

RESPONSE:

a) See Attachment A.

[Attachment C Redacted. The Corporation is seeking confidential treatment of this response].

b) Figure 1 and 2 below are updates to INV-42 and INV-43. See Attachment B for the supporting forecasts.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-27

[Attachment C Redacted. The Corporation is seeking confidential treatment of this response].

Figure 1: SIRF, Naïve and 50/50 GoC 10 Year Bond Forecast as of July 2018

Line Average No. BMO NB CIBC Desjardins Global National RBC Scotia TD (SIRF) Naïve 50/50 1 2018 Q2 2.28% 2.19% 2.17% 2.23% 2.17% 2.17% 2.17% 2.20% 2.20% 2.17% 2.18% 2 Q3 2.30% 2.50% 2.35% 2.43% 2.22% 2.35% 2.40% 2.45% 2.38% 2.17% 2.27% 3 Q4 2.50% 2.55% 2.55% 2.52% 2.57% 2.60% 2.55% 2.55% 2.55% 2.17% 2.36% 4 2019 Q1 2.60% 2.65% 2.70% 2.63% 2.74% 2.70% 2.60% 2.60% 2.65% 2.17% 2.41% 5 Q2 2.65% 2.70% 2.80% 2.74% 2.93% 2.80% 2.65% 2.65% 2.74% 2.17% 2.46% 6 Q3 2.75% 2.65% 2.90% 2.84% 3.01% 2.90% 2.70% 2.70% 2.81% 2.17% 2.49% 7 Q4 2.80% 2.60% 2.95% 2.92% 3.09% 2.95% 2.75% 2.75% 2.85% 2.17% 2.51% 8 2020 Q1 X.XX% 2.72% 3.00% 2.98% 3.26% X.XX% 2.78% 2.96% 2.17% 2.56% 9 Q2 X.XX% 2.75% 3.00% 3.03% 3.37% X.XX% 2.80% 3.01% 2.17% 2.59% 10 Q3 X.XX% 2.80% 2.80% 3.06% 3.35% X.XX% 2.83% 3.01% 2.17% 2.59% 11 Q4 X.XX% 2.85% 2.55% 3.08% 3.33% X.XX% 2.85% 3.00% 2.17% 2.59% 12 2021 Q1 X.XX% 2.90% 2.35% 3.08% 3.31% X.XX% 2.85% 2.99% 2.17% 2.58% 13 Q2 X.XX% 2.95% 2.25% 3.09% 3.29% X.XX% 2.85% 2.97% 2.17% 2.57% 14 Q3 X.XX% 2.96% 2.20% 3.09% 3.33% X.XX% 2.85% 2.97% 2.17% 2.57% 15 Q4 X.XX% 2.98% 2.20% 3.08% 3.37% X.XX% 2.85% 2.99% 2.17% 2.58% 16 2022 Q1 2.20% 3.07% 3.40% X.XX% 2.85% 2.96% 2.17% 2.57% 17 Q2 2.25% 3.06% 3.44% X.XX% 2.85% 2.97% 2.17% 2.57% 18 Q3 2.35% 3.05% 3.48% X.XX% 2.85% 3.01% 2.17% 2.59% 19 Q4 2.45% 3.04% 3.52% X.XX% 2.85% 3.04% 2.17% 2.61%

Figure 2: SIRF, Naïve, 50/50 90-Day T-Bill Forecast as of July 2018

Line Average No. BMO NB CIBC Desjardins Global National RBC Scotia TD (SIRF) Naïve 50/50 1 2018 Q2 1.21% 1.24% 1.26% 1.25% 1.42% 1.26% 1.26% 1.22% 1.27% 1.26% 1.26% 2 Q3 1.50% 1.45% 1.45% 1.49% 1.53% 1.40% 1.55% 1.50% 1.48% 1.26% 1.37% 3 Q4 1.70% 1.45% 1.55% 1.74% 1.88% 1.65% 1.80% 1.63% 1.68% 1.26% 1.47% 4 2019 Q1 1.70% 1.75% 1.70% 1.99% 1.96% 1.90% 2.05% 1.76% 1.83% 1.26% 1.55% 5 Q2 1.95% 1.70% 1.80% 2.24% 2.18% 2.15% 2.30% 1.88% 2.00% 1.26% 1.63% 6 Q3 2.15% 1.95% 1.95% 2.49% 2.21% 2.15% 2.30% 2.01% 2.15% 1.26% 1.71% 7 Q4 2.15% 2.00% 2.05% 2.74% 2.21% 2.15% 2.50% 2.13% 2.22% 1.26% 1.74% 8 2020 Q1 X.XX% 2.10% 2.25% 3.03% 2.39% X.XX% 2.22% 2.35% 1.26% 1.80% 9 Q2 X.XX% 2.20% 2.25% 3.03% 2.47% X.XX% 2.32% 2.42% 1.26% 1.84% 10 Q3 X.XX% 2.21% 2.20% 3.03% 2.41% X.XX% 2.41% 2.40% 1.26% 1.83% 11 Q4 X.XX% 2.23% 1.90% 3.03% 2.35% X.XX% 2.50% 2.35% 1.26% 1.81% 12 2021 Q1 X.XX% 2.24% 1.40% 3.03% 2.28% X.XX% 2.50% 2.30% 1.26% 1.78% 13 Q2 X.XX% 2.25% 1.25% 3.03% 2.22% X.XX% 2.50% 2.31% 1.26% 1.79% 14 Q3 X.XX% 2.26% 1.25% 3.03% 2.22% X.XX% 2.50% 2.30% 1.26% 1.78% 15 Q4 X.XX% 2.28% 1.25% 3.03% 2.22% X.XX% 2.50% 2.30% 1.26% 1.78% 16 2022 Q1 1.25% 3.03% 2.26% X.XX% 2.50% 2.31% 1.26% 1.79% 17 Q2 1.25% 3.03% 2.30% X.XX% 2.50% 2.32% 1.26% 1.79% 18 Q3 1.25% 3.03% 2.33% X.XX% 2.50% 2.33% 1.26% 1.80% 19 Q4 1.25% 3.03% 2.37% X.XX% 2.50% 2.34% 1.26% 1.80%

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A Canadian Economic Outlook Our key forecasts for the Canadian economy March 16, 2018

2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 Production q/q % chng : a.r. Real GDP (chain-weighted) 4.0 4.4 1.5 1.7 1.8 2.3 2.1 1.9 1.8 1.7 1.7 1.6 1.4 3.0 2.0 1.8 Final Sales 1.1 3.5 0.5 2.8 2.2 2.4 2.3 2.0 1.9 1.8 1.8 1.6 1.7 2.2 2.2 2.0 Final Domestic Demand 4.5 3.6 3.9 3.9 1.7 2.3 2.0 1.9 1.9 1.8 1.7 1.6 1.1 3.0 2.7 1.9 Consumer Spending 3.5 4.6 3.7 2.1 2.0 2.3 2.0 1.8 1.8 1.7 1.7 1.4 2.4 3.5 2.4 1.8 Durables 10.9 7.6 1.1 1.6 2.2 2.0 1.7 1.5 1.8 1.7 1.5 1.7 4.5 6.4 2.1 1.7 Nondurables 1.7 6.1 0.6 1.8 2.0 2.2 1.9 1.9 1.6 1.6 1.6 1.3 1.7 2.6 2.0 1.7 Services 2.8 3.0 5.7 2.5 1.9 2.5 2.2 1.9 1.9 1.7 1.8 1.6 2.2 3.2 2.7 1.9 Goverment Spending 2.5 1.1 4.8 4.0 3.7 2.8 2.4 2.3 2.2 2.0 2.0 2.0 2.7 2.5 3.3 2.2 Business Investment 12.1 9.5 5.4 8.2 2.3 2.8 2.4 2.4 2.6 2.3 2.0 2.0 -9.4 2.6 4.3 2.4 Non-residential Construction 2.0 10.8 7.2 5.4 2.2 2.7 2.4 2.3 2.6 2.3 2.0 2.0 -11.5 0.3 4.0 2.4 Machinery and Equipment 29.3 7.7 2.8 12.6 2.5 3.0 2.5 2.5 2.6 2.3 2.0 2.0 -6.0 6.0 4.8 2.4 Residential Construction 9.4 -2.9 -0.2 13.4 -7.0 0.0 0.0 0.0 0.5 1.0 1.0 1.0 3.3 3.1 0.3 0.5 Exports 2.7 6.3 -10.4 3.0 3.4 2.3 2.8 2.2 2.0 2.2 2.2 2.2 1.0 1.0 1.3 2.2 Imports 13.9 6.2 0.3 6.3 1.9 2.2 2.0 1.9 2.0 2.0 2.0 2.0 -1.0 3.6 2.8 2.0 2007$ blns (contribution in ppts : a.r.) Inventory Change 10.2 14.0 16.9 13.8 12.4 12.1 11.6 11.3 10.8 10.2 9.7 9.7 1.0 13.7 11.8 10.1 Contribution to GDP Growth 2.8 0.8 0.7 -0.7 -0.4 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 0.0 -0.3 0.8 -0.1 -0.1 Net Exports 1.8 1.9 -14.7 -19.7 -17.6 -17.4 -16.3 -15.8 -15.9 -15.7 -15.6 -15.4 7.4 -7.7 -16.8 -15.7 Contribution to GDP Growth -3.7 -0.1 -3.4 -1.2 0.4 0.0 0.2 0.1 0.0 0.0 0.0 0.0 0.6 -0.9 -0.5 0.0 $ blns : a.r. (growth in q/q % chng : a.r.) Nominal GDP 2,115 2,137 2,146 2,180 2,205 2,230 2,253 2,275 2,296 2,317 2,337 2,358 2,036 2,144 2,241 2,327 Growth 7.1 4.2 1.7 6.5 4.7 4.7 4.1 4.0 3.7 3.7 3.6 3.6 2.0 5.3 4.5 3.9 Real GDP y/y % chng 2.3 3.7 3.0 2.9 2.3 1.8 2.0 2.0 2.0 1.9 1.8 1.7 Inflation q/q % chng : a.r. GDP Price Index 3.2 -0.3 0.0 5.0 2.8 2.3 1.9 2.0 1.9 1.9 1.9 1.9 0.6 2.3 2.4 2.0 CPI All Items 2.6 0.2 1.4 3.0 3.6 1.3 1.8 2.2 2.5 1.9 2.0 2.1 1.4 1.6 2.2 2.1 Ex. Food and Energy 2.3 0.7 1.4 2.1 2.2 1.1 1.8 2.2 2.6 1.9 2.0 2.1 1.9 1.6 1.8 2.1 Food Prices -1.0 4.2 3.0 0.3 2.0 2.1 1.8 2.1 2.6 2.1 1.8 2.1 1.5 0.0 1.9 2.1 Energy Prices 17.0 -15.1 -4.8 24.8 19.9 1.3 1.6 2.4 1.4 2.3 2.4 2.0 -2.9 5.4 7.9 1.9 Services 2.9 3.7 2.2 0.0 2.4 2.2 2.3 1.5 1.9 2.4 2.3 1.5 1.9 2.2 1.9 2.0 CPI All Items y/y % chng 1.9 1.3 1.4 1.8 2.0 2.3 2.4 2.2 2.0 2.1 2.2 2.1 CPIX8 y/y % chng 1.5 1.0 0.8 1.1 1.3 1.6 1.9 2.0 2.0 2.0 1.9 2.0 1.9 1.1 1.7 2.0 New Core CPIs y/y % chng : avg. 1.5 1.3 1.5 1.7 1.9 2.0 2.0 2.1 2.0 2.0 1.9 2.0 1.9 1.5 2.0 2.0 Financial % : quarterly avg. Overnight Rate 0.50 0.50 0.83 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.50 2.50 0.50 0.71 1.44 2.31 3-Month T-Bill 0.47 0.54 0.81 0.92 1.15 1.20 1.45 1.70 1.90 2.15 2.35 2.35 0.49 0.69 1.35 2.20 90-Day BAs 0.94 0.91 1.31 1.43 1.65 1.70 1.90 2.15 2.35 2.55 2.75 2.75 0.88 1.15 1.85 2.60 10-Year Bond Yield 1.71 1.51 1.95 1.96 2.30 2.40 2.55 2.65 2.80 2.95 3.05 3.20 1.25 1.78 2.45 3.00 Canada/US Spread bps 90 Day -13 -36 -25 -30 -43 -65 -58 -51 -45 -38 -27 -27 17 -26 -54 -34 10 Year -73 -75 -30 -41 -48 -50 -46 -42 -38 -34 -30 -26 -59 -55 -46 -32 Foreign Trade $ blns : a.r. (share in % of GDP) Current Account Balance -54.6 -61.3 -74.4 -65.4 -58.8 -56.8 -55.0 -53.5 -53.5 -53.2 -52.9 -52.4 -65.4 -63.9 -56.0 -53.0 Share of GDP -2.6 -2.9 -3.5 -3.0 -2.7 -2.5 -2.4 -2.4 -2.3 -2.3 -2.3 -2.2 -3.2 -3.0 -2.5 -2.3 Merchandise Balance -10.1 -20.7 -36.1 -28.6 -22.5 -20.5 -18.8 -17.6 -17.7 -17.6 -17.5 -17.4 -25.9 -23.9 -19.8 -17.6 Non-Merchandise Balance -44.5 -40.6 -38.3 -36.8 -36.4 -36.3 -36.2 -35.9 -35.7 -35.6 -35.4 -35.0 -39.5 -40.0 -36.2 -35.4 quarterly avg. US$ US¢/C$ 75.6 74.4 79.9 78.6 79.1 78.1 79.1 79.9 80.3 80.8 81.3 81.8 75.5 77.1 79.1 81.1 C$/US$ 1.323 1.344 1.252 1.272 1.264 1.280 1.265 1.252 1.245 1.237 1.230 1.222 1.326 1.298 1.265 1.234 Yen ¥/C$ 85.9 82.6 88.6 88.8 85.7 82.6 83.4 84.0 84.1 84.2 84.3 84.4 82.0 86.5 83.9 84.2 Euro C$/€ 1.41 1.48 1.47 1.50 1.56 1.59 1.57 1.56 1.56 1.56 1.56 1.56 1.47 1.46 1.57 1.56 Incomes y/y % chng Corporate Profits Before Tax 61.7 69.8 17.5 10.0 3.8 11.3 20.1 9.8 9.5 9.2 9.0 8.8 -6.8 34.8 11.0 9.1 Corporate Profits After Tax 27.1 27.6 15.2 9.5 7.5 12.3 10.5 5.5 5.2 5.5 7.2 8.8 1.9 19.2 8.9 6.7 Personal Income 3.7 4.2 4.5 4.6 5.3 5.0 4.6 4.2 3.9 3.6 3.5 3.5 2.2 4.3 4.8 3.6 Real Disposable Income 4.2 3.6 3.4 3.4 4.1 3.4 2.3 2.0 1.9 1.5 1.3 1.3 1.3 3.7 2.9 1.5 Savings Rate % : quarterly avg. 3.0 3.1 4.0 4.2 4.2 4.3 4.5 4.4 4.4 4.4 4.4 4.5 3.5 3.6 4.4 4.4 Other Indicators quarterly avg. (000s and mlns are a.r.) Unemployment Rate percent 6.6 6.5 6.2 6.0 5.8 5.8 5.7 5.6 5.6 5.6 5.5 5.5 7.0 6.3 5.7 5.5 Housing Starts 000s 222 207 223 229 222 217 204 198 198 196 194 191 198 220 210 195 Existing Home Sales y/y % chng 0.7 -6.5 -10.1 -0.4 -6.1 -8.2 -1.5 -8.0 -5.5 2.3 0.8 0.8 5.9 -4.5 -8.0 2.5 MLS Home Price Index y/y % chng 17.1 17.7 11.5 9.4 6.2 1.4 2.8 1.9 0.8 0.6 1.0 1.7 12.7 13.8 3.0 1.0 Motor Vehicle Sales mlns 2.09 2.07 2.07 2.07 2.05 1.95 1.93 1.93 1.93 1.92 1.91 1.91 1.99 2.08 1.97 1.92 q/q % chng : a.r. Employment Growth 2.1 1.7 2.0 2.6 0.1 2.0 1.3 1.2 0.6 1.0 1.1 1.0 0.7 1.9 1.5 1.0 Industrial Production 5.7 7.7 2.3 0.7 2.5 2.2 2.6 2.2 1.9 1.8 1.6 1.6 0.1 5.1 2.4 2.0 Federal Budget Balance % of FY GDP -0.9 -0.9 -0.8 -0.8 Shaded values represent forecasts Please refer to page 2 for Important Disclosures

Page 1 A publication of BMO Capital Markets Economic Research • Douglas Porter, CFA, Chief Economist • economics.bmocapitalmarkets.com • 416-359-6372 bullets: Position: hanging left ind: 0.3125 first line: -0.25 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

CIBC Capital Markets Economic Insights - March 22, 2018

MARKET CALL

• We’re sticking to our guns that the Bank of Canada will be on hold until July, and that a quarter point hike could be the last we hear from them until 2019. True, there’s a bit more hope now that a NAFTA deal can be reached. But we still have the BoC needing enough evidence that the only 1.6% growth pace in the second half of last year has given way to much better times, and that there isn’t too much of a drag from new mortgage regulation and rate hikes to date.

• Dollar-Canada came a long way towards our 1.32 target, but could lose a few cents if the BoC takes a pass on rate hikes in the next two months. We would see anything through that level as an opportunity to buy the Canadian currency, expecting a weaker general trend for the US$ to give it at least a stable track in the last half of this year.

• The very long end of both the US and Canadian curves looks rich, given our expectations for an upward creep in CPI in both countries. Long rates will also be pressured higher globally if, as we expect, markets start to focus on the upcoming end to QE in Europe and a potential for major central banks to begin tightening policy earlier than they now assert.

INTEREST & FOREIGN EXCHANGE RATES

2018 2019 END OF PERIOD: 21-Mar Jun Sep Dec Mar Jun Sep Dec CDA Overnight target rate 1.25 1.25 1.50 1.50 1.75 1.75 2.00 2.00 98-Day Treasury Bills 1.10 1.25 1.45 1.45 1.75 1.70 1.95 2.00 2-Year Gov't Bond 1.87 1.85 2.05 2.05 2.10 2.10 2.20 2.25 10-Year Gov't Bond 2.27 2.35 2.35 2.35 2.45 2.40 2.55 2.60 30-Year Gov't Bond 2.38 2.50 2.65 2.70 2.75 2.80 2.90 2.95 U.S. Federal Funds Rate 1.625 1.875 2.125 2.125 2.375 2.625 2.625 2.875 91-Day Treasury Bills 1.74 1.80 1.90 2.05 2.25 2.55 2.65 2.80 2-Year Gov't Note 2.31 2.30 2.40 2.50 2.60 2.70 2.70 2.80 10-Year Gov't Note 2.88 2.85 2.80 2.90 3.05 3.10 3.10 3.15 30-Year Gov't Bond 3.11 3.25 3.35 3.40 3.40 3.45 3.55 3.50 Canada - US T-Bill Spread -0.63 -0.55 -0.45 -0.60 -0.50 -0.85 -0.70 -0.80 Canada - US 10-Year Bond Spread -0.61 -0.50 -0.45 -0.55 -0.60 -0.70 -0.55 -0.55 Canada Yield Curve (10-Year — 2-Year) 0.40 0.50 0.30 0.30 0.35 0.30 0.35 0.35 US Yield Curve (10-Year — 2-Year) 0.58 0.55 0.40 0.40 0.45 0.40 0.40 0.35

EXCHA NGE RA TES CADUSD 0.78 0.77 0.76 0.76 0.78 0.78 0.76 0.77 USDCAD 1.29 1.30 1.32 1.31 1.28 1.29 1.31 1.30 USDJPY 106 105 103 102 102 102 101 100 EURUSD 1.23 1.25 1.27 1.28 1.29 1.29 1.30 1.32 GBPUSD 1.41 1.37 1.38 1.43 1.45 1.47 1.48 1.52 AUDUSD 0.78 0.80 0.82 0.83 0.85 0.86 0.86 0.85 USDCHF 0.95 0.94 0.92 0.92 0.92 0.93 0.93 0.92 USDBRL 3.27 3.26 3.40 3.45 3.40 3.50 3.52 3.58 USDMXN 18.4 20.1 19.5 19.0 18.8 18.8 18.5 19.0

2 Page 2 August 8, 2018 2019 GRA Information Requests - Round 1 FINANCIAL MARKETS MONTHLY | MARCH 2018 PUB (MPI) 1-27 (a) Attachment A

Interest rate outlook %, end of period

Actuals Forecast 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 Canada Overnight 0.50 0.50 1.00 1.00 1.25 1.50 1.75 2.00 2.25 2.25 2.25 2.25 Three-month 0.52 0.71 1.00 1.06 1.20 1.45 1.70 2.05 2.25 2.15 2.15 2.15 Two-year 0.75 1.10 1.52 1.69 1.75 2.05 2.25 2.45 2.60 2.50 2.40 2.30 Five-year 1.12 1.40 1.75 1.87 2.00 2.30 2.55 2.75 2.90 2.85 2.85 2.80 10-year 1.62 1.76 2.10 2.04 2.20 2.50 2.75 2.95 3.10 3.10 3.05 3.05 30-year 2.30 2.14 2.47 2.27 2.45 2.75 3.05 3.15 3.25 3.25 3.30 3.30 United States Fed funds** 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 Three-month 0.76 1.03 1.06 1.39 1.55 1.80 2.05 2.30 2.55 2.80 3.05 3.30 Two-year 1.27 1.38 1.47 1.89 2.10 2.35 2.55 2.75 3.00 3.25 3.40 3.55 Five-year 1.93 1.89 1.92 2.20 2.50 2.70 2.90 3.05 3.25 3.45 3.55 3.65 10-year 2.40 2.31 2.33 2.40 2.80 3.00 3.15 3.30 3.45 3.60 3.70 3.75 30-year 3.02 2.84 2.86 2.74 3.20 3.35 3.50 3.60 3.70 3.75 3.80 3.85 United Kingdom Bank rate 0.25 0.25 0.25 0.50 0.50 0.75 0.75 0.75 1.00 1.00 1.00 1.25 Two-year 0.12 0.36 0.46 0.45 0.75 0.80 0.85 0.95 1.00 1.05 1.10 1.15 10-year 1.14 1.26 1.38 1.19 1.65 1.75 1.85 1.90 2.00 2.10 2.20 2.30 Euro area Deposit Rate -0.40 -0.40 -0.40 -0.40 -0.40 -0.40 -0.40 -0.40 -0.40 -0.40 -0.30 -0.20 Two-year -0.74 -0.57 -0.69 -0.63 -0.65 -0.65 -0.60 -0.50 -0.50 -0.50 -0.40 -0.30 10-year 0.33 0.47 0.47 0.43 0.65 0.65 0.70 0.80 1.00 1.05 1.25 1.25 Australia Cash target rate 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.75 2.00 2.00 2.00 Two-year 1.76 1.78 1.94 2.00 2.00 2.10 2.25 2.40 2.50 2.60 2.60 2.60 10-year 2.70 2.60 2.84 2.63 2.70 2.75 3.05 3.30 3.70 4.10 4.10 4.05 New Zealand Cash target rate 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 2.00 Two-year swap 2.31 2.32 2.19 2.20 2.20 2.30 2.40 2.50 2.60 2.75 2.80 2.80 10-year swap 3.41 3.35 3.24 3.13 3.25 3.40 3.50 3.60 3.75 3.85 4.10 4.25

Yield curve* Canada 87 66 58 35 45 45 50 50 50 60 65 75 United States 113 93 86 51 70 65 60 55 45 35 30 20 United Kingdom 102 90 92 74 90 95 100 95 100 105 110 115 Eurozone 107 104 116 106 130 130 130 130 150 155 165 155 Australia 94 82 90 63 70 65 80 90 120 150 150 145 New Zealand 110 103 105 93 105 110 110 110 115 110 130 145 * Two-year/10-year spread in basis points, **Top of 25 basis point range Source: Reuters, RBC Economics Research

Central bank policy rate %, end of period

Current Last Current Last UnitedStates Fedfunds 1.25-1.501.00-1.25December13,2017 Eurozone Depositrate -0.40 -0.30 March10,2016 Canada Overnightrate 1.25 1.00 January17,2018 Australia Cashrate 1.50 1.75 August3,2016 UnitedKingdom Bankrate 0.50 0.25 November2,2017 NewZealand Cashrate 1.75 2.00 November10,2016

Source: Bloomberg, Reuters, RBC Economics Research

5 Page 3 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A GLOBAL ECONOMICS | SCOTIABANK’S FORECAST TABLES March 6, 2018

2017 2018 2019 Central Bank Rates Q4 Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Americas (%, end of period) Bank of Canada 1.00 1.25 1.50 1.50 1.75 2.00 2.25 2.25 2.50 US Federal Reserve (upper bound) 1.50 1.75 1.75 2.00 2.25 2.25 2.50 2.50 2.75 Bank of Mexico 7.25 7.50 7.50 7.50 7.75 7.75 7.50 7.25 7.00 Central Bank of Brazil 7.00 6.75 6.50 6.50 6.75 7.00 7.50 8.00 8.50 Bank of the Republic of Colombia 4.75 4.50 4.25 4.25 4.25 4.50 4.75 5.00 5.00 Central Reserve Bank of Peru 3.25 2.75 2.75 2.75 2.75 3.00 3.00 3.25 3.25 Central Bank of Chile 2.50 2.50 2.75 3.00 3.25 3.50 3.50 3.75 3.75 Europe European Central Bank 0.00 0.00 0.00 0.00 0.00 0.00 0.25 0.25 0.50 Bank of England 0.50 0.50 0.75 0.75 1.00 1.00 1.25 1.50 1.50 Asia/Oceania Reserve Bank of Australia 1.50 1.50 1.50 1.50 1.75 1.75 2.00 2.00 2.25 Bank of Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 People's Bank of China 4.35 4.35 4.35 4.35 4.35 4.60 4.60 4.85 4.85 Reserve Bank of India 6.00 6.00 6.00 6.00 6.00 6.25 6.25 6.50 6.50 Bank of Korea 1.50 1.50 1.75 1.75 2.00 2.00 2.25 2.25 2.25 Bank of Thailand 1.50 1.50 1.50 1.50 1.75 1.75 2.00 2.00 2.25

Currencies and Interest Rates Americas (end of period) Canadian Dollar (USDCAD) 1.26 1.28 1.27 1.26 1.25 1.25 1.22 1.22 1.25 Canadian Dollar (CADUSD) 0.80 0.78 0.79 0.79 0.80 0.80 0.82 0.82 0.80 Mexican Peso (USDMXN) 19.66 18.84 19.11 19.18 19.46 19.56 19.38 19.43 19.71 Brazilian Real (USDBRL) 3.31 3.25 3.15 3.25 3.25 3.30 3.30 3.35 3.35 Colombian Peso (USDCOP) 2,986 2,800 2,900 2,900 2,900 2,950 2,950 3,000 3,050 Peruvian Nuevo Sol (USDPEN) 3.24 3.22 3.19 3.20 3.18 3.18 3.14 3.15 3.12 Chilean Peso (USDCLP) 615 597 598 597 596 593 591 588 586 Europe Euro (EURUSD) 1.20 1.18 1.18 1.20 1.20 1.24 1.24 1.28 1.28 UK Pound (GBPUSD) 1.35 1.35 1.35 1.37 1.37 1.38 1.38 1.40 1.40 Asia/Oceania Japanese Yen (USDJPY) 113 114 114 115 115 118 118 120 120 Australian Dollar (AUDUSD) 0.78 0.79 0.79 0.80 0.80 0.81 0.81 0.82 0.82 Chinese Yuan (USDCNY) 6.51 6.40 6.40 6.30 6.30 6.20 6.20 6.10 6.10 Indian Rupee (USDINR) 63.9 64.5 64.5 64.0 64.0 63.5 63.5 63.0 63.0 South Korean Won (USDKRW) 1,067 1,060 1,060 1,040 1,040 1,030 1,030 1,020 1,020 Thai Baht (USDTHB) 32.6 31.8 31.8 31.6 31.6 31.2 31.2 31.0 31.0 Canada (Yields, %) 3-month T-bill 1.06 1.20 1.50 1.55 1.75 2.05 2.30 2.30 2.50 2-year Canada 1.69 1.75 2.00 2.20 2.30 2.40 2.50 2.55 2.65 5-year Canada 1.87 2.00 2.25 2.30 2.45 2.55 2.60 2.65 2.75 10-year Canada 2.05 2.20 2.45 2.50 2.60 2.65 2.70 2.75 2.85 30-year Canada 2.27 2.40 2.65 2.75 2.90 3.00 3.10 3.15 3.10 United States (Yields, %) 3-month T-bill 1.38 1.70 1.85 2.05 2.30 2.30 2.55 2.60 2.80 2-year Treasury 1.88 2.25 2.30 2.50 2.60 2.70 2.75 2.85 2.90 5-year Treasury 2.21 2.65 2.70 2.75 2.80 2.85 2.90 3.00 3.05 10-year Treasury 2.40 2.90 2.95 2.95 3.00 3.05 3.10 3.15 3.20 30-year Treasury 2.74 3.20 3.20 3.25 3.25 3.30 3.30 3.35 3.35 Sources: Scotiabank Economics, Bloomberg.

Page 4

Visit our web site at scotiabank.com/economics or contact us by email at [email protected] 5 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

INTEREST RATE OUTLOOK 2017 2018 2019 Q1 Q2 Q3 Q4 Q1* Q2F Q3F Q4F Q1F Q2F Q3F Q4F CANADA Overnight Target Rate 0.50 0.50 1.00 1.00 1.25 1.25 1.50 1.50 1.75 1.75 2.00 2.00 3-mth T-Bill Rate 0.52 0.71 1.00 1.06 1.08 1.38 1.50 1.63 1.75 1.88 2.00 2.13 2-yr Govt. Bond Yield 0.75 1.09 1.52 1.68 1.77 1.85 1.95 2.10 2.20 2.30 2.35 2.40 5-yr Govt. Bond Yield 1.12 1.38 1.75 1.86 2.00 2.15 2.25 2.35 2.40 2.45 2.55 2.60 10-yr Govt. Bond Yield 1.63 1.75 2.10 2.04 2.16 2.35 2.45 2.55 2.60 2.65 2.70 2.75 30-yr Govt. Bond Yield 2.31 2.13 2.47 2.26 2.32 2.60 2.75 2.85 2.95 3.00 3.05 3.10 10-yr-2-yr Govt Spread 0.88 0.66 0.58 0.36 0.39 0.50 0.50 0.45 0.40 0.35 0.35 0.35 U.S. Fed Funds Target Rate 1.00 1.25 1.25 1.50 1.50 2.00 2.25 2.25 2.50 2.75 3.00 3.00 3-mth T-Bill Rate 0.76 1.03 1.06 1.39 1.72 1.98 2.10 2.23 2.53 2.78 2.90 2.90 2-yr Govt. Bond Yield 1.27 1.38 1.47 1.89 2.26 2.35 2.50 2.65 2.75 2.85 2.95 2.95 5-yr Govt. Bond Yield 1.93 1.89 1.92 2.20 2.61 2.75 2.85 2.95 3.00 3.05 3.10 3.10 10-yr Govt. Bond Yield 2.40 2.31 2.33 2.40 2.82 2.95 3.05 3.15 3.20 3.25 3.30 3.30 30-yr Govt. Bond Yield 3.02 2.84 2.86 2.74 3.06 3.15 3.25 3.35 3.40 3.45 3.50 3.50 10-yr-2-yr Govt Spread 1.13 0.93 0.86 0.51 0.56 0.60 0.55 0.50 0.45 0.40 0.35 0.35 CANADA - U.S SPREADS Can - U.S. T-Bill Spread -0.24 -0.32 -0.06 -0.33 -0.64 -0.60 -0.60 -0.60 -0.78 -0.90 -0.90 -0.77 Can - U.S. 10-Year Bond Spread -0.77 -0.56 -0.23 -0.36 -0.66 -0.60 -0.60 -0.60 -0.60 -0.60 -0.60 -0.55 F: Forecast by TD Bank Group as at March 2018. All forecasts are end-of-period. Source: Bloomberg, Bank of Canada, Federal Reserve, TD Economics. * Spot rate as at March 14, 2018.

FOREIGN EXCHANGE OUTLOOK 2017 2018 2019 Currency Exchange rate Q1 Q2 Q3 Q4 Q1* Q2F Q3F Q4F Q1F Q2F Q3F Q4F Exchange rate to U.S. dollar Japanese yen JPY per USD 111 112 113 113 106 106 105 105 105 105 104 104 Euro USD per EUR 1.07 1.14 1.18 1.20 1.24 1.22 1.21 1.22 1.23 1.24 1.25 1.26 U.K. pound USD per GBP 1.25 1.30 1.34 1.35 1.40 1.38 1.39 1.39 1.40 1.41 1.42 1.43 Exchange rate to Canadian dollar U.S. dollar USD per CAD 0.75 0.77 0.80 0.80 0.77 0.77 0.78 0.79 0.79 0.80 0.80 0.80 Japanese yen JPY per CAD 83.6 86.6 90.0 90.0 82.1 81.5 82.0 82.7 83.3 83.1 82.8 82.5 Euro CAD per EUR 1.43 1.48 1.48 1.51 1.60 1.59 1.55 1.55 1.55 1.56 1.57 1.58 U.K. pound CAD per GBP 1.67 1.69 1.68 1.69 1.81 1.79 1.78 1.77 1.76 1.77 1.78 1.79 F: Forecast by TD Bank Group as at March 2018. All forecasts are end-of-period. Source: Bloomberg, Bank of Canada, Federal Reserve, TD Economics. * Spot rate as at March 14, 2018.

COMMODITY PRICE OUTLOOK 2017 2018 2019 Q1 Q2 Q3 Q4 Q1* Q2F Q3F Q4F Q1F Q2F Q3F Q4F Crude Oil (WTI, $US/bbl) 52 48 48 55 61 60 59 59 59 59 58 58 Natural Gas ($US/MMBtu) 2.99 3.04 2.93 2.88 2.69 3.00 3.05 3.18 3.20 3.05 3.10 3.18 Gold ($US/troy oz.) 1218 1258 1278 1276 1325 1315 1315 1325 1325 1335 1375 1375 Silver (US$/troy oz.) 17.47 17.22 16.85 16.71 16.55 16.50 16.75 17.50 18.00 18.50 19.00 19.00 Copper (cents/lb) 264 257 288 309 314 324 329 329 331 331 335 335 Nickel (US$/lb) 4.66 4.19 4.78 5.26 6.29 6.00 5.75 5.75 5.50 5.50 6.00 6.00 Aluminum (cents/lb) 84 87 91 95 95 98 99 98 98 98 99 99 Wheat ($US/bu) 6.53 6.80 7.79 7.47 7.78 7.15 7.00 7.15 7.25 7.50 7.75 7.80 F: Forecast by TD Bank Group as at March 2018. All forecasts are period averages. Source: Bloomberg, TD Economics, USDA (Haver). * Spot rate as at March 14, 2018.

http://economics.td.com @TD_Economics Page 5 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

March 2018 Highlights

 With passage of the Bipartisan Budget Act, the odds of faster U.S. policy normalization have increased. However, the recent budget deal combined with the tax cuts voted late last year is projected to push the net supply of Treasury marketable debt above US$1 trillion in 2018, twice as much as in 2017, adding to the upward pressure on 10-year yields. In these circumstances, the FOMC will have to focus on overall financial conditions. Since long rates have more effect on the economy than short rates, we see the FOMC easing up on the brakes a bit. A combination of a 10-year rate trading around 3.17% and a target fed funds range of 2.00—2.25% by year end is what we see as the most likely scenario for the end of this year.

 In Canada, wages and salaries can be expected to accelerate further as the year progress, setting the stage for the Bank of Canada to normalize further. Yet we expect the Bank to move cautiously, since rapid policy normalization could trigger mortgage repricing (wider spreads on top of rising swap rates) at a time when the housing market faces tougher macro-prudential measures (B-20) and mortgage rates already higher than a year ago. We see the Bank hiking a quarter- point in May and again in October. If global interest rates lag our forecast, limiting the tightening of financial conditions in Canada, the Bank could still deliver one more rate hike in December. We see the overnight rate at 1.75% in December and 10-year Canadas trading around 2.68%.

Paul-André Pinsonnault

Forecast dated February 23, 2018

United States

Quarters Fed Fund 3 Mth Bill 2YR 5YR 10YR 30YR 02/23/18 1.50 1.64 2.24 2.62 2.87 3.16 Q1/18 1.75 1.60 2.25 2.69 2.93 3.17 Q2 1.75 1.60 2.35 2.75 2.97 3.19 Q3 2.00 1.85 2.46 2.83 3.00 3.21 Q4 2.25 2.10 2.56 2.89 3.17 3.36 Q1/19 2.25 2.10 2.63 2.94 3.22 3.40 Q2 2.50 2.35 2.77 3.01 3.27 3.43 Q3 2.75 2.60 2.91 3.11 3.33 3.48 Q4 3.00 2.85 3.00 3.18 3.38 3.52

Canada

Quarters Overnight 3 Mth Bill 2YR 5YR 10YR 30YR 02/23/18 1.25 1.15 1.78 2.05 2.24 2.40 Q1/18 1.25 1.30 1.89 2.15 2.38 2.50 Q2 1.50 1.46 1.96 2.18 2.51 2.60 Q3 1.50 1.65 2.05 2.28 2.63 2.71 Q4 1.75 1.88 2.13 2.33 2.68 2.74 Q1/19 2.00 1.96 2.31 2.57 2.87 2.93 Q2 2.00 2.18 2.37 2.62 2.94 2.98 Q3 2.25 2.21 2.48 2.74 3.02 3.06 Q4 2.25 2.21 2.55 2.77 3.05 3.08

Page 6 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

ECONOMIC STUDIES

FINANCIAL FORECASTS Following a very tough week at the start of February, a relative calm returned to the markets, and stock indexes shed much of their losses. However, the markets remain a little edgy, with investors still concerned about the potential for a steeper rise in bond yields, and by the U.S. government’s protectionist intentions. Despite the concerns, favourable economic outlooks and slightly stronger inflationary pressure suggest that interest rates will keep rising gradually. In the United States, the Federal Reserve seems certain to raise its key rates again on March 21st, and could signal a few more rate increases for the coming quarters, while continuing its gradual approach. Consequently, we are expecting slightly faster, steeper increases in U.S. rates in the coming years. Key rates are also expected to rise gradually in Canada, but some signs of slowing in the housing market and household debt, and the heightened risks associated with U.S. protectionism could convince the Bank of Canada (BoC) to wait until summer before tightening its monetary policy further. The BoC’s slightly more cautious tone and fears of protectionism recently took the Canadian dollar to around US$0.77. These factors should curb the loonie’s appreciation in the coming quarters, despite the fairly good outlook for commodity prices.

TABLE 2 Summary of the financial forecasts 2017 2018 2019 END OF PERIOD IN % (EXCEPT IF INDICATED) Q3 Q4 Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Key interest rate United States 1.25 1.50 1.75 2.00 2.25 2.25 2.50 2.75 3.00 3.00 Canada 1.00 1.00 1.25 1.25 1.50 1.75 1.75 2.00 2.25 2.25 Euro zone 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.25 0.25 0.50 United Kingdom 0.25 0.50 0.50 0.75 0.75 0.75 0.75 0.75 0.75 0.75

Federal bonds United States 2-year 1.49 1.88 2.35 2.50 2.60 2.70 2.85 3.00 3.05 3.15 5-year 1.92 2.19 2.75 2.90 3.00 3.05 3.15 3.20 3.25 3.30 10-year 2.33 2.41 2.95 3.05 3.15 3.25 3.35 3.40 3.45 3.45 30-year 2.86 2.74 3.20 3.30 3.40 3.45 3.55 3.60 3.65 3.70 Canada 2-year 1.52 1.69 1.80 1.95 2.10 2.25 2.30 2.45 2.50 2.60 5-year 1.75 1.87 2.05 2.20 2.40 2.50 2.55 2.65 2.70 2.75 10-year 2.10 2.04 2.25 2.40 2.60 2.75 2.80 2.85 2.90 2.90 30-year 2.47 2.26 2.45 2.55 2.75 2.90 2.95 3.00 3.05 3.10

Currency market Canadian dollar (USD/CAD) 1.25 1.26 1.28 1.27 1.25 1.25 1.27 1.25 1.23 1.23 Canadian dollar (CAD/USD) 0.80 0.79 0.78 0.79 0.80 0.80 0.79 0.80 0.81 0.81 Euro (EUR/USD) 1.18 1.20 1.23 1.23 1.24 1.25 1.26 1.28 1.29 1.30 British pound (GBP/USD) 1.34 1.35 1.39 1.41 1.41 1.40 1.38 1.37 1.38 1.40 Yen (USD/JPY) 112 113 107 109 111 113 114 115 115 114

Stock markets (level and growth)* United States – S&P 500 2,674 Target: 2,875 (+7.5%) Target: 3,025 (+5.2%) Canada – S&P/TSX 16,209 Target: 17,000 (+4.9%) Target: 18,300 (+7.6%)

Commodities (annual average) WTI oil (US$/barrel) 51 (60*) 60 (62*) 64 (68*) Gold (US$/ounce) 1,258 (1,303*) 1,300 (1,275*) 1,250 (1,200*)

f: forecasts; WTI: West Texas Intermediate; * End of year. Sources: Datastream and Desjardins, Economic Studies

Page 7 MARCH 2018 | ECONOMIC & FINANCIAL OUTLOOK 3 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

Global Insight - March 2018 Financial Markets 3-Month T-Bill Rate (%) GOC Ten-Year Bond Rate (%) 18Q1 1.17 2.24 18Q2 1.38 2.42 18Q3 1.55 2.60 18Q4 1.72 2.75 19Q1 1.97 2.88 19Q2 2.22 2.97 19Q3 2.47 3.03 19Q4 2.72 3.08 20Q1 3.03 3.12 20Q2 3.03 3.16 20Q3 3.03 3.19 20Q4 3.03 3.20 21Q1 3.03 3.20 21Q2 3.03 3.20 21Q3 3.03 3.20 21Q4 3.03 3.19 22Q1 3.03 3.18 22Q2 3.03 3.18 22Q3 3.03 3.17 22Q4 3.03 3.16 23Q1 3.03 3.16 23Q2 3.03 3.15 23Q3 3.03 3.15 23Q4 3.03 3.15

Page 8 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

National Interest rate forecast

United States

Quarters Fed Fund 3 Mth 2YR 5YR 10YR 30YR 03/27/18 1.75 1.77 2.27 2.57 2.78 3.03 Q2 1.75 1.69 2.35 2.75 2.97 3.17 Q3 2.00 1.91 2.46 2.83 3.00 3.19 Q4 2.25 2.10 2.56 2.89 3.17 3.34 Q1/19 2.25 2.10 2.63 2.94 3.22 3.38 Q2 2.50 2.35 2.77 3.01 3.27 3.41 Q3 2.75 2.60 2.91 3.11 3.33 3.46 Q4 3.00 2.85 3.00 3.18 3.38 3.51

Canada

Quarters Overnight 3 Mth Bill 2YR 5YR 10YR 30YR 03/27/18 1.25 1.10 1.83 2.03 2.14 2.28 Q2 1.50 1.46 1.96 2.18 2.45 2.54 Q3 1.50 1.65 2.05 2.28 2.59 2.66 Q4 1.75 1.88 2.13 2.33 2.68 2.74 Q1/19 2.00 1.96 2.31 2.50 2.78 2.83 Q2 2.00 2.18 2.37 2.63 2.92 2.96 Q3 2.25 2.21 2.48 2.74 3.02 3.06 Q4 2.25 2.21 2.55 2.78 3.06 3.09

Source: NBF Economics and Strategy - 2018/03/27

Page 9 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

CIBC LT forecast-March 19, 2018

Page 10 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (a) Attachment A

Desjardins Canada

2018 2019 2020 2021 2022 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4

Bank of Canada over 1.25 1.25 1.50 1.75 1.75 2.00 2.25 2.25 2.25 2.25 2.25 2.00 1.50 1.25 1.25 1.25 1.25 1.25 1.25 1.25

Bons du Trésor - 3 m1.20 1.30 1.55 1.75 1.80 2.05 2.25 2.25 2.25 2.25 2.20 1.90 1.40 1.25 1.25 1.25 1.25 1.25 1.25 1.25 Obligations fédérales - 10 ans 2.25 2.40 2.60 2.75 2.80 2.85 2.90 2.90 2.95 2.95 2.75 2.50 2.30 2.20 2.15 2.15 2.15 2.20 2.30 2.40

Source : Datastream (CN14309, CNTBL3M,CNBCH10)

19-Mar-18

Page 11 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B Canadian Economic Outlook Our key forecasts for the Canadian economy July 6, 2018

2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 Production q/q % chng : a.r. Real GDP (chain-weighted) 4.0 4.6 1.7 1.7 1.3 2.4 1.5 2.2 1.8 1.7 1.7 1.6 1.4 3.0 1.9 1.8 Final Sales 1.2 3.9 0.1 2.8 1.0 3.0 1.7 2.2 1.9 1.8 1.8 1.6 1.7 2.3 1.9 2.0 Final Domestic Demand 4.9 3.2 3.6 4.1 2.1 2.0 2.0 2.0 1.9 1.8 1.7 1.6 1.1 3.0 2.7 1.9 Consumer Spending 4.0 4.3 3.1 2.2 1.1 1.7 2.0 2.0 1.8 1.7 1.7 1.4 2.4 3.5 2.0 1.8 Durables 12.2 7.2 -0.6 2.1 0.2 -2.0 1.7 1.5 1.8 1.7 1.5 1.7 4.5 6.5 0.7 1.4 Nondurables 2.1 5.6 0.4 3.5 -0.3 1.8 1.9 2.0 1.6 1.6 1.6 1.3 1.7 2.6 1.7 1.7 Services 3.0 2.8 5.2 2.0 2.1 2.5 2.2 2.1 1.9 1.7 1.8 1.6 2.2 3.2 2.6 1.9 Goverment Spending 3.3 0.5 4.8 4.5 3.3 2.8 2.4 2.3 2.2 2.0 2.0 2.0 2.7 2.6 3.3 2.2 Business Investment 14.3 7.5 5.9 8.0 10.9 3.4 2.4 2.4 2.6 2.3 2.0 2.0 -9.4 2.8 6.5 2.4 Non-residential Construction 5.9 6.7 8.9 4.0 6.3 3.0 2.4 2.3 2.6 2.3 2.0 2.0 -11.5 0.7 4.8 2.4 Machinery and Equipment 28.5 8.7 1.6 14.5 18.1 4.0 2.5 2.5 2.6 2.3 2.0 2.0 -6.0 6.0 9.0 2.5 Residential Construction 7.1 -1.3 -0.1 13.5 -7.2 0.0 0.0 0.0 0.5 1.0 1.0 1.0 3.3 2.9 0.4 0.5 Exports 2.6 6.4 -9.9 3.9 1.7 10.4 1.2 2.4 2.0 2.2 2.2 2.2 1.0 1.1 2.4 2.5 Imports 14.9 4.1 1.3 7.7 4.9 6.8 2.0 1.9 2.0 2.0 2.0 2.0 -1.0 3.6 4.7 2.3 2007$ blns (contribution in ppts : a.r.) Inventory Change 8.9 12.8 18.3 15.8 15.3 12.5 11.6 11.6 11.0 10.5 9.9 10.0 1.0 13.9 12.7 10.4 Contribution to GDP Growth 2.5 0.9 1.3 -0.6 -0.1 -0.6 -0.2 0.0 -0.1 -0.1 -0.1 0.0 -0.3 0.8 0.0 -0.1 Net Exports 0.3 3.5 -13.7 -19.2 -24.1 -19.6 -20.9 -20.2 -20.3 -20.1 -20.0 -19.8 7.4 -7.3 -21.2 -20.1 Contribution to GDP Growth -4.1 0.7 -3.6 -1.3 -1.1 0.9 -0.3 0.1 0.0 0.0 0.0 0.0 0.6 -0.9 -0.8 0.0 $ blns : a.r. (growth in q/q % chng : a.r.) Nominal GDP 2,115 2,138 2,147 2,181 2,194 2,226 2,245 2,268 2,290 2,311 2,331 2,352 2,036 2,145 2,233 2,321 Growth 7.0 4.5 1.7 6.3 2.6 5.8 3.5 4.2 3.9 3.7 3.6 3.6 2.0 5.4 4.1 3.9 Real GDP y/y % chng 2.3 3.8 3.1 3.0 2.3 1.8 1.7 1.9 2.0 1.8 1.8 1.7 Inflation q/q % chng : a.r. GDP Price Index 2.8 0.0 0.3 4.2 1.4 3.3 2.0 2.0 2.1 1.9 1.9 1.9 0.6 2.3 2.1 2.1 CPI All Items 2.6 0.2 1.4 3.0 3.6 1.0 1.7 2.2 2.5 1.9 2.0 2.1 1.4 1.6 2.2 2.1 Ex. Food and Energy 2.3 0.7 1.4 2.1 2.7 0.7 1.5 2.2 2.6 1.9 2.0 2.1 1.9 1.6 1.7 2.0 Food Prices -1.0 4.2 3.0 0.3 0.9 0.8 1.3 2.1 2.6 2.1 1.8 2.1 1.5 0.0 1.4 2.0 Energy Prices 16.7 -15.0 -3.3 23.0 20.3 6.1 0.8 2.4 1.4 2.3 2.4 2.0 -2.9 5.4 8.8 2.1 Services 2.9 3.7 2.2 0.0 4.2 2.8 2.7 1.5 1.9 2.4 2.3 1.5 1.9 2.2 2.5 2.1 CPI All Items y/y % chng 1.9 1.3 1.4 1.8 2.1 2.3 2.3 2.1 1.9 2.1 2.2 2.1 CPIX8 y/y % chng 1.5 1.0 0.8 1.1 1.3 1.4 1.7 1.8 1.7 2.1 2.0 2.0 1.9 1.1 1.6 2.0 New Core CPIs y/y % chng : avg. 1.5 1.4 1.5 1.7 1.9 2.0 2.0 1.8 1.7 2.1 2.0 2.1 1.9 1.5 1.9 2.0 Financial % : quarterly avg. Overnight Rate 0.50 0.50 0.83 1.00 1.25 1.25 1.50 1.75 1.75 2.00 2.25 2.25 0.50 0.71 1.44 2.06 3-Month T-Bill 0.47 0.54 0.81 0.92 1.14 1.21 1.50 1.70 1.70 1.95 2.15 2.15 0.49 0.69 1.40 2.00 90-Day BAs 0.94 0.91 1.31 1.43 1.67 1.74 2.00 2.15 2.20 2.40 2.55 2.55 0.88 1.15 1.90 2.40 10-Year Bond Yield 1.71 1.51 1.95 1.96 2.24 2.28 2.30 2.50 2.60 2.65 2.75 2.80 1.25 1.78 2.35 2.70 Canada/US Spread bps 90 Day -13 -36 -25 -30 -44 -66 -53 -54 -71 -68 -60 -60 17 -26 -55 -64 10 Year -73 -75 -30 -41 -52 -64 -62 -58 -54 -51 -47 -44 -59 -55 -59 -49 Foreign Trade $ blns : a.r. (share in % of GDP) Current Account Balance -55.9 -59.6 -71.7 -65.9 -78.0 -68.5 -69.6 -67.9 -66.4 -66.1 -65.9 -65.5 -65.4 -63.3 -71.0 -66.0 Share of GDP -2.6 -2.8 -3.3 -3.0 -3.6 -3.1 -3.1 -3.0 -2.9 -2.9 -2.8 -2.8 -3.2 -2.9 -3.2 -2.8 Merchandise Balance -11.1 -19.8 -34.9 -30.0 -35.9 -27.0 -28.2 -26.8 -26.2 -26.1 -26.0 -26.0 -25.9 -24.0 -29.5 -26.0 Non-Merchandise Balance -44.7 -39.8 -36.8 -36.0 -42.1 -41.5 -41.4 -41.2 -40.2 -40.1 -39.9 -39.6 -39.5 -39.3 -41.6 -39.9 quarterly avg. US$ US¢/C$ 75.6 74.4 79.9 78.6 79.1 77.5 76.9 78.1 78.7 79.1 79.5 79.9 75.5 77.1 77.9 79.3 C$/US$ 1.323 1.344 1.252 1.272 1.265 1.291 1.300 1.281 1.271 1.265 1.258 1.252 1.326 1.298 1.284 1.261 Yen ¥/C$ 85.9 82.6 88.6 88.8 85.7 84.6 84.1 84.6 84.6 84.4 84.2 84.1 82.0 86.5 84.7 84.3 Euro C$/€ 1.41 1.48 1.47 1.50 1.55 1.54 1.54 1.55 1.56 1.56 1.56 1.56 1.47 1.46 1.55 1.56 Incomes y/y % chng Corporate Profits Before Tax 61.6 68.3 17.7 8.6 2.1 10.6 18.0 9.5 9.8 9.2 9.1 8.9 -6.8 34.1 9.9 9.2 Corporate Profits After Tax 26.2 27.3 15.4 9.1 7.3 12.0 9.6 5.3 5.6 5.5 7.4 8.9 1.9 18.8 8.5 6.9 Personal Income 3.7 4.2 4.4 4.6 5.0 4.7 4.2 4.0 3.9 3.8 3.8 3.6 2.2 4.2 4.5 3.8 Real Disposable Income 4.2 3.7 3.7 3.3 3.8 2.7 1.5 1.7 1.8 1.7 1.7 1.4 1.3 3.7 2.4 1.7 Savings Rate % : quarterly avg. 3.0 3.3 4.3 4.5 4.4 4.5 4.4 4.6 4.4 4.4 4.3 4.3 3.5 3.8 4.5 4.4 Other Indicators quarterly avg. (000s and mlns are a.r.) Unemployment Rate percent 6.6 6.5 6.2 6.0 5.8 5.9 5.9 5.7 5.7 5.7 5.6 5.6 7.0 6.3 5.8 5.6 Housing Starts 000s 222 207 223 229 223 209 215 213 211 207 204 200 198 220 215 205 Existing Home Sales y/y % chng 0.7 -6.5 -10.1 -0.4 -14.8 -15.0 -9.7 -15.7 -3.3 2.5 2.2 2.2 5.9 -4.5 -13.5 1.0 MLS Home Price Index y/y % chng 16.2 17.0 11.0 8.9 5.8 1.2 1.9 1.1 0.2 0.1 1.5 2.3 11.8 13.2 2.5 1.0 Motor Vehicle Sales mlns 2.08 2.08 2.07 2.07 2.13 2.03 2.03 2.03 2.02 2.01 1.99 1.99 1.99 2.07 2.05 2.00 q/q % chng : a.r. Employment Growth 2.1 1.7 2.0 2.6 0.1 0.7 1.3 1.3 0.8 1.0 1.1 1.0 0.7 1.9 1.2 1.0 Industrial Production 5.8 7.7 2.2 1.9 2.6 6.8 2.6 2.0 1.5 1.8 1.6 1.6 0.1 5.2 3.5 2.1 Federal Budget Balance % of FY GDP -0.9 -0.9 -0.8 -0.8 Shaded values represent forecasts Please refer to page 2 for Important Disclosures Page 1 A publication of BMO Capital Markets Economic Research • Douglas Porter, CFA, Chief Economist • economics.bmocapitalmarkets.com • 416-359-6372 bullets: Position: hanging left ind: 0.3125 first line: -0.25 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

CIBC Capital Markets Economic Insights - July 4, 2018

MARKET CALL

• Back in January, we argued that the moderate pace to economic growth since mid-2017 would put the Bank of Canada on the sidelines until July, expecting a firmer pace to growth in Q2. The numbers have cooperated, and a July hike looks very probable. But thereafter, we again see another half-year pause on rates, in line with our view that trade headwinds and tighter mortgage rules obviate the need for a faster pace to monetary tightening.

• In the past month, we shifted one of our 2019 forecast Fed hikes into 2018, in line with an upgraded near term growth outlook and on target inflation. That still leaves us with fed funds topping out just below 3% in 2019, and if fiscal policy tightens in 2020 to address the deficit, that might be a near term peak. Long yields still need to move higher as the term premium adjusts to modest momentum in inflation and supply pressures as global central banks step away from QE.

• Much of the pressure on the loonie in recent months has simply reflected global US dollar strength. Should the greenback shed some of that supremacy, that will keep a lid on how weak the Canadian dollar can get against its US counterpart even if, as we expect, the C$ weakens on other crosses when the Bank of Canada goes back on hold. A much softer C$ would be in the offing should the US go ahead with punitive tariffs on Canadian automotive products.

INTEREST & FOREIGN EXCHANGE RATES

2018 2018 2019 END OF PERIOD: 3-Jul Sep Dec Mar Jun Sep Dec CDA Overnight target rate 1.25 1.50 1.50 1.75 1.75 2.00 2.00 98-Day Treasury Bills 1.24 1.45 1.45 1.75 1.70 1.95 2.00 2-Year Gov't Bond 1.91 2.05 2.05 2.10 2.10 2.20 2.25 10-Year Gov't Bond 2.19 2.50 2.55 2.65 2.70 2.65 2.60 30-Year Gov't Bond 2.22 2.45 2.75 2.85 2.85 2.90 3.05 U.S. Federal Funds Rate 1.875 2.125 2.375 2.375 2.625 2.625 2.875 91-Day Treasury Bills 1.98 2.05 2.25 2.35 2.55 2.65 2.80 2-Year Gov't Note 2.55 2.60 2.75 2.75 2.80 2.80 2.85 10-Year Gov't Note 2.86 2.95 3.05 3.20 3.30 3.25 3.15 30-Year Gov't Bond 2.98 3.25 3.45 3.50 3.50 3.55 3.60 Canada - US T-Bill Spread -0.74 -0.60 -0.80 -0.60 -0.85 -0.70 -0.80 Canada - US 10-Year Bond Spread -0.67 -0.45 -0.50 -0.55 -0.60 -0.60 -0.55 Canada Yield Curve (10-Year — 2-Year) 0.28 0.45 0.50 0.55 0.60 0.45 0.35 US Yield Curve (10-Year — 2-Year) 0.31 0.35 0.30 0.45 0.50 0.45 0.30

EXCHA NGE RA TES CADUSD 0.76 0.75 0.75 0.76 0.78 0.76 0.77 USDCAD 1.32 1.33 1.34 1.31 1.28 1.31 1.30 USDJPY 111 112 110 108 106 104 104 EURUSD 1.16 1.17 1.19 1.21 1.23 1.25 1.28 GBPUSD 1.32 1.31 1.32 1.36 1.38 1.42 1.47 AUDUSD 0.74 0.76 0.79 0.81 0.82 0.84 0.85 USDCHF 0.99 0.98 0.97 0.96 0.95 0.94 0.94 USDBRL 3.90 3.70 3.55 3.50 3.45 3.50 3.55 USDMXN 19.6 19.4 18.9 18.5 18.1 18.4 18.0

2 Page 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

Desjardins Canada

2018 2019 2020 2021 2022 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4

Bank of Canada ov 1.25 1.25 1.50 1.50 1.75 1.75 2.00 2.00 2.25 2.25 2.25 2.00 1.50 1.25 1.25 1.25 1.25 1.25 1.25 1.25

Bons du Trésor - 1.10 1.26 1.45 1.55 1.70 1.80 1.95 2.05 2.25 2.25 2.20 1.90 1.40 1.25 1.25 1.25 1.25 1.25 1.25 1.25 Obligations fédérales - 10 ans 2.09 2.17 2.35 2.55 2.70 2.80 2.90 2.95 3.00 3.00 2.80 2.55 2.35 2.25 2.20 2.20 2.20 2.25 2.35 2.45

Source : Datastream (CN14309, CNTBB3M,CNBB10Y)

3-Jul-18

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July - August 2018 Highlights

 Assuming some limited further deterioration in trade talks between the U.S. and its major trading partners before year end, we expect the FOMC to be cautious taking the fed funds target range to 2.00%-2.25%. In the longer portion of the yield curve the market will face crosscurrents. International uncertainty will tend to limit rate increases while Fed balance sheet normalization, softer pension-fund demand and large borrowing requirements will tend to pull rates up. All things considered, we have revised our year-end forecast for the 10-year yield slightly downward, to 3.04% from 3.18%, but left it unchanged at 3.47% for year end 2019.

 While we see numerous yellow beeps on our radar screen, none are strong enough yet to turn outright bearish about the global outlook. In that context, our base case scenario (55% odds) is that the Bank will proceed with one more rate hike this year. Most likely in October when it will update its economic outlook. Looking at the longer end of the yield curve we see 10-year Canada trading around 2.57% by year end and around 3.09% in December 2019.

Paul-André Pinsonnault

Forecast dated July 11, 2018

United States Quarters Fed Fund 3 Mth Bill 2YR 5YR 10YR 30YR 07/09/18 2.00 1.96 2.56 2.75 2.86 2.97 Q3 2.25 2.13 2.68 2.82 2.96 3.06 Q4 2.25 2.08 2.73 2.85 3.04 3.12 Q1/19 2.50 2.25 2.76 2.87 3.12 3.24 Q2 2.50 2.37 2.98 3.13 3.33 3.44 Q3 2.75 2.62 3.13 3.22 3.41 3.50 Q4 3.00 2.83 3.20 3.32 3.47 3.56

Canada Quarters Overnight 3 Mth Bill 2YR 5YR 10YR 30YR 07/09/18 1.25 1.42 1.94 2.09 2.17 2.22 Q3 1.50 1.53 2.06 2.15 2.22 2.29 Q4 1.75 1.88 2.28 2.46 2.57 2.63 Q1/19 2.00 1.96 2.31 2.49 2.74 2.79 Q2 2.00 2.18 2.38 2.63 2.93 2.97 Q3 2.25 2.21 2.48 2.74 3.01 3.05 Q4 2.25 2.21 2.55 2.78 3.09 3.14

Page 4 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

FINANCIAL MARKET FORECASTS July 12, 2018

Interest rates (%, end of quarter, ) Actual Forecast Actual Forecast 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 2016 2017 2018 2019 Canada Overnight 0.50 0.50 1.00 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.25 2.25 0.50 1.00 1.75 2.25 Three-month 0.52 0.71 1.00 1.06 1.10 1.26 1.40 1.65 1.90 2.15 2.15 2.15 0.46 1.06 1.65 2.15 Two-year 0.75 1.10 1.52 1.69 1.78 1.91 2.10 2.30 2.45 2.45 2.40 2.35 0.75 1.69 2.30 2.35 Five-year 1.12 1.40 1.75 1.87 1.97 2.07 2.25 2.45 2.55 2.65 2.70 2.70 1.12 1.87 2.45 2.70 10-year 1.62 1.76 2.10 2.04 2.09 2.17 2.35 2.60 2.70 2.80 2.90 2.95 1.71 2.04 2.60 2.95 30-year 2.30 2.14 2.47 2.27 2.23 2.20 2.45 2.70 2.80 2.90 3.00 3.00 2.31 2.27 2.70 3.00 Yield curve (10s-2s) 87 66 58 35 31 26 25 30 25 35 50 60 96 35 30 60

United States Fed funds* 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 0.75 1.50 2.50 3.50 Three-month 0.76 1.03 1.06 1.39 1.73 1.93 2.15 2.35 2.65 2.90 3.15 3.35 0.51 1.39 2.35 3.35 Two-year 1.27 1.38 1.47 1.89 2.27 2.52 2.65 2.80 3.00 3.25 3.40 3.55 1.20 1.89 2.80 3.55 Five-year 1.93 1.89 1.92 2.20 2.56 2.73 2.95 3.10 3.25 3.45 3.55 3.65 1.93 2.20 3.10 3.65 10-year 2.40 2.31 2.33 2.40 2.74 2.85 3.15 3.30 3.45 3.60 3.70 3.75 2.45 2.40 3.30 3.75 30-year 3.02 2.84 2.86 2.74 2.97 2.98 3.35 3.50 3.65 3.75 3.80 3.85 3.06 2.74 3.50 3.85 Yield curve (10s-2s) 113 93 86 51 47 33 50 50 45 35 30 20 125 51 50 20

Yield spreads Three-month T-bills -0.24 -0.32 -0.06 -0.33 -0.63 -0.67 -0.75 -0.70 -0.75 -0.75 -1.00 -1.20 -0.05 -0.33 -0.70 -1.20 Two-year -0.52 -0.28 0.05 -0.20 -0.49 -0.61 -0.55 -0.50 -0.55 -0.80 -1.00 -1.20 -0.45 -0.20 -0.50 -1.20 Five-year -0.81 -0.49 -0.17 -0.33 -0.59 -0.66 -0.70 -0.65 -0.70 -0.80 -0.85 -0.95 -0.81 -0.33 -0.65 -0.95 10-year -0.78 -0.55 -0.23 -0.36 -0.65 -0.68 -0.80 -0.70 -0.75 -0.80 -0.80 -0.80 -0.74 -0.36 -0.70 -0.80 30-year -0.72 -0.70 -0.39 -0.47 -0.74 -0.78 -0.90 -0.80 -0.85 -0.85 -0.80 -0.85 -0.75 -0.47 -0.800.00 -0.85 0.00 Note: Interest Rates are end of period rates. * Top of 25 basis point range

Exchange rates (end of quarter, )

Actual Forecast Actual Forecast

17Q1 17Q2 17Q3 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 2016 2017 2018 2019

AUD/USD 0.76 0.77 0.78 0.78 0.77 0.74 0.73 0.70 0.71 0.72 0.73 0.73 0.72 0.78 0.70 0.73

USD/CAD 1.33 1.30 1.25 1.26 1.29 1.31 1.30 1.28 1.26 1.26 1.27 1.28 1.34 1.26 1.28 1.28

EUR/USD 1.07 1.14 1.18 1.20 1.23 1.17 1.16 1.12 1.14 1.16 1.18 1.20 1.05 1.20 1.12 1.20

USD/JPY 111.4 112.4 112.5 112.7 106.3 110.8 112.0 115.0 117.0 119.0 122.0 125.0 117.0 112.7 115.0 125.0

NZD/USD 0.70 0.73 0.72 0.71 0.72 0.68 0.69 0.70 0.70 0.71 0.72 0.72 0.69 0.71 0.70 0.72

USD/CHF 1.00 0.96 0.97 0.97 0.95 0.99 1.02 1.09 1.08 1.07 1.06 1.05 1.02 0.97 1.09 1.05

GBP/USD 1.26 1.30 1.34 1.35 1.40 1.32 1.27 1.20 1.23 1.25 1.27 1.29 1.24 1.35 1.20 1.29

The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any way, in whole or in part, without express authorization of the copyright holder in writing. The statements and statistics contained herein have been prepared by RBC Economics Research based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This publication is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

®Registered trademark of Royal Bank of Canada. ©Royal PageBank of 5 Canada. August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

INTEREST RATE OUTLOOK 2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2* Q3F Q4F Q1F Q2F Q3F Q4F CANADA Overnight Target Rate 0.50 0.50 1.00 1.00 1.25 1.25 1.50 1.50 1.75 1.75 2.00 2.00 3-mth T-Bill Rate 0.52 0.71 1.00 1.06 1.10 1.22 1.50 1.63 1.75 1.88 2.00 2.13 2-yr Govt. Bond Yield 0.75 1.09 1.52 1.68 1.77 1.87 1.95 2.10 2.20 2.30 2.35 2.40 5-yr Govt. Bond Yield 1.12 1.38 1.75 1.86 1.96 2.06 2.25 2.35 2.40 2.45 2.55 2.60 10-yr Govt. Bond Yield 1.63 1.75 2.10 2.04 2.09 2.20 2.45 2.55 2.60 2.65 2.70 2.75 30-yr Govt. Bond Yield 2.31 2.13 2.47 2.26 2.23 2.24 2.60 2.70 2.75 2.80 2.85 2.90 10-yr-2-yr Govt Spread 0.88 0.66 0.58 0.36 0.32 0.33 0.50 0.45 0.40 0.35 0.35 0.35 U.S. Fed Funds Target Rate 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.25 3-mth T-Bill Rate 0.75 1.01 1.04 1.37 1.70 1.89 2.23 2.48 2.78 3.03 3.15 3.15 2-yr Govt. Bond Yield 1.27 1.38 1.47 1.89 2.27 2.55 2.75 2.90 3.00 3.10 3.15 3.15 5-yr Govt. Bond Yield 1.93 1.89 1.92 2.20 2.56 2.79 2.95 3.05 3.15 3.20 3.20 3.20 10-yr Govt. Bond Yield 2.40 2.31 2.33 2.40 2.74 2.92 3.10 3.20 3.25 3.30 3.35 3.35 30-yr Govt. Bond Yield 3.02 2.84 2.86 2.74 2.97 3.05 3.30 3.40 3.45 3.50 3.55 3.55 10-yr-2-yr Govt Spread 1.13 0.93 0.86 0.51 0.47 0.37 0.35 0.30 0.25 0.20 0.20 0.20 CANADA - U.S SPREADS Can - U.S. T-Bill Spread -0.23 -0.30 -0.04 -0.31 -0.60 -0.67 -0.73 -0.85 -1.03 -1.15 -1.15 -1.02 Can - U.S. 10-Year Bond Spread -0.77 -0.56 -0.23 -0.36 -0.65 -0.72 -0.65 -0.65 -0.65 -0.65 -0.65 -0.60 F: Forecast by TD Bank Group as at June 2018. All forecasts are end-of-period. Source: Bloomberg, Bank of Canada, Federal Reserve, TD Economics. * Spot rate as at June 18, 2018.

FOREIGN EXCHANGE OUTLOOK 2017 2018 2019 Currency Exchange rate Q1 Q2 Q3 Q4 Q1 Q2* Q3F Q4F Q1F Q2F Q3F Q4F Exchange rate to U.S. dollar Japanese yen JPY per USD 111 112 113 113 106 111 108 106 105 104 103 102 Euro USD per EUR 1.07 1.14 1.18 1.20 1.23 1.16 1.20 1.21 1.22 1.23 1.24 1.25 U.K. pound USD per GBP 1.25 1.30 1.34 1.35 1.40 1.32 1.37 1.39 1.40 1.41 1.42 1.43 Exchange rate to Canadian dollar U.S. dollar USD per CAD 0.75 0.77 0.80 0.80 0.78 0.76 0.78 0.78 0.79 0.79 0.79 0.79 Japanese yen JPY per CAD 83.6 86.6 90.0 90.0 82.4 83.7 83.7 82.8 82.7 82.1 81.5 80.8 Euro CAD per EUR 1.43 1.48 1.48 1.51 1.59 1.53 1.55 1.55 1.55 1.56 1.57 1.58 U.K. pound CAD per GBP 1.67 1.69 1.68 1.69 1.81 1.75 1.77 1.78 1.78 1.79 1.80 1.80 F: Forecast by TD Bank Group as at June 2018. All forecasts are end-of-period. Source: Bloomberg, Bank of Canada, Federal Reserve, TD Economics. * Spot rate as at June 18, 2018.

COMMODITY PRICE OUTLOOK 2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2* Q3F Q4F Q1F Q2F Q3F Q4F Crude Oil (WTI, $US/bbl) 52 48 48 55 63 66 68 67 66 65 65 65 Natural Gas ($US/MMBtu) 2.99 3.04 2.93 2.88 3.10 3.02 2.85 3.05 3.06 3.00 3.05 3.10 Gold ($US/troy oz.) 1218 1258 1278 1276 1329 1279 1300 1300 1325 1335 1375 1375 Silver (US$/troy oz.) 17.47 17.22 16.85 16.71 16.74 16.49 16.80 17.00 17.50 18.00 18.50 19.00 Copper (cents/lb) 264 257 288 309 316 318 324 324 327 327 331 331 Nickel (US$/lb) 4.66 4.19 4.78 5.26 6.01 6.89 5.90 5.75 5.70 5.70 5.86 5.86 Aluminum (cents/lb) 84 87 91 95 98 100 99 101 99 96 99 101 Wheat ($US/bu) 6.53 6.80 7.79 7.47 7.42 7.16 7.40 7.30 7.40 7.50 7.75 7.80 F: Forecast by TD Bank Group as at June 2018. All forecasts are period averages. Source: Bloomberg, TD Economics, USDA (Haver). * Spot rate as at June 18, 2018.

http://economics.td.com Page 6 @TD_Economics August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

GLOBAL ECONOMICS | SCOTIABANK’S FORECAST TABLES July 3, 2018

2017 2018 2019 Central Bank Rates Q4 Q1 Q2 Q3f Q4f Q1f Q2f Q3f Q4f Americas (%, end of period) Bank of Canada 1.00 1.25 1.25 1.50 1.75 2.00 2.25 2.25 2.50 US Federal Reserve (upper bound) 1.50 1.75 2.00 2.25 2.50 2.50 2.75 2.75 3.00 Bank of Mexico 7.25 7.50 7.75 7.75 8.00 8.25 8.25 8.25 8.00 Central Bank of Brazil 7.00 6.50 6.50 6.75 7.25 8.00 8.50 9.00 9.00 Bank of the Republic of Colombia 4.75 4.50 4.25 4.25 4.50 4.75 5.00 5.25 5.50 Central Reserve Bank of Peru 3.25 2.75 2.75 2.75 2.75 3.00 3.00 3.25 3.25 Central Bank of Chile 2.50 2.50 2.50 2.75 3.00 3.25 3.25 3.50 3.50 Europe European Central Bank 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Bank of England 0.50 0.50 0.50 0.75 0.75 0.75 0.75 0.75 1.00 Asia/Oceania Reserve Bank of Australia 1.50 1.50 1.50 1.50 1.75 1.75 2.00 2.00 2.25 Bank of Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 People's Bank of China 4.35 4.35 4.35 4.35 4.35 4.60 4.60 4.85 4.85 Reserve Bank of India 6.00 6.00 6.25 6.25 6.50 6.50 6.50 6.50 6.50 Bank of Korea 1.50 1.50 1.50 1.75 2.00 2.00 2.25 2.25 2.25 Bank of Thailand 1.50 1.50 1.50 1.50 1.75 1.75 2.00 2.00 2.25

Currencies and Interest Rates Americas (end of period) Canadian dollar (USDCAD) 1.26 1.29 1.31 1.28 1.28 1.25 1.22 1.22 1.25 Canadian dollar (CADUSD) 0.80 0.78 0.76 0.78 0.78 0.80 0.82 0.82 0.80 Mexican peso (USDMXN) 19.66 18.18 19.81 20.19 20.20 20.32 20.13 20.19 20.48 Brazilian real (USDBRL) 3.31 3.31 3.86 3.85 3.90 3.85 3.80 3.75 3.70 Colombian peso (USDCOP) 2,986 2,794 2,926 2,950 3,000 2,950 2,900 2,850 2,850 Peruvian sol (USDPEN) 3.24 3.23 3.28 3.20 3.18 3.18 3.14 3.15 3.12 Chilean peso (USDCLP) 615 604 653 624 602 599 596 593 590 Europe Euro (EURUSD) 1.20 1.23 1.17 1.17 1.20 1.22 1.25 1.30 1.35 UK pound (GBPUSD) 1.35 1.40 1.32 1.30 1.32 1.32 1.35 1.37 1.40 Asia/Oceania Japanese yen (USDJPY) 113 106 108 110 110 110 110 108 105 Australian dollar (AUDUSD) 0.78 0.77 0.73 0.73 0.73 0.75 0.77 0.77 0.77 Chinese yuan (USDCNY) 6.51 6.28 6.50 6.45 6.45 6.40 6.40 6.30 6.30 Indian rupee (USDINR) 63.9 65.2 68.0 67.0 67.0 66.0 66.0 65.0 65.0 South Korean won (USDKRW) 1,067 1,064 1,100 1,080 1,080 1,070 1,070 1,060 1,060 Thai baht (USDTHB) 32.6 31.2 33.0 32.5 32.5 32.0 32.0 31.5 31.5 Canada (Yields, %) 3-month T-bill 1.06 1.15 1.26 1.55 1.80 2.05 2.30 2.30 2.50 2-year Canada 1.69 1.78 1.91 2.05 2.30 2.40 2.50 2.55 2.60 5-year Canada 1.87 1.97 2.07 2.25 2.45 2.55 2.60 2.65 2.70 10-year Canada 2.05 2.09 2.17 2.40 2.55 2.60 2.65 2.70 2.75 30-year Canada 2.27 2.23 2.20 2.50 2.70 2.80 2.85 2.90 2.95 United States (Yields, %) 3-month T-bill 1.38 1.70 1.92 2.20 2.45 2.50 2.70 2.75 3.00 2-year Treasury 1.88 2.27 2.53 2.60 2.70 2.80 2.90 3.00 3.10 5-year Treasury 2.21 2.56 2.73 2.85 2.90 2.95 3.00 3.10 3.20 10-year Treasury 2.40 2.74 2.84 3.00 3.05 3.10 3.15 3.20 3.30 30-year Treasury 2.74 2.97 2.96 3.15 3.20 3.30 3.35 3.40 3.45 Sources: Scotiabank Economics, Bloomberg.

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Global Insight - July 2018

Financial Markets 3-Month T-BiGOC Ten-Year Bond Rate (%) 18Q1 1.15 2.21 18Q2 1.25 2.23 18Q3 1.49 2.43 18Q4 1.74 2.52 19Q1 1.99 2.63 19Q2 2.24 2.74 19Q3 2.49 2.84 19Q4 2.74 2.92 20Q1 3.03 2.98 20Q2 3.03 3.03 20Q3 3.03 3.06 20Q4 3.03 3.08 21Q1 3.03 3.08 21Q2 3.03 3.09 21Q3 3.03 3.09 21Q4 3.03 3.08 22Q1 3.03 3.07 22Q2 3.03 3.06 22Q3 3.03 3.05 22Q4 3.03 3.04 23Q1 3.03 3.03 23Q2 3.03 3.02 23Q3 3.03 3.01 23Q4 3.03 3.01

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CIBC July 2018

Page 9 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

National Bank Interest rate forecast

United States

Quarters Fed Fund 3 Mth B 2YR 5YR 10YR 30YR 07/09/18 2.00 1.96 2.56 2.75 2.86 2.97 Q3 2.25 2.13 2.68 2.82 2.96 3.06 Q4 2.25 2.08 2.73 2.85 3.04 3.12 Q1/19 2.50 2.25 2.76 2.87 3.12 3.24 Q2 2.50 2.37 2.98 3.13 3.33 3.44 Q3 2.75 2.62 3.13 3.22 3.41 3.50 Q4 3.00 2.83 3.20 3.32 3.47 3.56 Q1/20 3.00 3.00 3.26 3.34 3.48 3.56 Q2 3.25 3.12 3.33 3.50 3.61 3.68 Canada

Quarters Overnight 3 Mth Bill 2YR 5YR 10YR 30YR 07/09/18 1.25 1.42 1.94 2.09 2.17 2.22 Q3 1.50 1.53 2.06 2.15 2.22 2.29 Q4 1.75 1.88 2.28 2.46 2.57 2.63 Q1/19 2.00 1.96 2.31 2.49 2.74 2.79 Q2 2.00 2.18 2.38 2.63 2.93 2.97 Q3 2.25 2.21 2.48 2.74 3.01 3.05 Q4 2.25 2.21 2.55 2.78 3.09 3.14 Q1/20 2.25 2.46 2.60 2.83 3.12 3.18 Q2 2.5 4.47 2.7998949 3.0369943 3.2860419 3.3381019

Source: NBF Economics and Strategy - 2018/07/12

Page 10 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-27 (b) Attachment B

INTEREST RATE OUTLOOK Annual Average End of Period 17 18F 19F 20F 21F 22F 17 18F 19F 20F 21F 22F U.S. FIXED INCOME Fed Funds Target Rate (%)* 1.25 2.15 3.05 3.25 3.00 2.75 1.50 2.50 3.25 3.25 3.00 2.75 3-mth T-Bill Rate (%) 1.05 2.10 3.05 3.10 2.85 2.65 1.37 2.48 3.15 3.03 2.78 2.65 2-yr Govt. Bond Yield (%) 1.50 2.60 3.10 3.15 2.90 2.70 1.89 2.90 3.15 3.05 2.80 2.70 5-yr Govt. Bond Yield (%) 2.00 2.85 3.20 3.20 3.00 2.85 2.20 3.05 3.20 3.10 2.90 2.85 10-yr Govt. Bond Yield (%) 2.35 3.00 3.30 3.30 3.10 3.00 2.40 3.20 3.35 3.20 3.00 3.00 10-yr-2-yr Govt. Spread (%) 0.85 0.40 0.20 0.15 0.20 0.30 0.51 0.30 0.20 0.15 0.20 0.30 CANADIAN FIXED INCOME Overnight Target Rate (%) 0.75 1.40 1.90 2.40 2.50 2.50 1.00 1.50 2.00 2.50 2.50 2.50 3-mth T-Bill Rate (%) 0.80 1.40 1.95 2.40 2.50 2.50 1.06 1.63 2.13 2.50 2.50 2.50 2-yr Govt. Bond Yield (%) 1.25 1.95 2.30 2.50 2.55 2.55 1.68 2.10 2.40 2.55 2.55 2.55 5-yr Govt. Bond Yield (%) 1.55 2.20 2.50 2.70 2.70 2.70 1.86 2.35 2.60 2.70 2.70 2.70 10-yr Govt. Bond Yield (%) 1.90 2.35 2.70 2.85 2.85 2.85 2.04 2.55 2.75 2.85 2.85 2.85 10-yr-2-yr Govt. Spread (%) 0.65 0.40 0.40 0.35 0.30 0.30 0.36 0.45 0.35 0.30 0.30 0.30

*Upper bound of target range. F: Forecast by TD Economics as at June 2018. Annual averages are the average of the four quarterly end-of-period forecasts. Source: Bank of Canada, Bloomberg, Statistics Canada, TD Economics.

Disclaimer This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

http://economics.td.com Page 11 @TD_Economics August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-28

PUB (MPI) 1-28

Part and VI INV 16.2.1; Figure Page No.: 79 Chapter: INV-47 PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investments Sub Topic: Basic Interest Rate Risk with Naive Forecast

Preamble to IR (If Any):

Question:

a) Please provide an updated table of INV-47 for the most current date. Based on the updated table at the most current date, please provide the same table (Basic Investment and Claims Net Interest Rate Impact) for the following interest rate forecasting methods: i. Naïve ii. 50/50 b) Please provide additional commentary and analysis on each forecasting method, where possible.

Rationale for Question:

To understand and compare the Basic investment and claims net interest rate impact under different forecast approaches with current information.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-28

RESPONSE: a) See Figure 1 and 2 below.

i. Naïve

Figure 1: Basic Investment and Claims Net Interest Rate Impact with Naïve Forecast (June 30, 2018)

Line 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 No. Actual Actual Actual Actual Actual FB Forecast Forecast Forecast Forecast (in Millions of Dollars) 1 Marketable Bond Yield 2.80% 2.27% 2.85% 2.91% 3.04% 3.13% 3.14% 3.14% 3.14% 3.14% 2 YoY Change 0.05% -0.53% 0.58% 0.06% 0.13% 0.09% 0.01% 0.00% 0.00% 0.00%

3 Claims Discount Rate 3.68% 2.92% 3.28% 3.39% 3.47% 3.51% 3.42% 3.36% 3.31% 3.27% 4 YoY Change 0.13% -0.76% 0.36% 0.11% 0.08% 0.04% -0.10% -0.06% -0.05% -0.05%

5 Duration Gap (Years)* (1.4) (0.7) 0.2 0.3 0.1 0.0 0.0 0.0 0.0 0.0

6 Investments 7 Investment Income 147.7 188.5 (4.0) 82.9 116.3 199.2 81.1 83.5 86.2 88.9 8 (1) Marketable Bond Gain/(Loss) (19.4) 85.6 (52.5) (18.8) 4.6 7.7 (0.0) (0.0) (0.0) (0.0) 9 Investment Income excluding Marketable Bond G/L 167.2 102.8 48.5 101.7 111.7 191.5 81.1 83.5 86.2 88.9

10 Claims 11 Net Claims Incurred 747.4 745.8 666.4 806.0 783.0 826.8 900.2 951.2 1,007.7 1,063.3 12 (2) Claims Interest Rate Impact (26.1) 122.4 (76.2) (9.0) (15.8) 1.9 9.2 11.9 10.6 10.5 13 Claims Excluding Interest Rate Impact 773.5 623.4 742.6 815.0 798.8 824.9 891.0 939.3 997.1 1,052.8

14 Net Interest Rate Impact 15 (1) Marketable Bond Gain/Loss (19.4) 85.6 (52.5) (18.8) 4.6 7.7 (0.0) (0.0) (0.0) (0.0) 16 (2) Claims Interest Rate Impact (26.1) 122.4 (76.2) (9.0) (15.8) 1.9 9.2 11.9 10.6 10.5 17 Net Impact of Changes in Interest Rates [(1) - (2)] 6.7 (36.8) 23.7 9.0 75.6 5.8 (9.2) (11.9) (10.6) (10.5)

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-28

ii. 50/50

Figure 2: Basic Investment and Claims Net Interest Rate Impact with 50/50 Forecast (July 2018)

Line 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 No. Actual Actual Actual Actual Actual FB Forecast Forecast Forecast Forecast (in Millions of Dollars) 1 Marketable Bond Yield 2.80% 2.27% 2.85% 2.91% 3.04% 3.32% 3.48% 3.55% 3.54% 3.53% 2 YoY Change 0.05% -0.53% 0.58% 0.06% 0.13% 0.28% 0.16% 0.07% -0.01% -0.01%

3 Claims Discount Rate 3.68% 2.92% 3.28% 3.39% 3.47% 3.65% 3.67% 3.68% 3.64% 3.62% 4 YoY Change 0.13% -0.76% 0.36% 0.11% 0.08% 0.18% 0.02% 0.01% -0.04% -0.02%

5 Duration Gap (Years)* (1.4) (0.7) 0.2 0.3 0.1 0.0 0.0 0.0 0.0 0.0

6 Investments 7 Investment Income 147.7 188.5 (4.0) 82.9 116.3 178.2 63.9 79.0 95.1 93.9 8 (1) Marketable Bond Gain/(Loss) (19.4) 85.6 (52.5) (18.8) 4.6 (13.5) (21.2) (11.1) 0.8 (4.3) 9 Investment Income excluding Marketable Bond G/L 167.2 102.8 48.5 101.7 111.7 191.7 85.1 90.1 94.3 98.2

10 Claims 11 'Net Claims Incurred 747.4 745.8 666.4 806.0 783.0 799.5 875.8 935.4 1,003.2 1,054.6 12 (2) Claims Interest Rate Impact (26.1) 122.4 (76.2) (9.0) (15.8) (25.5) (14.3) (2.2) 8.2 3.7 13 Claims Excluding Interest Rate Impact 773.5 623.4 742.6 815.0 798.8 825.0 890.0 937.5 995.0 1,050.9

14 Net Interest Rate Impact 15 (1) Marketable Bond Gain/Loss (19.4) 85.6 (52.5) (18.8) 4.6 (13.5) (21.2) (11.1) 0.8 (4.3) 16 (2) Claims Interest Rate Impact (26.1) 122.4 (76.2) (9.0) (15.8) (25.5) (14.3) (2.2) 8.2 3.7 17 Net Impact of Changes in Interest Rates [(1) - (2)] 6.7 (36.8) 23.7 9.0 75.6 12.0 (6.9) (9.0) (7.4) (8.0) b) MPI considers the Naïve forecast as the best estimate. In addition to the analysis completed in Figure INV-8, see PUB(MPI) 1-11 (a) for additional analysis on the Naïve and 50/50 forecast.

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-29

PUB (MPI) 1-29

Part and VI INV.17 Page No.: 81-82 Chapter: PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investments Sub Topic: Investment Policy Statement – Material Changes

Preamble to IR (If Any):

The Investment Policy Statement and associated governance documents attached to this application are current to the time of filing and material changes to the current Investment Policy Statement from the documents previously filed are explained below.

Fixed Income Portfolio (Section 8.4)

For interest rate risk management purposes the duration of the marketable bond portfolio (excluding MUSH bonds) will be matched to the duration of the claims liabilities.

Rationale: This change is required because of the change in the calculation methodology of the claims discount rate (from duration weighted to dollar weighted) as discussed in INV.16.1.

Minimum Credit Rating (Section 8.6)

The minimum credit rating was changed from “A (low)” to “BBB”.

Rationale: To conform to the standard definition of Investment Grade securities. This change was approved at the December 8, 2017 Investment Committee meeting.

Manitoba Public Insurance Page 1 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-29

Question: a) Please discuss the impact of the change made to matching the duration marketable bond portfolio (excluding MUSH bonds) to the duration of the claims liabilities. b) Please discuss the impact on risk versus return of the change made to move the minimum credit rating from “A (low)” to “BBB”.

Rationale for Question:

To better understand the details of any impact from the material changes to the Investment Policy Statement.

RESPONSE: a) Rationale for Change

As background, the claims discount rate methodology was changed to use the dollar-weighted yield of the fixed income portfolio rather than the duration- weighted yield. Under the duration-weighted yield approach, capital gains/losses for marketable bonds were based on changes in the market weighted yield of the portfolio, whereas claims liabilities were being valued based on the duration- weighted yield of the fixed income portfolio, which created basis risk (i.e.: valuation on two different bases). The dollar-weighted (i.e. market-value weighted) claims discount rate methodology provided tighter tracking (less basis risk) and was easier to explain compared to the duration-weighted claims discount rate. Page 7 of the Actuarial Report as of October 31, 2017 states:

“We switched from duration adjusted yield to market value weighted yield in selecting the discount rate. The Corporation’s asset liability management policy strives to minimize the impact to its income statement due to a change in market interest rates.”

Manitoba Public Insurance Page 2 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-29

As a result of this change to the claims discount rate methodology, the marketable bond duration was required to match to the claims liability duration. MUSH bonds were removed from the duration matching calculation because MUSH bonds are a poor hedge against changes in interest rates. MUSH bonds are measured at amortized cost, and are not sensitive to changes in interest rates. This lack of sensitivity creates basis risk (valuation on two different bases). When there are fluctuations in market interest rates, marketable bond yields change and MUSH bond yields do not change.

The duration-weighted claims discount rate places a smaller weighting on MUSH bonds than the market value weighted claims discount rate. To illustrate (using approximate, round numbers), for a 100 bps change in market interest rates:

• The duration weighted claims discount rate would change by approximately 80 bps. This is because marketable bonds have an approximate 80% weight and MUSH bonds would have a 20% weight in the claims discount rate on a duration weighted basis.

• The market value weighted claims discount rate would change by approximately 67 bps. This is because the market value weight of marketable bonds to non-marketable bonds is approximately 67%/33%.

In summary, changing the claims discount rate methodology to a market-value weighted basis decreased the impact of the interest rate-sensitive assets (marketable bonds) in the claims discount rate. As a result, matching the duration of the claims liabilities to the total fixed income portfolio (including MUSH bonds) did not provide sufficient protection from changes to interest rates when using a market value weighted claims discount rate. Matching the marketable bond duration to the claims duration ensures that interest rate-sensitive liabilities are duration matched to interest rate-sensitive assets.

Manitoba Public Insurance Page 3 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-29

Impact of the Change in the 2019 GRA

The removal of the MUSH portfolio from the duration-matching fixed income portfolio required the government bond duration to fall by 2.2 years from 11.9 years to 9.7 years in Q2 2018/19. Note that the corporate bond duration remained unchanged at 9.9 years, and the claims liability duration was 9.7 years in Q2 2018/19.

When the government bond duration fell by 2.2 years, it caused the government bond yield spread to fall by 7 bps (see INV.4.3.4 to see further discussion on the government bond yield spread). This in turn caused the claims discount rate to decrease by 4 bps, which increased the claims liabilities by $9.4M. Since there is no offsetting impact to the fixed income portfolio from the decline in the government bond yield, this change had a $9.4M negative impact on net income.

In 2018/19, two other factors impacted the claims discount rate/claims liabilities without an offsetting impact to the fixed income portfolio. First, a declining MUSH yield and declining allocation to MUSH bonds negatively impact net income. Second, the corporate bond allocation was forecasted to increase from $115.9M as of Q4 2018/19 to $619.0M as of Q4 2019/20. Also, a forecasted allocation to corporate bonds with added exposure to BBB bonds increased the corporate bond yield from 3.35% to 3.90%. A larger allocation to higher yielding corporate bonds more than offset the negative impact from government bonds and MUSH bonds in 2018/19.

For the 2019 GRA, the combined impact of 1) a lower government bond duration, 2) a declining MUSH yield and a declining exposure to MUSH bonds, and 3) an increasing corporate bond yield with increasing exposure to corporate bonds, resulted in an increase to net income in the amount of $8.2 million dollars. b) A credit rating is an evaluation of the credit risk of a debtor, predicting their ability to repay their debt and the likelihood of defaulting on their financial obligations. A lower rated investment (e.g. BBB compared to A (low)) implies a higher probability of default by a debtor. Defaults by investment grade bonds in Canada (BBB or

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higher credit rating) are rare, but occurred in the global financial crisis of 2008/2009. According to Moody’s, the average cumulative default rates for corporate issuers over any 5 year period from 1989-2013 was 0.2% for A rated bonds and 1.8% for BBB rated bonds.

The table below shows yields, management fees, credit loss rates, total returns and volatility for long term corporate bonds with A and BBB credit ratings. Credit loss rates are the product of default frequency and loss severity (reflecting the fact that when an issuer defaults the borrower often recovers a portion of their investment, i.e. the loss severity is not necessarily 100%). Net yields represent gross yields after considering management fees and credit loss rates.

Figure 1: Corporate Bond Yields – February 28, 2017

Yield Spread Line Average One to No. Management Year Credit Government 1 Bond Category Yield DOF fees fees Total fees Loss Rates* Net Yield Bonds Volatility 2 Long Term Corp A 3.79% 0.07% 0.13% 0.20% 0.00% 3.59% 0.77% 7.10% 3 Long Term Corp BBB 4.37% 0.07% 0.13% 0.20% 0.20% 3.97% 1.15% 8.10% 4 *Credit Loss Rates were calculated by Moody's and are the product of default frequency and loss severity

The table above indicates that, even when considering the higher loss rates on long term corporate bonds rated BBB relative to corporate bonds rated A (0.2% vs.0.0%), BBB bonds provide a significant additional net yield (0.38%) with a relatively small increase in risk (as measured by volatility, from 7.1% to 8.1%).

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PUB (MPI) 1-30

Part and VI INV.18; Figure INV- Page No.: 83 Chapter: 50 PUB Approved 8. Performance of the investment portfolio Issue No: 11. Operational Benchmarking Topic: Investments Sub Topic: Benchmarking Performance

Preamble to IR (If Any):

SGI and ICBC’s fiscal 2017 returns have not yet been published. MPI will provide those returns when they are available.

Question:

Please refile the table in Figure INV-50 including the 2017 returns for SGI and ICBC, when available.

Rationale for Question:

To understand the relative performance of the Corporation’s investment portfolio with other comparable organizations.

RESPONSE:

ICBC’s returns will not be available until the corporation’s annual report is filed with the BCUC; because ICBC’s year-end is at March 31 the report has not yet been released. Last year we did not receive this information until early October.

The table below includes SGI’s return information, which when adjusted to match MPI’s asset allocation is slightly lower than MPI’s return.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-30

Figure 1: Return Comparison

Line No. Year CSSB TRAF WCB SGI Average MPI 1 2013 14.7% 14.0% 13.6% 5.7% 12.0% 8.0% 2 2014 9.2% 10.8% 10.0% 9.0% 9.8% 9.6% 3 2015 7.6% 8.3% 7.9% 6.6% 7.6% 2.7% 4 2016 5.7% 7.3% 3.5% 4.6% 5.3% 6.5% 5 2017 10.8% 9.2% 8.3% 9.1% 9.4% 6.3% Annualized Return 6 over 5 Years 9.6% 9.9% 8.6% 7.0% 8.8% 6.6%

7 MPI Value Added -3.0% -3.3% -2.0% -0.4% -2.2%

8 Asset Allocation Adjusted Returns 9 2016 4.2% 5.5% 2.4% 4.0% 6.5% 10 2017 6.4% 6.5% 4.9% 6.2% 6.0% 6.3%

11 MPI Value Added (Asset Allocation Adjusted Returns) 12 2016 2.3% 1.0% 4.1% 2.5% 13 2017 -0.1% -0.2% 1.4% 0.1% 0.3%

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-31

PUB (MPI) 1-31

Part and VI INV Appendix 1 Page No.: 2 Chapter: PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investment Policy Statement Sub Topic: Review of Investment Policy Statement

Preamble to IR (If Any):

The Investment Policy Statement is: to be reviewed annually by the Investment Committee [of the Board]. The next scheduled review will occur in April 2019. The Investment Committee will be required to provide a written report on the results of its review, including assessment of the effectiveness of this Policy and recommendations for revisions.

Question: a) Please indicate the current composition of the individuals on the Investment Committee Working Group. b) Please file the results of the most current review of the Investment Committee/ Investment Committee Working Group, including the effectiveness of the Investment Policy Statement, and any recommendations for revisions.

Rationale for Question:

To understand the forecasting of investment income.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-31

RESPONSE:

a) The following individuals are members of the Investment Committee Working Group:

1. Ben Graham; President & CEO 2. Luke Johnston; Vice President, Product and Risk Management & Chief Actuary 3. Mark Giesbrecht; Vice President, Finance & Chief Financial Officer 4. Glenn Bunston; Manager, Investments 5. Cynthia Campbell; Corporate Controller 6. Diane Hopkins; Manager, Financial Forecasting 7. Garry Steski; Assistant Deputy Minister of Finance, Province of MB 8. Don Delisle; Director of Capital Markets, Province of Manitoba 9. Scott Wiebe; Director of Treasury Services, Province of Manitoba 10. Bob Block; Director of Risk Management & Banking, Province of MB b) The Investment Policy Statement is still being reviewed by the Investment Committee. A copy of the revised policy and a list of the changes will be filed with the PUB, when available.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-32

PUB (MPI) 1-32

Part and VI INV Appendix 1; Page No.: Appendix 1 Chapter: Appendix 17 Appendix 17 PUB Approved 8. Performance of the Investment Portfolio and Issue No: Composition 14. Risk Assessment and Risk Management 21. Asset Liability Management Study Topic: Five Optimized Portfolios Sub Topic: Definition of Risk

Preamble to IR (If Any):

Question:

Please articulate what is defined as "risk" in relation to the establishment of each of the five Optimized portfolios.

Rationale for Question:

To understand the definition of risk and how it is used in establishing optimal investment portfolios.

RESPONSE:

In each portfolio (except the RSR), the expected volatility of the funded position (assets/liabilities) was the primary risk measure and the expected excess return of assets over liabilities was the primary reward measure.

For the RSR portfolio, the primary risk measure was expected return volatility and the primary reward measure was the expected return. A mean-variance optimizer identified the portfolios with the maximum return, at each level of risk, which then formed the efficient frontier. By definition, all portfolios on the efficient frontier are optimal.

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-33

PUB (MPI) 1-33

Part and VI INV Appendix 6 Page No.: 1-3 Chapter: PUB Approved 8. Performance of the Investment Portfolio Issue No: Topic: Investment Income Sub Topic: Investment Portfolio Composition

Preamble to IR (If Any):

Question:

a) Please provide an update to INV Appendix 6, indicating the current balance of Unrealized Gains and Losses on the equity portfolio, and the relative market value to book value ratio. b) Please provide details of the changes in the forecast balance of AOCI for 2018/19 and 2019/20.

Rationale for Question:

To understand the current performance of the Investment Portfolio.

RESPONSE:

a) Please refer to Appendix 1 attached.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-33

b) Please refer to the schedule below.

Manitoba Public Insurance Accumulated Other Comprehensive Income / (Loss)

Line (C$ 000s) For the Years Ended February No. 2019BF 2020F

1 Beginning Accumulated Other Comprehensive Income (Loss) 39,870 (52,111)

2 Unrealized Gains (losses) on Available for Sale Assets 16,852 11,887 3 Reclassification of net realized (gains) losses on Available for Sale Assets (116,236) (4,221) 4 Allocation adjustment on Employee Future Benefit Liabilities 7,589 - 5 Allocation adjustment on Available for Sale Assets (186) 186

6 Ending Accumulated Other Comprehensive Income (Loss) (52,111) (44,259)

The change in value on Available for Sale Assets represents RSR and Basic’s share of the employee future benefit assets. The allocation adjustment on Employee Future Benefit Liabilities in 2018/19 is due to the new ALM strategy whereby the primary allocator is now the payroll ratio and not the investment ratio.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-33(a) Appendix 1 MANITOBA PUBLIC INSURANCE INVESTMENT HOLDINGS AS OF May 31, 2018

Holding's Name Units/Par Book Value Market Value Unrealized Gain/(Loss) 10 Canadian Equities Available for Sale AKITA DRILLING LTD 85,140.00 511,691.41 477,635.41 -34,056.00 ALIMENTATION COUCHE-TARD INC 75,000.00 4,823,955.00 4,056,000.00 -767,955.00 ALTAGAS LTD SUB RECPT 97,185.00 2,551,106.38 2,461,696.04 -89,410.34 ALTAGAS LTD SUB RECPT 21,100.00 560,205.00 534,674.00 -25,531.00 ARITZIA INC 129,030.00 1,616,908.23 1,778,033.40 161,125.17 BADGER DAYLIGHTING LTD. 48,785.00 1,118,632.74 1,404,032.32 285,399.58 BANK OF MONTREAL 40,000.00 2,358,387.30 4,012,799.99 1,654,412.69 BANK OF NOVA SCOTIA 167,473.00 9,135,935.51 13,098,063.35 3,962,127.84 BLACK DIAMOND GROUP LTD 98,010.00 277,368.32 318,532.58 41,164.26 CAN IMP BANK OF COMMERCE 78,774.00 6,282,640.74 8,917,216.79 2,634,576.05 CANADA TREASURY BILL 2,845,000.00 2,829,514.75 2,845,000.00 15,485.25 CANADA TREASURY BILL 1,000,000.00 996,880.00 1,000,000.00 3,120.00 CANADA TREASURY BILL 3,000,000.00 2,990,530.00 3,000,000.00 9,470.00 CANADA TREASURY BILL 2,925,000.00 2,911,154.24 2,925,000.00 13,845.76 CANADIAN NATIONAL RAILWAY CO C 41,000.00 3,170,750.65 4,434,970.02 1,264,219.37 CANADIAN TIRE CORP LTD CLASS A 31,910.00 3,298,272.27 5,264,511.81 1,966,239.54 CANADIAN WESTERN BANK 103,320.00 2,253,709.77 3,481,884.02 1,228,174.25 CANFOR CORPORATION 80,085.00 1,175,110.91 2,588,347.19 1,413,236.28 CANFOR CORPORATION 85,323.00 886,205.74 1,925,740.11 1,039,534.37 CDN NATURAL RESOURCES LTD 259,052.00 8,699,978.82 11,608,120.14 2,908,141.32 CERVUS EQUIPMENT CORP 16,530.00 194,062.25 246,297.00 52,234.75 CGI GROUP INC CL A SUB VTG 38,632.00 1,031,492.96 3,074,720.89 2,043,227.93 CI FINANCIAL INC 116,319.00 3,092,150.43 2,905,648.62 -186,501.81 COMINAR REAL ESTATE INVESTMENT 140,830.00 1,869,213.08 1,711,084.50 -158,128.58 CORUS ENTERTAINMENT 75,058.00 723,768.97 466,110.17 -257,658.80 E-L FINANCIAL CORP LTD 3,365.00 1,493,352.41 2,708,825.00 1,215,472.59 ELEMENT FINANCIAL CORP 100,380.00 558,749.38 545,063.40 -13,685.98 EMERA INC 100,000.00 4,583,495.78 4,047,000.00 -536,495.78 ENBRIDGE INC COM 95,000.00 4,616,185.62 3,824,700.00 -791,485.62 ENERCARE INC. 107,810.00 2,042,422.34 1,851,097.70 -191,324.64 ENSIGN ENERGY SERVICES INC. 208,851.00 1,163,294.67 1,225,955.37 62,660.70 EVERTZ TECHNOLOGIES LTD 69,235.00 1,090,585.99 1,158,301.56 67,715.57 FAIRFAX FINANCIAL HOLDINGS LTD 4,399.00 2,195,946.08 3,184,876.00 988,929.92 FINNING INTERNATIONAL INC 80,442.00 1,776,284.67 2,590,232.40 813,947.73 FORTIS INC. 100,000.00 3,260,841.65 4,136,999.99 876,158.34 FRESHII INC CL A SUB 132,340.00 1,369,657.88 881,384.40 -488,273.48 GDI INTEGRATED FACILITY SVCS 40,645.00 652,977.18 679,177.94 26,200.76 GILDAN ACTIVE WEAR INC. 113,000.00 4,199,679.66 4,239,760.01 40,080.35 GREAT WEST LIFECO INC. 71,490.00 2,043,972.99 2,340,582.59 296,609.60

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Holding's Name Units/Par Book Value Market Value Unrealized Gain/(Loss) 10 Canadian Equities Available for Sale GUARDIAN CAP GRP CL A 98,110.00 1,739,096.25 2,282,038.58 542,942.33 HUSKY ENERGY INC 255,697.00 3,875,200.60 4,761,078.14 885,877.54 IMPERIAL OIL LTD 140,387.00 5,844,229.00 5,952,408.78 108,179.78 INDUSTRIAL-ALLIANCE LIFE INSUR 113,780.00 4,951,364.15 6,003,032.81 1,051,668.66 INFORMATION SVCS CORP CLS 42,820.00 665,681.54 749,778.16 84,096.62 INTACT FINANCIAL CORP COMMON 44,000.00 4,138,640.26 4,298,800.00 160,159.74 KNIGHT THERAPEUTICS INC 146,945.00 1,166,371.85 1,175,560.00 9,188.15 LABRADOR IRON ORE 45,105.00 564,255.84 1,071,243.79 506,987.95 LASSONDE INDS INC SUBD COM 11,475.00 732,679.33 3,204,623.27 2,471,943.94 LAURENTIAN BANK OF CANADA 17,055.00 725,633.34 770,715.52 45,082.18 LEONS FURNITURE 108,465.00 1,236,199.17 1,963,216.54 727,017.37 LOBLAW COS LTD 27,666.00 1,236,284.85 1,852,792.01 616,507.16 LOGISTEC CORP CL B 20,460.00 706,279.20 1,036,299.00 330,019.80 MAGNA INTL INC CL A SVS 126,772.00 5,625,445.66 10,530,950.05 4,905,504.39 MAJOR DRILLING GROUP INC 100,545.00 632,428.05 723,923.99 91,495.94 MANULIFE FINANCIAL CORP TR REC 185,450.00 3,775,061.51 4,530,543.50 755,481.99 MAXAR TECHNOLOGIES LTD 19,830.00 1,178,348.66 1,229,460.00 51,111.34 MELCOR DEVS LTD 83,810.00 1,151,671.35 1,274,750.03 123,078.68 MULLEN GROUP LTD. 102,460.00 1,482,645.40 1,531,777.03 49,131.63 NATIONAL BANK OF CANADA 75,000.00 2,539,275.78 4,651,500.01 2,112,224.23 NUTRIEN LTD 88,114.00 4,192,373.65 5,781,159.54 1,588,785.89 OPEN TEXT CORP. 78,564.00 2,318,733.41 3,552,664.06 1,233,930.65 PARKLAND FUEL CORP 88,035.00 2,055,102.21 2,777,504.24 722,402.03 PASON SYSTEMS INC. 51,075.00 740,644.57 1,017,413.97 276,769.40 PEYTO EXPLORATION & DEVELOPMEN 72,790.00 1,016,410.82 767,934.50 -248,476.32 POWER CORP CDA SVS 118,906.00 3,299,430.44 3,588,583.08 289,152.64 PRECISION DRILLING CORP 290,605.00 1,166,438.34 1,299,004.31 132,565.97 RICHELIEU HARDWARE LTD. 19,505.00 162,052.66 581,834.15 419,781.49 ROGERS COMMUNICATIONS INC. 80,458.00 3,155,003.07 4,894,260.14 1,739,257.07 ROYAL BANK OF CANADA 135,725.00 7,808,241.25 13,299,692.74 5,491,451.49 SECURE ENERGY SERVICES INC 227,163.00 1,707,697.77 1,778,686.27 70,988.50 SHAW COMMUNICATIONS INC CLASS 118,596.00 2,680,832.33 3,084,681.96 403,849.63 SHAWCOR LTD COMMON NEW 98,491.00 3,107,012.27 2,527,279.07 -579,733.20 SHERRITT INTERNATIONAL LTD 491,945.00 388,678.75 570,656.20 181,977.45 SNC - LAVALIN GROUP INC 45,556.00 1,848,979.83 2,572,091.76 723,111.93 SOLIUM CAPITAL INC. 85,064.00 632,184.13 946,762.31 314,578.18 STANTEC INC. 49,540.00 1,623,151.06 1,616,490.20 -6,660.86 SUN LIFE FINANCIAL 80,000.00 3,367,710.41 4,284,000.00 916,289.59 SUNCOR ENERGY INC NEW COMM 245,710.00 9,050,688.96 12,668,807.56 3,618,118.60 SUPERIOR PLUS CORP COMMO 184,720.00 2,061,818.95 2,281,292.00 219,473.05 TECK RESOURCES LIMITED 31,950.00 284,479.39 1,121,445.01 836,965.62 TELUS CORP COM 90,000.00 3,806,297.37 4,103,100.00 296,802.63 THOMSON REUTERS CORP 30,693.00 978,116.22 1,545,392.58 567,276.36 TOROMONT INDUSTRIES LTD. 10,715.00 309,612.27 621,470.00 311,857.73 TORONTO DOMINION BANK 156,460.00 5,434,720.40 11,842,457.38 6,407,736.98 TRANSCANADA CORPORATION 75,000.00 4,015,387.92 4,066,499.99 51,112.07 Monday, July 16, 2018 HoldingMinorIssuer.dba/Managers Report Page 2 of 3 Page 2 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-33(a) Appendix 1

Holding's Name Units/Par Book Value Market Value Unrealized Gain/(Loss) 10 Canadian Equities Available for Sale TRANSCONTINENTAL INC 49,334.00 1,319,856.80 1,436,112.74 116,255.94 WINPAK LTD 9,835.00 93,723.82 434,116.90 340,393.08

Total Canadian Equities 17,695,894.00 208,999,242.63 272,605,958.58 63,606,715.95 Count 87 15 U.S. Equities Available for Sale Blackrock 182,860.00 17,527,230.82 31,085,156.21 13,557,925.39 Blackrock 747,290.00 69,130,565.16 117,126,902.10 47,996,336.94

Total U.S. Equities 930,150.00 86,657,795.98 148,212,058.31 61,554,262.33 Count 2 Total MPI 18,626,044.00 295,657,038.61 420,818,016.89 125,160,978.28

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PUB (MPI) 1-34

Part and VI INV Appendix 17 Page No.: 10 Chapter: PUB Approved 8. Performance of the investment portfolio Issue No: 21. Asset Liability Management Study Topic: Investments Sub Topic: Mercer ALM Alternatives & Board Risk Tolerance

Preamble to IR (If Any):

It was determined that the risk tolerance of MPI’s Board of Directors for the assets backing the Basic claims liabilities was very low and that mitigating risk was more important that maximizing returns. The focus was on further reducing interest rate risk, with a willingness to take on modest credit risk (as long as it is diversified and cost effective).

Based on this risk tolerance, it was determined that the best way to mitigate the interest rate risk associated with the Basic claims liability was to develop an investment portfolio with 100% fixed income assets (i.e. no growth assets) and dollar and duration matching those assets to the claims liabilities.

Private debt was excluded from the Basic Claims portfolio as it was deemed to be incompatible with the Investment Committee’s low appetite for risk for the Basic Claims portfolio. Similarly, leveraged bond funds and diversified growth funds (DGF) were excluded from consideration from all portfolios.

Question:

Please provide any support for the Board’s discussion, analysis, conclusion, etc. that resulted in private debt, leveraged bond funds and diversified growth funds being excluded from consideration of all portfolios.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-34

Rationale for Question:

To evaluate if there has been any significant changes or updates to efficient frontiers since the last Mercer report.

RESPONSE:

Private debt was not excluded from all portfolios; it was excluded from the Basic Claims portfolio but was included in the other portfolios. Leveraged bond funds and diversified growth funds were excluded because the Corporation was not comfortable with taking short positions in any securities. Diversified growth fund managers require full discretion to invest across a broad universe of asset classes and can use derivative instruments, similar to hedge funds. The Corporation was not comfortable with the use of derivatives in the asset class.

Both leveraged bond funds and diversified growth funds are considered growth asset classes. As a result of the Asset Liability Management study, the Corporation decreased the target weight of growth assets from 30% to 16% of the consolidated total portfolio. With allocations to infrastructure and real estate decreasing from 15% to 6%, and the equity allocation decreasing from 15% to 10%, there was little room to add meaningful allocations to growth asset classes to the asset mix (on a consolidated basis).

As discussed in CAC (MPI) 1-96, Board of Directors risk tolerance is shaped by the regulatory environment, the purpose of each of the funds, and the requirement to avoid negatively affecting the Province’s consolidated financial statements

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PUB (MPI) 1-35

Part and VI INV Appendix 17; Page No.: 4 Chapter: Figures 2 & 3 PUB Approved 8. Performance of the Investment Portfolio Issue No: 21. Asset Liability Management Study Topic: Investments Sub Topic: Mercer’s Interest Rate Forecasts

Preamble to IR (If Any):

Question:

Please provide the underlying assumptions and details in support of the Mercer interest rate forecasts in INV Appendix 17 Figure 2 (Standard) and Figure 3 (Forward Curve).

Rationale for Question:

To understand the source of the Mercer interest rate forecasts and assumptions for how the forecasts were determined.

RESPONSE:

[Redacted. This response has been filed in the confidential module pursuant to the Order No. 89/18.]

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-36

PUB (MPI) 1-36

Part and IV SDM.1.6 Service Page No.: 11 Chapter: Delivery Model PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Direct Repair Program Sub Topic:

Preamble to IR (If Any):

MPI implemented a straight through processing for high-performance repair shops. MPI has also implemented a Direct Repair Plus Program, which allows those enrolled to handle more perils and claims types that those solely in the Direct Repair Program.

Question:

a) Please explain what additional claims are handled under the Direct Repair Plus Program. b) Please indicate how MPI has determined which repair shops have demonstrated a proven record of accomplishment on performance repairs. c) How many body shops are eligible for the Direct Repair Program? d) How many claims have been handled under the direct repair process? e) How many post audits have been undertaken, and what have the results of the audits performed to date?

Rationale for Question:

To understand Direct Repair Program process.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-36

RESPONSE:

a) The Direct Repair (DR) Plus program allows DR Plus eligible facilities to complete claims of increased complexity such as collision with animals, common carrier (rental and fleet vehicles) and out of province claims in addition to the claims allowed under the DR Program. Customers agreed to participate in the DR Plus program for 25% of eligible claims compared to 47% participation in the DR program.

Effective July 18, 2018, the DR and DR Plus programs were amalgamated to provide greater access to the DR program across Manitoba. Prior to the amalgamation, collision with animal claims were not eligible for direct repair as all the DR Plus shops were located in Winnipeg. It is expected that this amalgamation will increase the overall DR adoption rate. b) Repair shops demonstrate a proven record of accomplishment based on performance by using Key Performance Indicators that align with MPI’s objectives to control costs, improve efficiencies, encourage proper repair and enhance customer service. These scores are distributed to the shops monthly. Opportunities for improvement are reviewed by the Shop Relationship Advisor with the shops as deemed necessary. c) As of February 28, 2018 there were 74 DR shops and 6 DR Plus shops. There were 15 additional shops that were eligible for the DR program based on KPI performance, but chose to not participate in DR at that time.

As of July 24, 2018, there are 90 DR shops in Manitoba after the amalgamation of DR and DR Plus. d) For the period of March 1, 2017 to Feb 28th 2018, there were 14,233 claims completed within the DR Program. e) MPI’s physical damage claim audit process targets claims that fail to comply with specific estimating policies and procedures. Though all shops are subject to audit,

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-36

MPI focuses on shops with an earned approval limit which makes up 25% of all claims approved through automation. Earned Authority Limits (EAL) are provided to DR shops and non DR shops. Claims above EAL are reviewed by MPI estimating staff. The table below provides a summary of the results of claims audited in FY 2017/18.

Shop Type Net $ Recovered Claims With Recoveries Total Claims Audited

Direct Repair $192,983.89 1,303 9,932 Direct Repair Plus $14,422.91 127 928 Non-Direct Repair $311,305.55 2,222 12,008

Grand Total $518,712.35 3,652 22,868

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PUB (MPI) 1-37

Part and IV SDM.1.7.2 Service Page No.: 12 Chapter: Delivery Model PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Cost Containment Measures Sub Topic:

Preamble to IR (If Any):

MPI has indicated that the current Light Vehicle Accreditation Agreement between MPI and the repair industry negatively impacts the financial viability of the Direct Repair (DR) program.

Question:

a) Please produce the Light Vehicle Accreditation Agreement, and if necessary, with a request for confidentiality under Rule 13. b) Please provide the analysis that demonstrates that the $81 per DR claim premium exceeds the value saved by the Corporation related to preparing the first estimate. c) Please file any analysis made that supported the establishment of the current premium. d) Please indicate the amount paid in DR premiums to date and provide the analysis that supports the annual cost estimate of $6.3M.

Rationale for Question:

To understand the details and impact related to the current Light Vehicle Accreditation Agreement.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-37

RESPONSE: a) The 2017 Light Vehicle Accreditation Agreement (LVAA) is available on the MPI Partners website (as a reference for shops), along with policies and Estimating Standards. The 2017 LVAA is accessible at: http://www.mpipartners.ca/documents/Policies_Procedures/2017-LVAA.pdf

Although the question specifically requests production of the LVAA, a separate agreement negotiated with Automotive Trades Association and Manitoba Motor Dealers Association specifies compensation. A signed copy of this agreement is included at Appendix “A”. b) Please refer to the detailed cost benefit analysis in PUB (MPI) 1-62, for which the Corporation is seeking confidential treatment. c) and d)

The Corporation initially established an amount of $6 million annually to be part of the LVAA payments for Direct Repair (DR) shops in the long run. The math used to support that estimate was that the Corporation expected 75% of the 98,000 annual repairable claims would be subject to the $81 premium over the long term. The $6 million in annual cost was not supported by established efficiencies to MPI, which are generated mainly through lower numbers of estimating staff. A key flaw in the $81 premium is that MPI is required to pay it on all jobs performed by a DR repair shop, not just DR jobs. Paying a premium for the roughly 80% of non-DR jobs creates a direct mismatch in costs and benefits, when no efficiencies are created. MPI is now relying on assessments of value, and NPV analysis in operational and claims management programs such as these. As significant efficiency gains have not materialized with DR, the Corporation has announced its intent to dramatically alter the $81 premium and other DR policies with its repair shop partner network. Future partner compensation negotiations better reflect the true cost incurred or value created, and also industry practice outside Manitoba, which is commonly not to remunerate repair shops for DR types of estimating.

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-37

To date, the Corporation paid $483,939 for 5,532 eligible claims in Q1 2018. The analysis supporting the annual cost estimate of $6.3M was subsequently revised it to $3.63M for 2018/19. As the DR program matures and adoption grows, the Corporation could expect that the DR premium could cost as much as $6 million per year if not changed and based on the percentage of MPI’s repair capacity that DR shops process multiplied by the $81 premium. The variance from $6.3m down to $3.63m for 2018/19 resulted from the following:

i. The confirmation of DR Premium implementation criteria after negotiations to only include claims with a date of loss after December 31, 2017, and the claim’s acceptance by a DR shop after February 28, 2018. 13,031 in claims paid by the Corporation in Q1 were excluded from the $81 payment due this change in criteria.

ii. The original estimate used a conservative scenario of 127 DR shops representing 71,989 claims being entitled to the premium.

iii. The estimate did not consider excluding claims for shops in corrective actions. DR shops must be in “good standing” to be entitled to the DR Premium. 264 claims were excluded from the DR Premium in Q1.

iv. DR Shops entering the operational phase of DR midway through Q1.

Figure 1: Annual Cost Estimate

Q1 Q1 Q3 Q4 Original Estimate $1.57M $1.57M $1.57M $1.57M 2018/19 $6.3M Re-Set Estimate $0.48M $0.48M $1.02M $1.15M $3.63M

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PUB (MPI) 1-38

Part and IV SDM.1.9 Service Page No.: 18-19 Chapter: Delivery Model PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Claims Expenses Sub Topic: BI3 Claims Management

Preamble to IR (If Any):

Question:

a) Please file the jurisdictional review that supports the increase in staffing levels for managing claims. b) Please indicate what additional case management capacity has been added to manage claims, in terms of FTE and annualized cost.

Rationale for Question:

To understand changes in claims expenses.

RESPONSE: a) The increase in staffing levels is based on the operational needs of MPI, however similar pressures are being felt in other jurisdictions.

A January 2018 Operational Review1 of ICBC by PWC specified an increase in the number of injury adjusters from 2011 to 2016 by nearly 20% (up from 555 in

1 https://www2.gov.bc.ca/assets/gov/british-columbians-our-governments/organizational-structure/crown- corporations/pwc-review-icbc-jan-2018.pdf. Page 10.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-38

2011 to 660 in 2016). The driving force behind this increase is ICBC’s efforts to reduce claim durations.

The Corporation has a strong working relationship with the Transport Accident Commission (TAC) in Victoria, Australia and both participate as part of the Global Users Group through FINEOS. The TAC has increased their case management staff by 20%, and are reporting dramatic reduction in injury durations where they experiment with higher case management resources and proactivity.

The Corporation’s thirteen (13) additional staff equates to an increase of less than 8% within injury claims management, which will increase the overall capacity of the 58.8 case managers within Rehabilitation Management, through the reduction of administrative functions. b) MPI did not add any case managers. The additional resources are as follows:

• 10 Benefit Administrators (2 of which are French designated)

• 1 Data Steward

• 1 Injury Claims Analyst

• 1 Supervisor

Figure 1 identifies the total costs associated with this additional staff is $930,000 per year calculated as follows:

Figure 1: Additional FTE Costs

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The 10 benefit administrators will complete all new claims intakes (excluding catastrophic claims, fatality claims, and claims where the claimant is still in hospital). They will assess and triage these claims to the most appropriate level of case management, a function that was previously completed by case manager 2s. As part of this role, they will:

• Confirm coverage

• Initiate Income Replacement

• Arrange Personal Care Assessments (when required)

• Arrange for the completion of authorizations

• Complete all Permanent Impairment Calculations

• Additional insertions of work are anticipated over the ensuing months, such as monitoring the opioid policy, dry cannabis policy, dental claims, and potentially personal care only claims, and short term duration IRI claims.

Removing these functions from case managers increases their overall capacity to focus on rehabilitation efforts that return claimants to health and to work through the Corporation’s active case management model.

The corporation projects a net savings to claims costs of over $2 million per year to be realized beginning in fiscal year 2020/21.

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PUB (MPI) 1-39

Part and IV SDM.2 Service Page No.: 21 Chapter: Delivery Model PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Cost Containment Measures Sub Topic: Customer Experience Framework

Preamble to IR (If Any):

MPI is establishing a Customer Experience framework, and expects it to be completed by the end of the current fiscal year.

Question: a) What organizations has the Corporation identified for comparison purposes? b) Please advise as to what benchmarks are being developed, and describe what they measure and where are they currently utilized. c) Who is responsible for developing the framework, and at what cost?

Rationale for Question:

To understand the Customer Experience Framework.

RESPONSE: a) The Corporation is currently seeking to compare Customer Experience (CX) metrics with other public insurers and to an overall benchmark for automobile insurance providers in Canada. The Corporation may also benchmark to other industries where relevant. b) The Corporation is seeking to develop benchmarks for Customer Experience (CX) quality metrics such as: that the experience delivers value to customers; that it is

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-39

easy to do business with the Corporation; and, how the customer feels about the experience. Customer loyalty metrics such as: the likelihood of customers engaging the Corporation’s services; and, the likelihood of speaking positively about the Corporation to other people will also have benchmarks established.

Metrics regarding CX quality and customer loyalty would feed into an overall CX Index Score. These metrics and the overall CX Index Score would be compared to similar organizations and to the automobile insurance industry overall in Canada or North America. The metrics would be gathered across important customer touchpoints with the Corporation, providing direction on what actions are needed to improve what the Corporation provides for Manitobans. c) The COO and VP of Customer Service has overall authority for the development of the framework. The target budget for development purposes is less than $150,000, which excludes implementation costs (yet to be determined). Use of in- house staff and the selective use of external resources will keep costs low in the development phase.

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PUB (MPI) 1-40

Part and V EXP.3, Figure EXP-5 Page No.: 16 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Cost Containment Sub Topic: Expense Variances

Preamble to IR (If Any):

Question:

a) Please provide a breakdown of the forecasted savings for 2018/19 for each of the items listed under EXP-5. b) Please elaborate on the savings realized for the one-time deferral of department redevelopment. c) Please explain why the Space Redevelopment Initiative was deferred.

Rationale for Question:

To understand the Corporation’s cost containment efforts.

RESPONSE:

a) Please see Figure 1 below for the reductions included in the 2018/19 budget:

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-40

Figure 1: Cost Containment

Line Description Savings No. (C$000s, except where noted) 1 Telc o Cell Phones 80 2 IBM Operat ions 200 3 Forward Collision Avoidanc e 164 4 Road Safety Promotion 424 5 Corporate Sponsorship - Business Partnerships 50 6 Corporate Sponsorship - Community Support 262 7 Impaired Driving Strategy 11 8 Vulnerable Road User Strategy 20 9 Entry Level Professional Truc k Driver Training 650 10 Corporate Fleet Vehicles 490 12 Total Savings 2,351

b) The $1.3M one-time deferral for departmental redevelopments at Cityplace was reallocated to another area of the business in support of the flat budget requirement for the 2017/18 year. There are no long term savings realized from the one-time deferral as it only changed the year in which the expenses would occur. This is not a long term cost containment solution. c) Same as b) above.

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PUB (MPI) 1-41

Part and V EXP Figure EXP-42 Page No.: 62-63 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Expenses Sub Topic: Basic Capital Expenditure by Project

Preamble to IR (If Any):

Notable projects include Technology Risk Management, Legacy Modernization, and the Finance Re-Engineering Initiative.

Question:

Please refile the table in Figure EXP-42 to include columns for the prior year expenditures on each of the listed projects, and a total column by project and in total.

Rationale for Question:

To understand the details of notable Basic capital expenditure projects.

RESPONSE:

Please see Figure 1 below:

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Figure 1: Basic Capital Expenditures by Project (Part 1)

Line Allocation Unassigned No. Project LTD Actual* Adjustment** 2017/18A 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F Capital** Total (C$000s, except where noted) 1 Deferred Development 194 7 (201) ------2 Capital Depreciation ------3 Expense - - 201 163 - - - - - 364 4 HR Management System Phase 3 & 4 194 7 - 163 - - - - - 364

5 Deferred Development - - - 1,159 941 - - - - 2,100 6 Capital Depreciation ------7 Expense ------8 BI3 Fineos Upgrade 2020 - - - 1,159 941 - - - - 2,100

9 Deferred Development ------1,153 - 1,153 10 Capital Depreciation ------11 Expense ------12 BI3 Fineos Upgrade 2024 ------1,153 - 1,153

13 Deferred Development - - - - - 1,628 814 - - 2,442 14 Capital Depreciation ------15 Expense ------16 Infor Major Upgrade 2022 - - - - - 1,628 814 - - 2,442

17 Deferred Development - - 595 786 - - - - (771) 610 18 Capital Depreciation ------19 Expense ------(9) (9) 20 High School Driver Education Phase 3 - - 595 786 - - - - (780) 601

21 Deferred Development 1,127 - 1,147 204 - - - - 105 2,583 22 Capital Depreciation ------23 Expense - - 159 - - - - - 10 169 24 Corporate Learning Management 1,127 - 1,306 204 - - - - 115 2,752

25 Deferred Development 1 - 2,367 186 - - - - 264 2,818 26 Capital Depreciation ------27 Expense - - 641 - - - - - (486) 155 28 Technology Risk Management - 2017 1 - 3,008 186 - - - - (222) 2,973

29 Deferred Development - - - 3,070 - - - - - 3,070 30 Capital Depreciation ------31 Expense - - - 407 - - - - - 407 32 Technology Risk Management - 2018 - - - 3,477 - - - - - 3,477

33 Deferred Development - - - - 3,256 - - - - 3,256 34 Capital Depreciation ------35 Expense - - - - 407 - - - - 407 36 Technology Risk Management - 2019 - - - - 3,663 - - - - 3,663

37 Deferred Development - - - - - 3,256 - - - 3,256 38 Capital Depreciation ------39 Expense - - - - - 407 - - - 407 40 Technology Risk Management - 2020 - - - - - 3,663 - - - 3,663

41 Deferred Development ------3,256 - - 3,256 42 Capital Depreciation ------43 Expense ------407 - - 407 44 Technology Risk Management - 2021 ------3,663 - - 3,663

45 Deferred Development ------3,256 - 3,256 46 Capital Depreciation ------47 Expense ------407 - 407 48 Technology Risk Management - 2022 ------3,663 - 3,663

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-41

Figure 1: Basic Capital Expenditures by Project (Part 2)

Line Allocation Unassigned No. Project LTD Actual* Adjustment** 2017/18A 2018/19FB 2019/20F 2020/21F 2021/22F 2022/23F Capital** Total (C$000s, except where noted) 49 Deferred Development 269 - 686 - - - - - 607 1,562 50 Capital Depreciation ------51 Expense - - 631 461 - - - - 81 1,173 52 Enhanced Direct Repair Capabilities 269 - 1,317 461 - - - - 688 2,735

53 Deferred Development 279 - (279) - 5,460 5,217 - - - 10,677 54 Capital Depreciation ------55 Expense - - 280 407 - - - - - 687 56 Finance Re-Engineering Initiative 279 - 1 407 5,460 5,217 - - - 11,364

57 Deferred Development - - 1,345 1,221 814 814 - - (577) 3,617 58 Capital Depreciation ------59 Expense ------60 Customer Self Service - - 1,345 1,221 814 814 - - (577) 3,617

61 Deferred Development - - - - 8,140 16,280 16,280 16,280 - 56,980 62 Capital Depreciation ------63 Expense - - - 1,628 - - - - - 1,628 64 Legacy Systems Modernization - - - 1,628 8,140 16,280 16,280 16,280 - 58,608

65 Deferred Development - - 208 810 - - - - 202 1,220 66 Capital Depreciation ------67 Expense 154 - - 4 - - - - - 158 68 Credit Card Strategy 154 - 208 814 - - - - 202 1,378

69 Deferred Development ------70 Capital Depreciation ------71 Expense 808 - 90 350 350 350 350 350 19 2,667 72 AOL PUB Release 808 - 90 350 350 350 350 350 19 2,667

73 Total BTO / BPR Project Costs 2,832 7 7,870 10,856 19,368 27,952 21,107 21,446 (555) 110,883 74 *LTD actual are expenditures from 2011/12 to 2016/17 for current projects identified in EXP-42. 75 **Allocation adjustment is required to adjust monthly alloations to annual balances.

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PUB (MPI) 1-42

Part and V EXP Appendix 4 Page No.: 1 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Basic Total Expenses Sub Topic: Compounded Annual Growth Rates

Preamble to IR (If Any):

Question:

a) Please explain the compounded annual growth rates for 4 years from 14/15 to 17/18 in Compensation-Overtime, and explain the 19.6% compounded growth through the forecast period (in 18/19 through 20/21). b) Please explain the compounded annual growth rates for 4 years from 14/15 to 17/18 in Furniture and Equipment, and explain the 18.6% compounded growth through the forecast period (18/19 to 20/21). c) Please explain the compounded annual growth rates for 4 years from 14/15 to 17/18 in Travel & Vehicle Expense, and explain the 12.7% compounded growth through the forecast period (18/19 to 20/21). d) Please explain the compounded annual growth rates for 4 years from 14/15 to 17/18 in Printing, Stationary and Supplies, and explain the 13.1% compounded growth through the forecast period (18/19 to 20/21). e) Please explain the compounded annual growth rates for 4 years from 14/15 to 17/18 in Public Information/Advertising, and explain the 7.8% compounded growth through the forecast period (18/19 to 20/21).

Rationale for Question:

To understand growth in Corporation’s expenses.

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RESPONSE:

a) Overtime Expense has steadily declined from $2.45 million in 2013/14 to $0.8 million in 2017/18. This explains the average decline of 23.5% for this period and is in large part due to MPI’s cost containment measures. However, the Corporation expects these expenses to grow slightly in 2018/19 and then to be below the 5-year average as cost containment measures continue. However, unexpected events (such as hail or winter storms) may increase the need for overtime. Please refer to PART V, EXP, Appendix 3, page 3, line 2, for a 10-year summary of Basic Total Overtime Expenses. b) Furniture and Equipment Expense declined from $1.1 million in 2013/14 to $0.7 million in 2017/18. However, 2017/18 was lower than historical values due to a deferral of various IT equipment refreshment cycles into the forecast period. The drop in 2017/18 expenses followed by an increase in forecasted expenses resulted in an 18.6% Compound Annual Growth Rate (CAGR) from 2018/19 to 2020/21. Please refer to PART V, EXP, Appendix 3, page 3, line 18, for a 10-year summary of Basic Total Furniture and Equipment Expenses. c) Travel and Vehicle Expense declined gradually from $1.2 million in 2013/14 to $0.7 million in 2017/18. However, while the 5-year forecast has increased from 2017/18, it has remained flat at approximately $0.9 million. This drop in expenses over the historical period followed by an increase in forecast expenses is mostly attributable to the Corporation’s cost containment measures, which has resulted in a 13.2% CAGR between 2014/15 and 2017/18. Although the 2018/19 to 2020/21 CAGR reflects a 12.7% average annual increase, this is primarily attributable to the establishment of the budget / forecast based on historical levels and is, from a dollar perspective, minimal. Please refer to PART V, EXP, Appendix 3, page 3, line 15 for a 10-year summary of Basic Total Travel and Vehicle Expenses. d) Printing, Stationary and Supplies Expenses declined from $1.8 million in 2013/14 to $1.1 million in 2017/18, mainly due to lower spending on computer accessories/supplies and stationery. However, while the 5-year forecast has increased from 2017/18, the forecast has remained flat at approximately $1.6 -

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$1.7 million. This drop in expenses over the historical period followed by an increase in forecast expenses is mostly attributable to the Corporation’s cost containment measures, which has resulted in a -11.9% CAGR per annum, between 2014/15 and 2017/18.. Although the 2018/19 to 2020/21 CAGR reflects an average annual increase of 13.1%, this is due to the establishment of the budget / forecast based on historical levels and is, from a dollar perspective, minimal. Please refer to PART V, EXP, Appendix 3, page 3, line 12, for a 10-year summary of Basic Total Printing, Stationary, and Supplies Expenses. e) Public Information/Advertising Expense declined from $2.5 million in 2013/14 to $1.9 million in 2017/18. However, while the 5 year forecast has increased from 2017/18, the forecast has remained flat at approximately $2.3 - $2.4 million. This drop in expenses over the historical period followed by an increase in forecast expenses is mostly attributable to the Corporation’s cost containment measures which has resulted in a -6.0% CAGR per annum, between 2014/15 and 2017/18. Although, the 2018/19 to 2020/21 CAGR reflects an average annual increase of 7.8%, this is due to the establishment of the budget / forecast based on historical levels. Please refer to PART V, EXP, Appendix 3, page 3, line 11, for a 10-year summary of Basic Total Public Information/Advertising Expenses.

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PUB (MPI) 1-43

Part and V EXP Appendix 7 Page No.: 7 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Expenses Sub Topic: Other Expenses

Preamble to IR (If Any):

Question:

Please provide a breakdown of the strategies and savings that were realized as part of the $2.64M stretch target budget included in the 2018 GRA.

Rationale for Question:

To understand the Corporation’s cost containment measures.

RESPONSE:

Please refer to the section EXP.3.2 Cost Containment of Part V Expenses, specifically Figure EXP-5 on page 16.

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PUB (MPI) 1-44

Part and V EXP Appendix 9-11; Page No.: 1, 1-2, 1-2 Chapter: PUB (MPI) 1-35 (2017 GRA) PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Expenses Sub Topic: Staffing Levels

Preamble to IR (If Any):

Question:

a) Please provide an update to staff turnover in PUB/MPI 1-35 (2017 GRA). b) Please file a copy of retirement statistics over the previous five years. c) Please indicate the current number of staff eligible for retirement.

Rationale for Question:

To understand Corporation’s attrition-based staff reduction strategy.

RESPONSE: a) For the period March 1, 2018 – June 30, 2018:

Voluntary Involuntary Retirements Total Comments Turnover Turnover

16 2 37 55

Percentage of overall 0.90% 0.11% 2.08% 3.10% permanent employee headcount.

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b) Retirements over the past five fiscal years:

• 2013/14: 60 • 2014/15: 58 • 2015/16: 44 • 2016/17: 63 • 2017/18: 73 c) There are presently (as of June 30, 2018) 127 employees (including active and inactive employees) who are eligible to retire.

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PUB (MPI) 1-45

Part and V EXP Appendix 16 Page No.: 1-3 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Expenses Sub Topic: Basic Capital Expenditures

Preamble to IR (If Any):

Question:

For Figure EXP App 16: Basic Capital Expenditures, please elaborate where possible on the root cause of the differences noted for the decreased spending by expenditure type (i.e. internal and/or external factors, change in policy, risk tolerance, etc.).

Rationale for Question:

To better understand the detail behind the significant differences noted for basic capital expenditures.

RESPONSE:

2017/18 Basic Capital Expenditures Variance Analysis

Automobiles

As part of the Fleet Vehicle Reduction Initiative in 2017/18, the Corporation replaced only 3 of the 29 vehicles that were disposed of during the year (as part of normal vehicle turnover/replacement practices), resulting in savings of approximately $733,000 to Basic.

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Office Equipment / Systems Furniture

The favorable variance is mainly due to the cancellation of redevelopment projects at Cityplace and lower level space redevelopments at the Main, Bison and Gateway Service Centres. The service centre redevelopments were planned in order to accommodate the relocation of staff as a result of the closure of the Pacific Avenue Service Centre, however, prior to the redeployment of staff into alternate Service Centre locations it was later found that existing space was available and suitable with minimal changes. In addition, approximately $309,000 in savings to Basic were realized through the repurposing of existing inventory as part of the renovations to the Pembina, Brandon and Plessis buildings.

Data Processing

The review and optimization of purchasing resulted in actual spending on data processing equipment being lower than budgeted in 2017/18. The Corporation also moved from hardware appliances to virtual appliances, matched hardware upgrades to capacity and performance needs and, in some cases, deferred equipment upgrades, in favour of maximizing the life span of its current infrastructure.

Land and Building

Land and Building costs are lower than budgeted for 2017/18, as a result of the cancelled or deferred building projects at Cityplace. This was a cost containment initiative which saved Basic approximately $1.3M for the 2017/18 fiscal year. The remaining favorable variance is due to the cancellation of lower level space redevelopment projects at the Main, Bison and Gateway Service Centres.

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PUB (MPI) 1-46

Part and VII LP Loss Prevention Page No.: 11 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: 22. Road Safety Program Costs and Budget Topic: Road Safety Expenses Sub Topic:

Preamble to IR (If Any):

Question:

Please indicate the anticipated savings from the use of Predictive Analytics.

Rationale for Question:

To understand the Corporation’s success in reducing costs.

RESPONSE:

The Corporation currently applies the Predictive Analytics tool only to Total Loss claims, which accounts for less than 20% of all physical damage claims (approximately 35,000 annually). The Corporation originally projected savings from the use of Predictive Analytics for the Total Loss claim segment at $500,000 annually. This projection was based on a very small data set of savings identified during the pilot period and soft launch of the Tool in late 2017/early 2018. Since that time, and with a larger data set, the Corporation has amended the projection to an annual saving of $250,000 by the end of this fiscal year.

The additional benefits of the Predictive Analytics tool (i.e. stronger referrals, higher success rates and shorter investigation times) continue to trend positively. The Tool permits investigators to conduct their investigations sooner and to focus them through

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-46

the identification of better leads. The result is an increase in investigator productivity and an improvement in customer service levels.

The Corporation will continue to optimize its use of Predictive Analytics to reduce claims costs and improve results.

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PUB (MPI) 1-47

Part and VIII AR Appendix 4 Page No.: 15 Chapter: PUB Approved 9. Cost of Operations and Cost Containment Measures Issue No: Topic: Expenses Sub Topic: Staffing Levels

Preamble to IR (If Any):

Question:

a) Please explain why number of management positions has decreased but employee positions have increased. b) Please provide details of the improvement initiative efficiencies that will be implemented to reduce staff levels.

Rationale for Question:

To understand Corporation’s staff reduction strategy.

RESPONSE:

a) Rationale for Management decrease: Please refer to Volume I, Overview, page 6 of the 2018 GRA. By December 2017, the Corporation was able to reduce its management FTE count by 15%. To achieve this reduction in management staff, the Corporation analyzed the span of control across the organization. Human Resources and business leaders then collaborated to identify opportunities to combine leadership portfolios/like functions in order to gain efficiencies and allow leaders to take on broader portfolios.

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Rationale for Employee positions increasing: Section 5.1 of AR Appendix 4 indicates that the number of FTE positions increased by 24 non-management FTEs (from 1757.90 FTEs in 2016/17 to 1781.90 FTEs in 2017/18), which represents a 1.35% change overall in the total number of employees. This increase was required to respond to the various business needs of the Corporation (i.e. increased seasonal demands on driver testing). b) Please see table below for details of the staffing savings forecast through improvement initiatives

Figure 1: Improvement Initiatives Staffing Efficiencies

Line No. Improvement Initiatives Staffing Efficiencies 2018/19FB 2019/20F 2020/21F 2021/22F 1 (C$000s, except where noted) 2 Financial Re-engineering Inititiative - - 52 318 3 Enhanced DR Capabilities - 280 280 280 4 Non-Basic Initiatives - - 762 762 5 Total - 280 1,094 1,360

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PUB (MPI) 1-48

Part and Part V CI Page No.: 41-42, 53-54 of 82 Chapter: PUB Approved 10. Claims Forecasting Issue No: Topic: Claims Forecasting Sub Topic: Comprehensive Hail

Preamble to IR (If Any):

Section CI.10.1.1 references the Corporation’s Paintless Dent Repair initiative for minor hail claims which: has greatly reduced the severity of hail claims.

Question:

a) Please document the derivation of the forecasted Repair, Total Loss and Total Basic Comprehensive Hail Claim Counts Excluding $0 Claims (as shown in Figure CI-37) from the historical information shown in Figure CI-36 reflecting the Corporation having: selected a ten-year average of claims and applied the latest repair and total loss ratios of 21% and 79% respectively. b) Please discuss the significant drop in Comprehensive Hail Severity Excluding $0 Claims in 2017/18 as shown in Figure CI-48, and how much of this decline is attributable to the Corporation’s Paintless Dent Repair initiative. In this context, please also discuss the rationale for the Corporation having: selected a weighted average severity (33%/67%) of the last two years giving the latest year the most weight.

Rationale for Question:

To assess the reasonableness of the forecasted Comprehensive Hail frequencies and severities.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-48

RESPONSE:

a) Calculations for the repair and total loss ratios for Basic Comprehensive Hail Claim Counts Excluding $0 Claims are set out below:

Repair ratio 79% = 1,559 / 1,972

Total Loss ratio 21% = 413 / 1,972

The Corporation selected the ten-year average total claims of 6,817 and applied the ratios to create the repair and total loss claim count forecast.

Repair claim counts 5,388 = 21% * 6,817

Total Loss claim counts 1,429 = 79% * 6,817 b) It is unknown how much the Paintless Dent Repair initiative will actually reduce claim severity in the forecast years. As it is not possible to repair all hail damage through the Paintless Dent Repair process (especially severe hail damage), the initiative may not significantly reduce claim severity in years with higher frequency or high intensity hailstorms. It would therefore be inaccurate to assume that claim severity will remain at 2017 levels going forward. As a result, the Corporation selected a weighted average severity between the two most recent years.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-49

PUB (MPI) 1-49

Part and IV BMK 4.1 , BMK 4.2 Page No.: 11, 17 Chapter: PUB Approved 11. Operational Benchmarking Issue No: Topic: Corporate and Claims Performance Sub Topic:

Preamble to IR (If Any):

Question: a) Please file supplemental tables detailing the MPI data used to calculate each of the benchmarking measures. b) Please provide the determination of MPI’s Benchmarks for 2017/18 and 2018/19, based on the same calculations in (a). c) Please file the trend analysis report prepared for MPI by Ward Group.

Rationale for Question:

To evaluate the benchmarking information presented and to assess trends.

RESPONSE: a) Supplemental tables used to calculate benchmarking measures are provided below:

Manitoba Public Insurance Page 1 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-49

Figure 1: Benchmarking Measures

Metric Corporate Performance Measure Reference MPI 2012/2013 MPI 2013/2014 MPI 2014/2015 MPI 2015/2016 MPI 2016/2017 4.1.1 Gross Expense per GPW K/A 32.00% 30.40% 29.88% 27.89% 27.21% 4.1.2 Gross Expenses per PIF K/B $288 $282 $286 $280 $279 Figure BMK-1: 4.1.3 FTEs per $100M of GPW J/(A/100,000,000) 153.25 148.33 140.39 130.98 128.30 Corporate 4.1.4 Ratio of Staff to Management I/H 6.83 7.52 7.04 6.64 6.95 Performance Results 4.1.5 Personnel Expense per FTE (Q+R+S)/J $79,275 $77,062 $78,489 $81,626 $81,978 4.1.6 Loss Ratio F/G 77.75% 88.42% 82.99% 70.90% 85.66% 4.1.7 Net Investment Yield (L+M)/N 5.88% 7.10% 9.13% -1.44% 6.08%

Claims Performance Measure 4.2.1 Claims Expense as a % of GPW P/A 7.14% 6.82% 6.51% 6.24% 6.02% 4.2.2 Claims Expense per Reported Claim P/C $261.05 $240.62 $253.88 $243.36 $236.18 4.2.3 Reported Claims per Claims FTE C/O 332.34 346.56 335.77 360.66 371.02 Reported Claims per 1,000 Policies in 4.2.4 Figure BMK-2: Force C/(B/1000) 246.22 262.50 244.95 256.93 261.28 Claims Personal Lines Losses Incurred per 4.2.5 Performance Paid Claim D/E $3,115 $2,845 $3,063 $2,841 $3,624 Results 4.2.6 FTEs per 100,000 Reported Claims J/(C/100,000) 560.21 523.32 547.65 510.86 503.73 4.2.7 Managers per 100,000 Reported Claims H/C 71.55 61.45 68.14 66.89 63.39 4.2.8 Staff per 100,000 Reported Claims I/(C/100,000) 488.66 461.87 479.51 443.97 440.34 4.2.9 Total Gross Expenses per Report Claims K/C $1,170 $1,072 $1,166 $1,088 $1,068

Manitoba Public Insurance Page 2 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-49

Please see reference table for calculations of benchmarking measures.

Figure 2: Reference Table

Reference Performance Measure 2012 2013 2014 2015 2016 A Gross Premiums Written $948,818,000 $995,555,960 $1,044,355,916 $1,119,773,285 $1,169,044,267 B Policies in Force 1,054,164 1,075,008 1,092,920 1,117,449 1,139,589 C Reported Claims 259,552 282,186 267,715 287,109 297,751 D Personal Lines Losses Incurred $649,650,501 $728,014,487 $711,941,729 $660,764,069 $837,497,917 E Personal Lines Paid Claims 208,531 255,858 232,418 232,568 231,106 F Net Losses Incurred $746,482,000 $861,137,764 $846,104,248 $770,488,027 $981,328,426 G Net Premiums Earned $960,121,000 $973,922,013 $1,019,553,923 $1,086,733,600 $1,145,638,187 H Managers FTE 186 173 182 192 189 I Staff FTE 1,268 1,303 1,284 1,275 1,311 J Total FTEs 1,454 1,477 1,466 1,467 1,500 K Gross Expenses $303,606,584 $302,621,876 $312,058,083 $312,331,785 $318,142,331 L Net Investment Gain (Losses) $89,330,000 $175,123,000 $226,150,000 ($4,731,000) $96,635,000 M Net Unrealized Capital Gains (Losses) $46,440,000 ($4,024,000) $6,625,000 ($32,545,000) $62,899,000 N Total Average Invested Assets $2,307,903,000 $2,409,770,500 $2,549,688,000 $2,595,066,000 $2,624,263,500 O Claims FTEs 780.99 814.24 797.31 796.06 802.53 P Claims Expense $67,755,549 $67,900,187 $67,968,342 $69,872,037 $70,322,837 Q Salaries $88,780,115 $89,802,488 $91,748,417 $94,458,362 $97,762,909 R Benefits $24,604,254 $21,519,764 $21,572,476 $23,837,377 $23,908,816 S Overtime $1,884,153 $2,476,852 $1,754,916 $1,426,967 $1,282,658

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b) The Ward benchmarking process does not involve future forecasting of any metrics.

The tables in Part IV (i) BMK 4.1 and 4.2 of the 2019 General Rate Application provide performance measures for 2012/13 to 2016/17. The Corporation will provide the performance measures for 2017/18 and 2019/20 as part of the 2020 and 2021 General Rate Applications respectively. c) [Redacted. The Corporation is seeking confidential treatment for this item]

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August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-50

PUB (MPI) 1-50

Part and V REV Appendix 3 Page No.: 3-5 Chapter: PUB Approved 15. Results of the Service Fees Review Issue No: Topic: Adequacy of Current Service Fees Sub Topic: Comparison of Total Service Fees Charged

Preamble to IR (If Any):

The table provides a comparison of the total service fees charged at MPI, SGI, and ICBC.

Question: a) Please update the table noted in the GRA REV Appendix 3 (comparison of the total service fees charged at MPI, SGI, and ICBC) supplemented with the year the fees were last established. b) To what extent has MPI performed cost/benefit analysis that relates to insurance service fees recovering costs of that service?

Rationale for Question:

To understand and evaluate an updated version of the comparison table.

RESPONSE: a) Please see GRA REV Appendix 2 for the year the fees were established. b) This information is contained in Part V Revenues Appendix 3, identified in the question. The 2nd column identifies the fees recovered for the service and the 3rd, 4th and 5th columns identify the estimates costs associated with performing the

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service. Any additional funds collected through a change in service fees would be offset by an equal reduction in funds collected through premiums, and so would have no effect on overall revenue requirement.

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PUB (MPI) 1-51

Part and V DSR.9 Page No.: 15 Chapter: PUB Approved 17. Driver Safety Rating Issue No: Topic: DSR Conclusions and Next Steps Sub Topic: Public Consultation Efforts

Preamble to IR (If Any):

MPI presently anticipates that, by the 2020 GRA, it will be in a position to report on the results of its public consultation efforts, its preliminary research on the no or low cost options as well as on its decision on whether to proceed with data collection for the higher cost options.

Question:

Please provide the current status of the consultation process including any key dates, who will be engaged to assist, and expected timing of public consultation to take place.

Rationale for Question:

To understand details and receive an update on the next steps for DSR public consultation.

RESPONSE:

The DSR consultation process is in its initial stages and key dates and expected timing of public consultation have not been determined at this time.

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PUB (MPI) 1-52

Part and V VFH.7 Figure VFH-2 Page No.: 16 Chapter: PUB Approved 18. Vehicles for Hire Issue No: Topic: Data Collection – Rate Making Sub Topic: Insured VFH Vehicles

Preamble to IR (If Any):

Question:

Please update Figure VFH-2 to include the detail on each time band, forecasted take- up vs. actual, and revenue expected to be earned vs. forecasted amounts based on experience to date.

Rationale for Question:

To understand the current status and detail related to VFH and insured VFH vehicles.

RESPONSE:

As of July 9, 2018, the numbers of insured vehicle for hire (VFH) vehicles (all territories) are as follows:

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Figure 1 Insured VFH vehicles (all territories)

Number of Time Bands

VFH Category 1 2 3 4 Total

Accessible 1 1 5 78 85

Limo 5 1 0 58 64

Passenger 18 16 10 394 438

Taxi 2 3 5 536 546

Total 26 21 20 1,066 1,133

The Corporation did not forecast the take-up level for VFH vehicles.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-53

PUB (MPI) 1-53

Part and V VFH.10 Page No.: 22 Chapter: PUB Approved 18. Vehicle for Hire Issue No: Topic: VFH Stakeholder Engagement Sub Topic:

Preamble to IR (If Any):

Although discussions between MPI and stakeholders have been substantial to date, they remain ongoing, particularly with those in the taxi and TNC industries.

Question:

Please provide an update on the stakeholder consultation for each of the parties.

Rationale for Question:

To receive an update and understand the ongoing stakeholder discussions and progress.

RESPONSE:

The current status of stakeholder consultations is as follows:

• Taxi Industry Representatives – MPI continues to hold quarterly meetings with the taxi industry representatives, with the most recent meeting taking place on June 29, 2018. Topics of discussion have included loss prevention, insurance and downtime rates, taxi damage estimating and repairs.

• City of Winnipeg – MPI continues to work with the City in relation to information sharing and associated data framework.

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• TappCar Inc. – MPI most recently met with the two principle owners of TappCar and their local representative on May 10, 2018. Discussions at this meeting centered on their successes in the Manitoba VFH market.

• Cowboy Taxi Ltd. – MPI has occasional telephone conversations with representatives of Cowboy Taxi to answer questions and obtain feedback. The most recent telephone conversation occurred on April 11, 2018.

• Lyft Inc. - Discussions continue with Lyft on opportunities to enter the Manitoba market and operate within the insurance framework established.

• Uber Technologies Inc. – There have been no recent discussions with Uber Technologies Inc.

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PUB (MPI) 1-54

Part and Part V VFH Page No.: Page 14 of 27 in VFH Chapter: Appendix 1

PUB Approved 18. Vehicles for Hire Issue No: Topic: Vehicles for Hire Sub Topic: Passenger VFH

Preamble to IR (If Any):

Figure 2 provides a Summary of the Corporation’s Jurisdictional Review of VFH Premiums

Question:

Please discuss the nature and origin of the information shown in Figure 2 for the “Base Rate” and the “TNC Endorsement”, and whether the latter amounts are consistent with full time usage as a VFH.

Rationale for Question:

To assess the reasonableness of the foundation for the proposed Passenger VFH rates.

RESPONSE:

The Corporation reviewed rating models and pricing in Ontario, Alberta and Quebec as, at the time, these were the only jurisdictions in Canada permitting the operation of Transportation Network Companies (TNC). The Corporation contacted insurers and agents/brokers in these jurisdictions to obtain quotes and/or estimates. The TNC endorsement premiums are consistent with the premium for a TNC operator in Manitoba that has selected all four time bands.

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PUB (MPI) 1-55

Part and IV BMK Attachment A Page No.: PDF.13 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Spending Sub Topic:

Preamble to IR (If Any):

MPI’s outsourcing costs include a prepayment for future upgrades as part of a ‘vitality’ clause in the IBM contract, which avoids large single year increases, but presents a higher yearly cost than might be expected.

Question: a) Please indicate the amount of spending that relates to the vitality clause. b) Please indicate whether MPI is undertaking an assessment of the competitiveness of the outsourcing and maintenance agreement. c) Please indicate what true-ups are done to determine any upgrades applied against the amounts determined to be pre-paid under the vitality clause. d) Please provide the current term of the existing IBM contract.

Rationale for Question:

To understand third party IT vendor costs.

RESPONSE:

[Redacted. The Corporation is seeking confidential treatment for this response.]

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-56

PUB (MPI) 1-56

Part and IV BMK Attachment A Page No.: PDF.14 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Spending Sub Topic:

Preamble to IR (If Any):

Question: a) Please explain why the average cost per blended FTE increased from $72,103 in 2015/16 to $95,569 in 2016/17. b) What analysis is prepared by MPI to determine insource versus outsource of IT functions when it relates to the IT functions that MPI has outsourced? c) In near future years, the consultants appear to be fixed at 80%. Please explain further the rationale for the constant level.

Rationale for Question:

To understand changes in IT FTE costs.

RESPONSE: a) In the review of the 2016/17 Infrastructure and Operations scorecard, it was identified that several resources were allocated to Infrastructure and Operations (MPI team) which were not part of the Infrastructure and Operations function (as defined by Gartner). In review of BMK Attachment A, PDF Page 14 (left chart) you can see how this resulted in a reduction of 52.3 staff in 2015/16 to 35.7 staff in 2016/17. This affected the cost per FTE (right chart) as some of the FTEs that were removed from Infrastructure and Operations, and accounted for in other

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areas (such as Security or Application Development / Support) had a lower cost. This is the major factor for the increase in cost per blended FTE from 2015/16 to 2016/17.

For consideration, Infrastructure and Operations is a subset of the overall CIO and Budget score card. This incorrect allocation of resources (between Infrastructure and Operations and other areas) would not impact the overall IT staff counts or cost metrics in the budget score card. b) As part of the Value Management process, MPI creates business cases to support major change such as the outsourcing of an IT function. The Value Management process outlines the documentation required to support the decision. Please see CAC (MPI) 1-63 (c) for additional actions on current agreements. Please see 2017 GRA (Information Technology – IT), IT.1 for details on the usage of consultants. c) This response assumes the question refers to the following quote: “MPI has embraced outsourcing for 8 of 10 I&O functions … “. These 8 I&O functions are received as part of the IBM data center agreement and are consistent over the duration of that agreement.

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PUB (MPI) 1-57

Part and IV VM.1.1 Page No.: 9 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Information Security Risk Management Sub Topic:

Preamble to IR (If Any):

Question:

Please provide the Board the Information Security Risk Management Projects including the timing of the associated spending and the cost of each initiative, and if necessary, with a request for confidentiality under Rule 13.

Rationale for Question:

To assess the reasonableness of IT Capital Spending.

RESPONSE:

The following project details were redacted from the Technology Risk Management Initiatives (2018/19) – Value Management Chapter, VM 1.1, page 9. Upon further review, the following information can be partially disclosed to the public, and it has also been provided as part of CAC (MPI)-1-56. Redactions bellow:

Project ITBT-2018-010 ITSM Identity and Access Management Self Service Password Reset Management

Automate common password requests, providing a secure, self-service, password reset solution for requests which are traditionally handled by the MPI IT Service Desk.

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Project ITBT-2018-025 Data Loss Prevention (DLP)

Implement information security improvements recommended in a 2017/18 DLP strategy, 2018/19 efforts will focus on:

• Creation of an implementation and Organizational Change Management strategy for data tagging and classification • Roll-out of the tagging and classification solution to the organization • Creation of an implementation and Organizational Change Management strategy for DLP Project ITBT-2018-035 Network and Perimeter Security Enhancement

Review and enhance current network protection processes and technologies with a focus on network and perimeter network security to protect MPI from current, emerging, and future threats. [Redacted. The corporation is seeking confidential treatment for this content].

Project ITBT-2018-043 Security Awareness Activities for Brokers and Partners

Formalize a Security Awareness Training Program for Brokers and Partners focused on raising awareness around securing and proper handling of MPI / client information as per industry best practices.

Project ITBT-2018-045 Forensics and Vulnerability Assessment

Acquire and implement tools and processes to enhance workstation forensics capabilities within MPI. Such tools include the ability to examine IT assets using forensics tools. Expand vulnerability assessments and penetration testing against MPI’s Internet facing applications (ethical hacking) in order to identity weaknesses requiring remediation.

Project ITBT-2018-046 Workstation Security Enhancement

Enhance the workstation security through the implementation of a threat analytics software (second generation anti-virus technology) that provides the intelligence to learn, analyze, and identify normal and suspicious user or device behavior. Review the local administrative privileges on workstations in order to develop an approach to address associated risks.

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For financial details please see Part IV(ii) 04 VM Value Management Appendix 1b Information Security Risk Management FA

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PUB (MPI) 1-58

Part and IV VM.1.2 Page No.: 12 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Legacy Systems Modernization Sub Topic:

Preamble to IR (If Any):

MPI identified in the 2018 GRA that there are concerns regarding IT legacy systems, which are 20 to 30 years old. Replacing these systems could potentially have significant costs. On direction from its Board, Management retained two industry consultants to complete independent assessments of the MPI legacy system risks and to confirm the need for future action to mitigate the associated technical and business risks.

According to the proposed timeline for the project, vendor presentations were to occur in June and September.

Question:

a) Please provide details of the consultants engaged related to the independent assessment of MPI legacy systems. b) Please file the respective consultants’ reports/ presentations and/or resulting business cases dealing with legacy system issues, including details on each of the consultants' responses to the each of the mandate scope established for the project. c) Please file any internal analysis that was prepared to support the consultants' reports or internally assess the AOL/ CARS replacement.

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Rationale for Question:

To understand assessment performed of legacy systems.

RESPONSE:

a) [Redacted: The Corporation is seeking confidential treatment for this response.]

b) Development of the Legacy Modernization business case is still in early stages, and only Deloitte has completed its high level assessment report.

[Attachment A Redacted: The Corporation is seeking confidential treatment for this response.] c) The Corporation provided background material to both Assessment Vendors but they requested no internal analysis and the Corporation did not prepare any for the assessment engagements. The Assessment Vendors were responsible for performing their own analysis.

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PUB (MPI) 1-59

Part and IV VM.1.4 Page No.: 23 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Customer Self-Service – Phase 1, 2 and 3 Sub Topic:

Preamble to IR (If Any):

Until a critical mass of over 300,000 users is met, the portal licensing is an operational costs driver. Once the 300,000 users threshold is reached, surpassed and maintained. The financial benefits of available customer self-serve services opposite the user licensing costs will be more financially viable.

Question: a) Is there concern that this number will not be met, factoring in marketing costs to get users to use the portal? b) How many transactions are processed in a year that could be potentially addressed by the self-service component, and what percentage would 300,000 users represent of that total? Please elaborate and provide supporting details where possible in the response.

Rationale for Question:

To understand the details of the cost/benefit analysis related to customer-self services.

RESPONSE:

[Redacted. The Corporation is seeking confidential treatment for this response.]

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-60

PUB (MPI) 1-60

Part and IV VM.1.6 Page No.: 24-25 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Credit Card Strategy Sub Topic:

Preamble to IR (If Any):

A funding envelope for the Credit Card Strategy was approved in the 2018/19 Capital Budget based upon a particular solution. An alternative, less costly, solution is presently being considered. Management is targeting a completed business case by the Fall 2018.

Question:

Please provide the referenced business case once completed (i.e. credit cards / credit card strategy).

Rationale for Question:

To obtain and understand the details from the business case as they apply to the credit card strategy.

RESPONSE:

MPI will provide the business case once it is completed. Please note that this business case may require confidential filing, but MPI will not know for certain until the document is finalized.

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-61

PUB (MPI) 1-61

Part and IV VM.2 Page No.: 29-32 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: MPI’s Cost Benefit Analysis of Customer Claims Reporting System (CCRS) Sub Topic:

Preamble to IR (If Any):

The Board of Directors directed the Value Management Process be applied to a number of these projects. Based upon the results, Management cancelled the Customer Claims Reporting System (CCRS) initiative.

Question: a) Please file the detailed cost benefit financial analysis in support of the incremental, life cycle and terminate project perspective. b) Please explain what was evaluated and determined to be “lite” scope and “full” scope of the CSSR project. Please describe the business solution in terms of lite and full scope. c) Please provide any further financial analysis that was prepared to support the decision to cancel the CSSR, which has not been provided in the Application. d) Please provide the amounts written off by major component, including detail of the spending by year, which formed part of the total impairment amount.

Rationale for Question:

To better understand analysis performed on CCSR initiative.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-61

RESPONSE:

[Redacted. The Corporation is seeking confidential treatment for this response]

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-62

PUB (MPI) 1-62

Part and IV VM.3 Page No.: 41 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: PDR Project Sub Topic: IT Expenses

Preamble to IR (If Any):

Question:

a) Please update the Updated PDR NPV Analysis table including the NPV for PDR from Gartner last year, including the discount rate used by Gartner. b) Please provide details of the project costs and ongoing costs, and provide a comparison with those costs forecast at the last GRA. c) Please provide the detailed schedules supporting the NPV analysis this year.

Rationale for Question:

To understand changes in the cost benefit analysis related to PDR.

RESPONSE:

[Redacted. The Corporation is seeking confidential treatment for this response]

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PUB (MPI) 1-63

Part and IV VM.3 Page No.: 41 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Deferred Development Costs Sub Topic: Impaired Deferred Development Cost

Preamble to IR (If Any):

Question:

a) Please provide supporting documents for the $20.3M impairment of Deferred Development costs, including working paper files, business case and any analysis performed, as well as details of impairment amount per each project. b) Please provide detail of the spending by year on each cancelled PDR project.

Rationale for Question:

To understand the impairment analysis performed.

RESPONSE: a) During the year, the various components of key projects were reviewed in more detail and the following principles (standard practice) were applied to them:

• If there is no future value of the expenditures, then the expenditures were written off • If the expenditures were research related, then the expenditures were written off • If the expenditures were to investigate a platform/software that the company did not go forward with, then the expenditures were written off

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The result of the review is outlined in the table below. Please see table below:

Figure 1: Impairment of Deferred Development Costs

Line 2017/18 No. Total Corporate Initiatives Impairment 1 (C$000s, except where noted) 2 Physical Damage Re-Engineering Main/Phase 3 993 3 Financial Re-engineering Inititiative 343 4 SRE Future State 55 5 High School Driver Education Phase 2 2,086 6 Enhanc ed DR Capabilities 681 7 Customer Claims Reporting System 15,624 8 PDR Opt Repair - Remote Estimating 229 9 HR Management System Phase 3 & 4 247 10 Total Impairment 20,258

Also please see the response to PUB(MPI) 1-61 (a) b) See table below for the details of the PDR impairments (other than the CCRS, these were not cancelled):

Figure 2: Impairment of PDR Projects

Line LTD No. Impairment of PDR Projects 2012/13A 2013/14A 2014/15A 2015/16A 2016/17A 2017/18A 2017/18A 1 (C$000s, except where noted) 2 Physical Damage Re-Engineering Main/Phase 3 - - - 223 1,018 (248) 993 3 Enhanced DR Capabilities - - - - 292 389 681 4 Customer Claims Reporting System 46 2,203 3,011 1,975 3,385 5,004 15,624 5 PDR Opt Repair - Remote Estimating - - 1 42 70 116 229 6 Total Impairment of PDR Projects 46 2,203 3,012 2,240 4,765 5,261 17,527

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PUB (MPI) 1-64

Part and IV VM Appendix 2a Page No.: 5 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: HSDE Business Case Sub Topic: Cost Benefit Analysis

Preamble to IR (If Any):

MPI has provided a business case for the High School Driver Education (HSDE) Project and indicates a measurable financial benefit of a better prepared driver will result in a reduction of at-fault claims. MPI has stated an increase in supervised practice from 24 to 45 hours is estimated to decrease collision claim risk by two percent (2%) and is supported by evidence as an anticipated outcome for this project.

Question: a) Please file PD and BI forecast Analysis - HSDE dynamic model vers3.xlsx and explain the forecast level of savings anticipated from the HSDE project. b) Please file the PD and BI historical - HSDE at-fault claims and costs. c) Please explain how the Corporation determined a targeted 2% improvement. d) Please explain why MPI applied a 5% annual increase to claims severity for the years 2021/22 through 2029/30. e) Please explain how a reduction in 3,000 second attempt in road tests leads to a reduction of 2 FTE.

Rationale for Question:

To understand the forecast of benefits from the HSDE program redesign.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-64

RESPONSE:

a) PD and BI forecast Analysis – HSDE dynamic model vers3.xlsx consists of 20 separate worksheets that forecast PD and BI savings based on changing at-fault claim reduction assumptions from one to 10 percent. VM Appendix 2b (2% PD BI claims forecasting) and VM Appendix 2c (5% PD BI claims forecasting) represent the relevant excerpts of the PD and BI forecast Analysis – HSDE dynamic model vers3.xlsx file.

The forecast level of savings are based on attaining a two or five percent (2% or 5%) improvement in the rate of at-fault claims frequency for drivers who will complete Driver Z (the new program). The calculations as detailed in Appendix 2b and 2c are based on historical at-fault claims experience and related average claim costs for drivers between the ages of 15 to 24 who have previously participated in the High School Drivers Education program. b) Please see Appendix 1 - PD and BI historical - HSDE at-fault claims and costs c) The two percent (2%) improvement in the rate of at-fault claims frequency is a best estimate by management based on available evidence of collision reductions associated with the practices and methods that will be incorporated in the new program. Research conducted on the topic of Driver Education, including the “Global Analysis of Emerging, Promising and Best Practices in Driver Education” report conducted by the American Driver and Traffic Safety Education Association for the Corporation in 2013, found that increasing pre-licensing training hours correlates to reductions in automobile accidents. In addition, the Insurance Institute for Highway Safety has quantified the expected change in collision claims and fatal crashes associated with increasing supervised practice hours of driving.

Redesigning the curriculum to focus on the chief factors behind motor vehicle crashes among youth (visual search, hazard detection, speed adjustment, space management, risk perception, traffic safety culture and pro-social driver behaviour) is also anticipated to garner improved collision frequency outcomes.

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-64

It is the Corporation’s belief that higher order learning methodologies, a focused curriculum on the root and practical causes of collisions, and greater requirements for on-road practice in different conditions will, by extension, produce an improvement in a tangible measurement of at-fault claims. Management will monitor results of this key performance measurement on an annual basis to quantify claims cost savings. Many other factors external to driver education may impact driver behaviour and risk in future (for example the use of personal communication devices or legalization of cannabis); therefore, the Corporation has taken a relatively conservative approach to estimating on the claims improvement front.

While the key benefit drivers for the new HSDE program initiative are primarily focused on delivering exceptional service and product given today’s audience, it was important to determine if there would also be a measurable financial benefit for Manitobans. The two-five percent (2% to 5%) improvement in the rate of frequency of at-fault claims for drivers completing the new HSDE program represents such a benefit that we hope to achieve. d) The five percent (5%) annual increase in claims severity is consistent with the Corporation’s claim forecasting results. e) The FTE reduction estimate assumes that a volume decrease of 1,500 road tests annually will result in enough additional system capacity to trigger one FTE saving. A Driver Examiner’s annual capacity for testing can ran range from 400 to 1,000 road tests per year (dependent on multiple considerations, including travel time). By improving the first attempt pass rate we are reducing the number of second, third and, in some cases, multiple road tests that are currently demanded by novice drivers. It is important to note that an improvement in the first attempt pass rate will eliminate the need for road tests spread over multiple locations, hence a full FTE reduction will not be achievable until a decrease significantly exceeds annual capacity; therefore the FTE reduction calculation is conservative.

Manitoba Public Insurance Page 3 of 3 August 8 , 2018 2018 GRA Information Requests - Round 1 PUB (MPI) 1-64 (b) Appendix 1

Total value of all at-fault claims for HSDE drivers in the 15-24 year old age range* Loss Insurance Years 2012-2017 Collision, Collision with Wildlife, and Collision with Domestic Animals (Physical Damage)

1 2 3 4 5 6 7 9 10 11 Col 4/7 Col 2/4 Col 2/3

Loss Average Number % of HSDE Insurance Customer of Claims per # HSDE Cumulative # of customers with Avg Claim per Avg Claim Year Incurred to Date Claim Count Count Customer Customers Drivers* a at-fault claim customer per claim HSDE HSDE HSDE HSDE 2011 4,409 2012 2,478,503 701 658 1.065 9,595 14,004 4.70% $ 3,767 $ 3,536 2013 7,866,640 2,123 1,920 1.106 9,317 23,321 8.23% $ 4,097 $ 3,705 2014 11,461,223 2,927 2,692 1.087 9,086 32,407 8.31% $ 4,258 $ 3,916 2015 16,844,876 3,930 3,632 1.082 9,247 41,654 8.72% $ 4,638 $ 4,286 2016 19,680,532 4,686 4,319 1.085 9,523 51,177 8.44% $ 4,557 $ 4,200 2017 24,604,259 5,545 5,102 1.087 8,025 59,202 8.62% $ 4,822 $ 4,437

Three year average 2015 to 2017 8,932 8.59% $ 4,672 Say 9,000

* This analysis provided by Business Analytics department as of March 2018 from the HSDE data set that was created in May 2011. As a result the "Cumulative # of drivers" total (for the 15 to 24 age group) of 59,202 does not include 5L licensed drivers who earned their licence in 2008, 2009 and 2010.

The definition of an HSDE Customer for this analysis is: 1. Students who passed In-Car and In-Class portion of the course 2. Age 15-24 years of age with Class 5 Learners 3. Removed students with "Dropped Out", "Cancelled" and "Unregistered" status.

Manitoba Public Insurance Page 1 BI

Total value of all bodily injury claims caused by HSDE and non-HSDE drivers in the 15-24 year old age range* Loss Insurance Years 2012-2017 Collision, Collision with Wildlife, and Collision with Domestic Animals

1 2 3 4 5 6 7 8 9 10 Col 4/7 Col 2/4 Col 2/3

Average % of HSDE Number of customers Avg Claim Claim Customer Claims per # HSDE Cumulative # with a at- per Avg Claim Loss Insurance Incurred to Date Count Count Customer Customers of Drivers * fault claim customer per claim Year HSDE HSDE HSDE HSDE 2011 4,409 2012 166,505.80 64 48 1.333 9,595 14,004 0.343% $ 3,469 $ 2,602 2013 882,417.44 194 145 1.338 9,317 23,321 0.622% $ 6,086 $ 4,549 2014 1,375,384.81 250 192 1.302 9,086 32,407 0.592% $ 7,163 $ 5,502 2015 3,347,962.19 373 307 1.215 9,247 41,654 0.737% $ 10,905 $ 8,976 2016 ** 8,473,110.57 376 321 1.171 9,523 51,177 0.627% $ 26,396 $ 22,535 2017 3,138,816.96 474 389 1.219 8,025 59,202 0.657% $ 8,069 $ 6,622

Three year average 2015 to 2017 8,932 0.674%

**There was a huge increase of incurred in 2016 as there is an open claim with $490K paid amount and $4.3M in reserve amount (making the incurred $4.8M)

PUB_(MPI)1_064_b_Appendix 1 BI

PUB_(MPI)1_064_b_Appendix 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-65

PUB (MPI) 1-65

Part and IV VM Appendix 6; Page No.: 1-26 Chapter: PUB (MPI) I-34 (2018 GRA) PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: PDR Project Sub Topic: IT Expenses

Preamble to IR (If Any):

At last year’s GRA, MPI provided a Cost/Benefit analysis of the PDR program which indicated a Net Present Value for the Project of $13.5 million. The analysis was provided in response to PUB/MPI I-34 (2018 GRA).

Question: a) Please provide an update to MPI Exhibit #33, providing a comparison of the forecast staff reductions associated with the PDR and the related change in forecast cost savings. b) Please explain why MPI is forecasting higher levels of Internal Efficiencies/Process Improvements in 2017/18 through 2019/20 this year versus what was forecast by Gartner last year. c) Please provide detailed calculations supporting the amounts forecast for reduction in benefits, by program component evaluation. d) Please explain the changes in the marketplace and trade negotiation forecast behind the major reduction in benefits for Loss of Use. e) Please provide an explanation of the forecast benefit for Claim Audit Recoveries.

Rationale for Question:

To understand the changes in benefits related to PDR.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-65

RESPONSE: a) See Below

Figure 1: PDR FTE Reductions Forecast

FY FY FY FY FY 2017/18 2018/19 2019/20 2020/21 2021/22

PDR FTE Reductions 0 13 19 23 9 (2018 GRA - MPI exhibit #33)

PDR FTE Reductions 3 10 16 21 0 (2018 PDR Analysis & forecast)

In preparing the 2018 PDR financial analysis, the Corporation categorized the updated benefit streams in a manner consistent with the Gartner 2017 PDR evaluation, to ensure a valid comparison. The new claims audit recoveries benefits stream (as described in “e)” below) was not originally forecasted in the most current PDR financial analysis. It is however, an operational realization of the model and focuses on estimate audits. The remainder of the internal efficiencies variance is depicted in a) above with respect to future PDR FTE reductions. b) Please see PUB(MPI) 1-62 (c) c) Please see PUB(MPI) 1-69 (d) d) The claims audit recoveries are claims costs which are reduced due to audits performed by the claims audit unit. These audit recoveries are claims expenses that would have otherwise been incurred and flowed through to overall claims costs. Initially, incremental claim expense recoveries were not anticipated in the creation of the Center of Excellence. The associated claims expense reductions are a byproduct of the unit’s efforts and is therefore attributable as a value benefits stream for PDR.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-66

PUB (MPI) 1-66

Part and IV VM Appendix 6 Page No.: VM Appendix 6 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: PDR Sub Topic:

Preamble to IR (If Any):

Question:

a) For each of the lessons learned in the PDR project, please indicate what specific changes have been made to improve the project evaluation process.

b) How has MPI incorporated changes to incorporate future software licensing, maintenance and operational support resource expenses are properly forecast? In particular, with respect to PDR, what changes were incorporated?

c) What project contingency was used in the PDR? Please describe the changes in project contingency that were incorporated in the evaluation of the PDR project. d) Please provide the sensitivity analysis that has been performed on benefit streams in evaluating the PDR.

Rationale for Question:

To understand changes in project evaluation.

Manitoba Public Insurance Page 1 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-66

RESPONSE: a) The Corporation has recently made very broad changes with respect to Value Management assessment and realization, project delivery governance and is more actively engaging with MPI business stakeholders as key business owners for corporate initiatives. For further information, please see 2018 GRA Volume I Value Management and 2019 GRA Volume IV Value Management and CAC 1-031 b) for details on the BTO Project Delivery approach, methodology and governance.

Lesson Learned

• Large capital programs like PDR should have iterative business cases with no longer than 3-year project funding/value management period assessments

Actions

• Active engagement (review, approval) of Value Management Office in development of business cases • Active engagement of business operations in development of business cases • Formal application of BTO project ‘gating’ checkpoints and controls

Lesson Learned

• Future software licensing, maintenance and operational support resource expenses need to be properly forecasted and included in financial analysis

Actions

• Active engagement (review, approval) of Value Management Office in development of business cases • Active engagement of IT operations and Enterprise Systems Support in the review of business case development

Manitoba Public Insurance Page 2 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-66

Lesson Learned

• Appropriate Discount Rate needs to be applied to financial analysis based on project risk

Actions

• Active engagement (review, approval) of Value Management Office in development of business cases • Value Management Office has formalized a framework for the application of appropriate discount rates in business cases – See 2019 GRA Volume IV Value Management Appendix 7

Lesson Learned

• Appropriate project contingency percentages need to be incorporated into project cost estimates based on project risks and updated annually based on findings/realizations

Actions

Lessons Learned

• A sensitivity analysis should be performed with respect to benefit stream projections

Manitoba Public Insurance Page 3 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-66

Actions

• Active engagement (review, approval) of Value Management Office in development of business cases

o Include optimistic, realistic and pessimistic modeling of business stream benefits and costs aspects of the business case.

o Discount rate sensitivity analysis as further explained in d) below. • Active engagement of business operations in development of business cases b) As per a) above c) A project contingency of 20% was utilized as part of the estimating of each major PDR program component. No changes in project contingency were exercised during the execution of the PDR program. In evaluating the NPV and/or financial viability of PDR program components, it was assumed that project contingency would be utilized as part of the program spend.

d) The following sensitivity analyses parameters and scenario analyses were performed in evaluating the PDR program:

• NPV discount rate • Cash flow (# of years) analysis • Direct Repair premium paid to repair shops • Direct Repair % of claims • Parts – alternative parts utilization rates • Loss of Use – Daily Allocation Factor (DAF) rates • Predictive Analytics – loss prevention claims costs impacts and/or recoveries • Labour rate differentials • Mitchell licensing MPI vs. shop funded • Customer Claims Reporting System (CCRS)

o Customer adoption rates o Staff productivity gains o Scope alternative “lite” vs. “full”

Manitoba Public Insurance Page 4 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-66

The results of the sensitivity analysis for the PDR project in terms of discount rates of 6.5% and 9.5% as well as the impact of the cash flow analysis for the 10, 15 and 20 Cost/Benefit years are reported on page 41 of Part IV (ii) Value Management Chapter in the 2019 GRA. Similarly for the CCRS project sensitivity analysis results are reported on page 31 and 32 of said chapter. The supporting documents for the NPV calculations of the PDR project as a whole as well as the CCRS project have been submitted in the confidential filing of responses to PUB (MPI) 1-62 and 1-61 respectively.

Manitoba Public Insurance Page 5 of 5 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-67

PUB (MPI) 1-67

Part and IV VM Appendix 6 Page No.: 3 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Spending Sub Topic: PDR

Preamble to IR (If Any):

Question:

a) Please file the MPI Management presentation regarding the PDR Program to the MPI Board of Directors (dated April 19, 2018) which restated the PDR cost and benefit projections. b) Please elaborate on the aspects of the agreements in place that limited the Corporation in achieving projected benefits.

Rationale for Question:

To understand changes in PDR project costs.

RESPONSE: a) [Appendix 1 Redacted. The Corporation is seeking confidential treatment for this response] b) The Corporation understands this question to pertain to overall net present value impact from agreements in place. While the projected benefits were not limited by the agreements in place, the costs of implementing PDR processes were impacted greatly by two key agreements. The first is the agreement made with the repair shop network in Manitoba that established an $81 premium payable for all claims

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-67

processed by a Direct Repair designated shop. This premium applied to all claims done by that shop, not just Direct Repair claims. The Corporation is currently negotiating a new compensation agreement with the repair community effective March 1, 2019. This new agreement will correct this issue, as industry standard is not to pay a premium for this type of estimating service. The second agreement that reduced the PDR net present value was the Mitchell licencing agreement for Collaborative Estimating. This was not included in the economic evaluation of PDR and should have been from the beginning. However, Mitchell estimating software is an industry standard tool for auto insurance and repair networks. Please see PUB (MPI) 1-062 Appendix 2 for Mitchell Licensing cost details.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-68

PUB (MPI) 1-68

Part and IV VM Appendix 6 Page No.: 4 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Spending Sub Topic: PDR

Preamble to IR (If Any):

Question:

a) Please identify which costs were excluded from the NPV analysis that was prepared by Gartner last year. b) Please identify and quantify the changed view on benefits from the project. Provide supporting assumptions behind the changed view.

Rationale for Question:

To understand changes in the PDR business case cost/benefit analysis.

RESPONSE:

a) Please see PUB(MPI) 1-62 Appendix 1-8 for details. The primary categories of costs which were not included in the NPV analysis prepared by Gartner last year include:

• Direct Repair Operations • Direct Repair Premium • Mitchell software licensing • CCRS software licensing • Partner Portal software licensing

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-68

• Car Part software licensing • Predictive Analytics software licensing and operations b) Please refer to Part IV Value Management Figure VM-1, and the accompanying commentary.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-69

PUB (MPI) 1-69

Part and IV VM Appendix 6 Page No.: 4 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Spending Sub Topic: PDR

Preamble to IR (If Any):

Gartner has reviewed the latest iteration of the PDR Value Management/Business Case data and related assumptions. It would appear that MPI has followed the advice provided by Gartner and applied a more rigorous approach to the PDR business case and application of the Value Management framework.

Question:

a) Please file as a document in this proceeding the Gartner prepared Cost / Benefit Analysis presented at the 2018 GRA. b) Please indicate who was responsible for the preparation of the Gartner PDR report filed in the 2018 GRA and the report filed in this GRA. c) Please indicate when the agreement with the repair shops was entered into and explain why Gartner did not review the agreement to inform its 2017 Cost / Benefit Analysis. d) Please provide the underlying support for the Loss of Use Benefit forecast last year. Please explain what could not be negotiated with repair shops.

Rationale for Question:

To understand changes in the cost/benefit analysis for PDR.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-69

RESPONSE:

a) In 2017, the program was showing a lengthy payback period, an Internal Rate of Return of 7% and a Net Present Value of $13.7M (using a 3% cost of capital), over the period from inception (2010/11) until 10 years after go-live when benefits start to accrue in 2016/17.

Gartner 2017 Analysis

b) Martin Geffen, Vice President, Gartner Canada Co., authored the 2018 GRA Gartner PDR report. Charles (Chuck) Henry, Vice President, Solution & Pricing, authored the 2019 GRA Gartner PDR report with quality assurance provided by Mr. Geffen and Rand Guy, Senior Managing Partner, Western Canada Energy & Public Sector. c) The Repair Shop Agreement came into effect on March 1, 2017 and expires on February 28, 2019. The Corporation did not share the repair shop agreement because it did not see the relevance in assessing the PDR program execution. The relevant aspects of the agreement however have been shared with Gartner (i.e. Direct Repair $81 premium, agreement duration, shop KPI’s, qualification criterion, claim types eligible) d) The Loss of Use (LOU) benefit stream projections assume that the Corporation and Manitoba repair shops will agree to transition from the ‘touch time’ Loss of Use allocation model to the more industry-prevalent Daily Allocation Formula (DAF) model. The DAF model presents an opportunity for repair shops to self-manage LOU expenses and incentivizes them to manage the repair process efficiently. At

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-69

this time, the transition remains under review and is the subject of ongoing negotiations with Manitoba repair shops. So as to not prejudice negotiations, and given the low likelihood of this benefits stream being realized, the Corporation removed the forecasted benefits from the 2018 PDR financial analysis.

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-70

PUB (MPI) 1-70

Part and IV VM Appendix 6 Page No.: 11 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Expenses Sub Topic: PDR Project

Preamble to IR (If Any):

Question: a) Please provide details the termination cost of $10.2 million. b) Please provide the detail of the $16.08 million spent on the CCRS. c) Please reconcile the difference between the spending used in the “go” vs. “no-go” analysis at $9.6M vs. $16.08M indicated by Gartner at March 31, 2018.

Rationale for Question:

To understand the details of the impairment charge for IT expenditures.

RESPONSE: a) Please see PUB(MPI) 1-61 (d) b) See table below:

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-70

Figure 1: Customer Claims Reporting System Cost Breakdown

Line LTD No. CCRS Cost Breakdown March 30, 2018 1 (C$000s, except where noted) 2 Compensation 836 3 External Labour 12,633 4 Software 2,601 5 Miscellaneous 7 6 Travel 5 7 Total CCRS 16,082 c) The $9.6M referenced was the projected remaining spend for the CCRS project, whereas the $16.08M was the spend to-date (at March 31, 2018) on the CCRS project.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-71

PUB (MPI) 1-71

Part and IV VM Appendix 7 Page No.: 1-7 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Capital Project Evaluation Sub Topic: Impaired Securities

Preamble to IR (If Any):

MPI utilized a 9.5% discount rate in evaluation of the Cost Benefit of the Customer Claims Reporting System (CCRS) project. In establishing the 9.5% discount rate, MPI noted:

Using the industry average as a hurdle rate will encourage competitive decision making that is comparable to that in the private sector. There is an associated risk that will exist if the Corporation is attempting to meet its social mandate while trying to make decisions using a private sector hurdle rate.

Question: a) Why was the CCRS project considered high risk? b) Please indicate where other Corporations apply a similar high discount rate for internal IT projects. c) Please explain what costs were excluded from the Net Present Value analysis. d) Please provide the cost benefit analysis for the proposed solution to replace the CCRS.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-71

Rationale for Question:

To understand CCRS framework.

RESPONSE: a) The CCRS project was considered high risk because of the significant amount of innovation it required and because:

• it involved the development of a new online application to address sophisticated technical requirements not previously offered by the insurance industry, namely the automation of the adjudication claims process using pictures and not text scans; • it required partnership with a vendor (Mitchell) with no prior experience in this field; • of uncertainty regarding customer acceptance of the delivered product; and • the forecasted benefits relied on assumptions regarding significant FTE reductions that were dependent on customer adoption rates and customer acceptance of the automated claims liability assessment provided which would have been ‘innovative’ in the industry at this time. b) The Corporation did not classify the project as a purely “internal” IT project. As previously mentioned, Mitchell and other vendors contributed significantly to the development of the CCRS application. However, it is common financial practice to apply a discount rate for all projects a company may pursue, additionally it is common for private enterprises to use discount rates in excess of 10% given their shareholder return expectations and costs of capital. Given the level of identified risk and using the Corporation’s discount rate methodology, it deemed the 9.5% rate appropriate. If the Corporation runs a low risk project in the future, it will assign it a lower discount rate following this logic. The rational for discount rate selection on projects going forward is provided in VM Appendix 7. c) The NPV calculation for CCRS does not include $5,306,060 in costs that were incurred from 2012/13 to 2015/16 that were written off in 2018. The Corporation incurred these costs with Fineos in the early development of the Optimized

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-71

Adjusting project and should have been categorized separately from CCRS. All other relevant costs are included in this calculation. d) There is no proposed solution to replace CCRS for online claims service at this time. The insurance industry is testing the ability to scan a customer’s free-form text description of the accident and assign a liability score based on that information. As outlined in IT Appendix 2, the Corporation prefers to adopt proven mainstream technology in lieu of innovating new technology (essentially following best in class innovations to ensure they work efficiently, before offering them in Manitoba). In the interim, given customer demand, the Corporation will focus its attention on moving other service elements online.

Manitoba Public Insurance Page 3 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-72

PUB (MPI) 1-72

Part and IV IT Page No.: Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Management Sub Topic:

Preamble to IR (If Any):

Question:

a) Please file an update to PUB/MPI I-29 Appendix 1 and I-29 (c) from the 2018 GRA. b) Please file an update to PUB/MPI 2-16 (a) & (b) from the 2018 GRA.

Rationale for Question:

To provide an update on project status.

RESPONSE:

[Redacted. The Corporation is seeking confidential treatment of this response].

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-73

PUB (MPI) 1-73

Part and IV IT Appendix 2 Page No.: 4 Chapter: PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: IT Strategy Sub Topic:

Preamble to IR (If Any):

Question:

What is the impact on staffing, processes, technology and cost of the new IT Strategy.

Rationale for Question:

To understand the impact of the new IT Strategy on the Corporation.

RESPONSE:

The financial and staffing impact of the IT strategy is included as part of the budgeting process and Value Management process (via individual business cases).

From a process perspective, there will be ongoing growth and improvement in business capabilities such as self-service to customers, driver education programming, financial reporting, and physical damage controls. These will be delivered through related projects (with associated business cases).

From a technology perspective, the future direction will be significantly influenced by the outcome of the Legacy Modernization Assessment. In the interim, initiatives will leverage / build upon pre-existing software solutions.

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-74

PUB (MPI) 1-74

Part and V EXP Appendix 19; Page No.: 4 Chapter: Figure EXP App 19-4 PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Expenses Sub Topic: IT Expenses

Preamble to IR (If Any):

Question: a) Please explain how MPI determined that 80% of operational activities relates to Basic. b) Please supplement the schedule including the internal FTE and related costs that support operational and IT projects.

Rationale for Question:

To assess the reasonableness of the allocation of IT project expenses to Basic.

RESPONSE: a) The 80% cost allocation estimate for Basic is based on Basic’s proportion of corporate operating expenses. Please refer to EXP Appendix 7, page 3 which provides support for this estimate. b) Please see table below:

Figure 1: Basic Initiatives Internal FTE Costs

Line No. Basic Internal FTE Costs 2013/14A 2014/15A 2015/16A 2016/17A 2017/18A 1 (C$000s, except where noted) 2 Initiatives Internal FTE Costs 889 817 1,139 1,741 1,261

Manitoba Public Insurance Page 1 of 1 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-75

PUB (MPI) 1-75

Part and V EXP Appendix 19; Page No.: 2, 4 Chapter: Figure EXP App 19-2;

Figure EXP App 19-4 PUB Approved 19. Current IT Strategic Plan and IT Expenses and Projects Issue No: Topic: Expenses Sub Topic: IT Expenses

Preamble to IR (If Any):

Question:

a) Please provide a schedule of fees paid by consulting professional service firms for the years 2016/17 and 2017/18 identifying the service(s) provided for the fees. b) Please provide an updated table from PUB/MPI I-32 (2018 GRA) of the IBM Data Centre costs forecast in this GRA with the 2018 GRA Forecast since the inception of the arrangement, though 2019/20. c) Per review of Figure EXP App 19-2, noted on line 34 the DC IBM charges increase to $500k up from $161k. Please explain the cause of this change. d) Figure EXP App 19-4, summary of consultant costs and FTE, note (4) indicates “Any changes to the planned improvement initiatives for 2019/20 and 2020/21 will impact the number of consultants.” Please summarize the programs or projects that can influence external consultant numbers. e) Please discuss how the cancellation of CCRS has impacted the use of external consultants.

Rationale for Question:

To understand the level of external consulting expense.

Manitoba Public Insurance Page 1 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-75

RESPONSE: a) Please see table below:

Figure 1: Consulting Fees - Basic

Line No. Consulting Fees 2016/17A 2017/18A 1 (C$000s, except where noted) 2 ITO Operational Ac tivities 4,376 2,568 3 Improvement Initiatives 15,528 11,778

4 Note: Consulting services rendered for participation on IT operational activities 5 and corporate initiatives. b) Please see table below:

Figure 2: IBM Data Centre Costs

Line 2019 GRA 2018 GRA Variance No. Fiscal Year Forecast/Actual Forecast/Actual 2019 vs 2018 % Change 1 (C$000s) 2 2014/15 (a) 7,593 7,593 - 0.00% 3 2015/16 (a) 9,084 9,084 - 0.00% 4 2016/17 (a) 9,700 9,700 - 0.00% 5 2017/18 9,337 9,430 (93) -0.99% 6 2018/19 10,840 10,668 172 1.61% 7 2019/20 12,239 11,022 1,217 11.04% c) Please see table below:

Figure 3: IBM Data Centre - Total Corporate

Line No. IBM Data Centre 2017/18A 2018/19FB Increase 1 (C$000s, except where noted) 2 IBM Data Centre 161 500 339

3 The $500,000 IBM Data Centre for 2018/19FB is related to TRM-2017 project 4 This is the estimate for Security Ops Centre; Website redesign & Infrastructure Improvements.

Manitoba Public Insurance Page 2 of 3 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-75

d) Please see table below:

Figure 4: 2019/20 and 2020/21 Basic Initiatives

Line No. Basic Initiatives 2019/20F 2020/21F 1 (C$000s, except where noted) 2 BI3 Fineos Upgrade 2020 941 - 3 Infor Major Upgrade 2022 - 1,628 4 Technology Risk Management - 2019 3,256 - 5 Technology Risk Management - 2020 - 3,256 6 Financial Re-engineering Inititiative 5,460 5,217 7 Customer Self Service 814 814 8 Legacy Systems Modernization 8,140 16,280 9 Total Deferred Development Costs 18,611 27,195

e) MPI’s decision to cancel the Customer Claims Reports System (CCRS) project resulted in 8 consultants being released from the MPI account and the reassignment of the remaining 17 consultant resources to new corporate or operational projects based on project resource requirements. The decision also decreased the number of external consultants added to the MPI account to initiate new projects in the corporate project portfolio.

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PUB (MPI) 1-76

Part and Part V RM Page No.: 31 of 58 Chapter: PUB Approved 20. Capital Maintenance Provision Issue No: 2. Rate Indication

Topic: Capital Maintenance Provision Sub Topic:

Preamble to IR (If Any):

Question:

a) Please provide supporting documentation for the estimated Capital Maintenance Provision of 3.3%, which the Corporation defines as" the required rate change to maintain capital adequacy in fiscal year 2019/20. Please include a detailed derivation of the MCT ratios as fiscal year-ends 2018/19 and 2019/20 (before application of the CMP), including commentary on any significant differences causing a shift in the MCT ratio. b) Please provide supporting documentation for the comparably derived Capital Maintenance Provisions for each year over the forecast period, with accompanying commentary on any observed changes or patterns starting from the 3.3% assumption used in the Application. c) From what the Corporation knows of past and current practices followed by Saskatchewan Auto Fund in deriving its Capital Maintenance Provision, how does the Corporation’s proposed approach compare? d) Please prepare an estimated Capital Maintenance Provision, with supporting documentation, following the approach currently in use by Saskatchewan Auto Fund, suitably adapted to Manitoba’s Basic Insurance program. e) Please prepare an alternate overall rate indication, with supporting documentation, incorporating the results from part d) above.

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f) Please prepare an alternate overall rate indication, with supporting documentation, incorporating the results from part d) above and the Board approved 50/50 interest rate forecast. g) The Corporation states: The Corporation is also in the process of developing a Capital Maintenance Plan, which may result in Capital Build and Release adjustments to the assumed base forecast in future year. [RSR.4.5.1.1] Please describe the nature and purpose of a Capital Build and Release Provision in a rate setting context, and how this may be adapted to work with a Basic Total Equity target capital range.

Rationale for Question:

To assess the reasonableness of the proposed approach to estimating the Capital Maintenance Provision.

RESPONSE: a) Please refer to Appendix 1, which shows the detailed derivation of the MCT ratios after applying the different required rate changes described in Part V, Ratemaking, pages 30 and 31.

The Corporation’s approach to determining the Net Capital Maintenance Provision (CMP) is straightforward. Per Part V, Ratemaking, page 30, “…the Net CMP ensures that the Minimum Capital Test (MCT) ratio… at fiscal year-end 2019/20 is unchanged from fiscal year-end 2018/19.” Per Figure 1, the MCT ratio at fiscal year-end 2019/20 based on breakeven rates is 63.5%. As such, a Net CMP equal to an additional 2.1% required overall rate increase is necessary to make the MCT ratio at fiscal year-end 2019/20 equal to 69.5% (i.e. the same MCT ratio as it was in the fiscal year-end 2018/19).

Per Part V, Ratemaking, page 31, “The Net CMP of 2.1% is comprised of a 1.2% decrease in the required rate change from the investment income earned on the Rate Stabilization Reserve (RSR), offset by a 3.3% increase in the required rate change to maintain capital adequacy in fiscal year 2019/20.” 3.3% is simply the

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difference between the increase of 2.1% from the Net CMP and the decrease of 1.2% from the investment income earned on the RSR.

In respect of capital adequacy, per Part V, Ratemaking, page 30, “The Net CMP is required to maintain capital adequacy in fiscal year 2019/20.” (i.e. the increase of 2.1% from the Net CMP is required to maintain capital adequacy).

b) Per Part V, ProFormas, page 6, based on breakeven rates, including the Net CMP (of 2.1%), the MCT Ratio remains consistently at 70% over the forecast period except for fiscal year 2022/23. As such, no additional Net CMP is required for the rating years 2020/21 and 2021/22, assuming that the required overall rate changes for those two rating years is zero. For 2022/23, assuming that the required overall rate change is zero, an additional Net CMP rate increase of 1.2%is required.

The rates sought in 2019/20 include a 2.1% Net CMP. The Corporation assumed that this Net CMP amount would remain in the base rates over the forecast period. MPI will however recalculate the Net CMP in each GRA.

c) The Corporation’s approach to capital maintenance increases available capital by the amount required to maintain the MCT ratio (i.e. 2019/20 MCT ratio = 2018/19 MCT ratio). In contrast, SAF’s approach increases capital available based on the long-term average growth in capital required. The Corporation’s approach charges current year policyholders for the cost of capital maintenance in the rating period, rather than basing this charge on the experience of the prior year. d) Please refer to DCAT Appendix 1, page 4. Applying SAF’s approach, the long-term annual growth in capital required is 5.98% [= ((382,621 / 303,315) ^ (1/4)) - 1]. This requires a Net CMP of $18.1M [= 303,315 * 5.98%], which is equal to an additional 1.8% required rate increase (compared to 2.1% per MPI’s proposed approach).

e) See the response to (d) above.

Manitoba Public Insurance Page 3 of 4 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-76

f) Please see Appendix 2 to this IR. Applying SAF’s approach, the long-term annual growth in capital required is 6.03% [= ((381,891 / 302,191) ^ (1/4)) - 1]. This requires a Net Capital Maintenance Provision of $18.2M [= 302,191 * 6.03%], which equals an additional 1.8% required rate increase (compared to 1.7% per PUB (MPI) 1-3(d)). g) On the assumption the Corporation and the PUB can agree on the methodology for the lower and upper RSR targets; the Corporation would expect the Capital Management Plan to act as follows:

1. Calculate the lower and upper RSR targets before the inclusion of any capital adjustments (i.e. 34% to 85% MCT for 2019/20 GRA).

2. Calculate the overall Basic rate indication based on Accepted Actuarial Practice (i.e. e.g. +0.1% for 2019/20 GRA).

3. Calculate the CMP for the rating year such that the MCT ratio remains constant over the rating period (i.e. 2018/19 MCT score is 70%; a 2.1% Net CMP is applied to ensure 2019/20 MCT score remains at 70%).

4. Calculate the Capital Build and Release Provision. The determination of an appropriate Capital Build and Release Provision is dependent on having appropriate RSR target and a Capital Maintenance Provision methodologies approved by the PUB. MPI cannot develop a Capital Management Plan without clarity and confidence in the underlying capital targets and rate setting methodologies that are the basis for the Capital Management Plan. There are multiple approaches to the Capital Build and Release Provision including (i) constantly moving to a target MCT level over a predetermined number of years (similar to SGI); (ii) only applying a Capital Build and Release if the RSR is outside of the approved range; etc. The Corporation will bring a Capital Management Plan to the 2020/21 GRA.

Manitoba Public Insurance Page 4 of 4 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-76(a) Appendix 1

Appendix 1 2019/2020 Rate Change Scenario Comparison Minimum Capital Test

Column Reference (a) (b) (c ) (d) (e) 2019/20 Basic Premium Rate Increase 0.0% 0.0% 0.1% -1.1% 2.2% 2018 - 2019 2019 - 2020 2019 - 2020 2019 - 2020 2019 - 2020 Forecast Base Forecast Forecast Forecast Forecast (All figures in $000s) Year Year Year Year Year (01) (02) (03) (02) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 210,765 210,135 211,178 198,620 233,068 Phase-in of capital available 03 0 0 0 0 0 Total Capital Available 09 210,765 210,135 211,178 198,620 233,068

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,485 98,579 97,458 100,540 Unpaid claims 22 194,866 203,516 203,517 203,518 203,523 Catastrophes 24 0 0 0 0 0 Margin required for reinsurance ceded to unregistered insurers 26 0 0 0 0 0 Subtotal: Insurance risk margin 29 289,525 302,001 302,096 300,976 304,063 Market Risk: Interest rate risk 30 4,990 19,656 19,667 19,515 19,917 Foreign exchange risk 32 15,503 15,147 15,147 15,147 15,147 Equity risk 34 68,628 66,694 66,694 66,694 66,694 Real estate risk 36 25,831 26,737 26,737 26,737 26,737 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 114,952 128,234 128,245 128,093 128,495 Credit Risk: Counterparty default risk for balance sheet assets 40 39,415 60,594 60,660 59,867 62,046 Counterparty default risk for off-balance sheet exposures 42 0 0 0 0 0 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 0 0 0 0 0 Subtotal: Credit risk margin 49 39,415 60,594 60,660 59,867 62,046 Operational risk margin 50 64,656 69,741 69,783 69,284 70,656 Less: Diversification credit 52 53,576 62,009 62,032 61,751 62,520 Total Capital (Margin) Required at Target 59 454,972 498,561 498,752 496,469 502,740 Minimum Capital (Margin) Required (line 59 / 1.5) 60 303,315 332,374 332,501 330,979 335,160 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 303,315 332,374 332,501 330,979 335,160 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (92,550) (122,239) (121,323) (132,359) (102,092) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 69.5% 63.2% 63.5% 60.0% 69.5%

Column Reference Scenario MCT Ratio % a) 2018/2019 @ Base Forecast (0.0% Rate Change) 69.5% b) 2019/2020 @ Base Forecast (0.0% Rate Change) 63.2% c) 2019/2020 @ Break-Even Rate (0.1% Rate Change) 63.5% d) 2019/2020 @ Break-Even Rate excluding RSR Investment Income (-1.1% Rate Change) 60.0% e) 2019/2020 @ Break-Even Rate including Net CMP (2.2% Rate Change) 69.5%

Manitoba Public Insurance Page 1 August 8, 2018 2019 GRA Information Requests - Round 1 PUB (MPI) 1-76(f) Appendix 2

Appendix 1a 50/50 Interest Rate Scenario with -0.5% Rate Change Minimum Capital Test

(All figures in $000s) 2018 - 2019 2019 - 2020 2020 - 2021 2021 - 2022 2022 - 2023 Forecast Base Forecast Forecast Forecast Forecast Year Year Year Year Year (01) (02) (03) (04) (05) Capital Available: Capital available (from page 30.62 - capital available) 01 219,790 223,190 220,982 213,045 195,408 Phase-in of capital available 03 Total Capital Available 09 219,790 223,190 220,982 213,045 195,408

Assets Available: Net Assets Available (from page 30.92 - net assets available) 11 0 0 0 0 0 Phase-in of net assets available 13 0 0 0 0 0 Total Net Assets Available 19 0 0 0 0 0

Capital (Margin) Required at Target: Insurance Risk: Premium liabilities 20 94,659 98,018 101,997 106,052 110,289 Unpaid claims 22 191,890 198,314 205,746 213,811 221,500 Catastrophes 24 Margin required for reinsurance ceded to unregistered insurers 26 Subtotal: Insurance risk margin 29 286,549 296,332 307,743 319,863 331,789 Market Risk: Interest rate risk 30 5,757 21,384 25,137 30,412 33,036 Foreign exchange risk 32 15,622 15,247 16,248 17,315 20,542 Equity risk 34 69,221 67,192 71,715 76,545 86,475 Real estate risk 36 25,962 26,877 27,577 28,509 30,012 Other market risk exposures 38 0 0 0 0 0 Subtotal: Market risk margin 39 116,562 130,700 140,677 152,781 170,065 Credit Risk: Counterparty default risk for balance sheet assets 40 39,399 60,323 62,469 63,974 64,962 Counterparty default risk for off-balance sheet exposures 42 Counterparty default risk for unregistered reinsurance collateral and SIRs 44 Subtotal: Credit risk margin 49 39,399 60,323 62,469 63,974 64,962 Operational risk margin 50 64,538 69,311 72,452 75,800 79,581 Less: Diversification credit 52 53,762 62,021 65,366 69,042 73,561 Total Capital (Margin) Required at Target 59 453,286 494,645 517,975 543,376 572,836 Minimum Capital (Margin) Required (line 59 / 1.5) 60 302,191 329,764 345,317 362,250 381,891 Phase-in of Capital (Margin) Required 62 0 0 0 0 0 Total Minimum Capital (Margin) Required 69 302,191 329,764 345,317 362,250 381,891 Excess Capital (Net Assets Available) over Minimum Capital (Margin) Required 79 (82,401) (106,574) (124,335) (149,205) (186,483) MCT (BAAT) Ratio (Line 09 or line 19 as a % of line 69) 90 72.7% 67.7% 64.0% 58.8% 51.2%

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PUB (MPI) 1-77

Part and VI INV.17 Page No.: 81 Chapter:

PUB Approved 21. Asset Liability Management Study Issue No:

Topic: Investment Policy Statement

Sub Topic: Revised Investment Policy Statement

Preamble to IR (If Any):

It is anticipated that the revised Investment Policy Statement will be provided as part of the answers to the first round of Information Requests.

Question:

Please provide the revised Investment Policy Statement (IPS).

Rationale for Question:

To note any significant changes to the IPS.

RESPONSE:

Please see the response to PUB(MPI) 1-31 (b).

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PUB (MPI) 1-78

Part and VI INV Appendix 2 Page No.: 1 Chapter: PUB Approved 21. Asset Liability Management Study Issue No: Topic: Operational Asset Liability Management Policy Sub Topic: Changes to ALM

Preamble to IR (If Any):

The Corporation has made changes to the Investment Policy Statement by which: Interest rate risk is managed by matching the duration of the fixed income portfolio, which includes marketable bonds and floating rate notes to the actuarially determined duration of the Corporation’s claims liabilities. If an allocation to floating rate notes is designated by the Working Group to fund other asset classes, then the designated amount can be excluded from the duration calculation.

Question:

a) Please explain the rationale for the changes made to the Operational Asset Liability Management Policy. b) Please advise as to the implications of removing nonmarketable bonds from the determination of duration matching of interest rate risk.

Rationale for Question:

To understand the changes in the Investment Policy Statement.

RESPONSE: a) The changes to the Operational Asset Liability Management Policy involved the removal of MUSH bonds from the duration matching portfolio as stated in Section

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-78

8.4 of the Investment Policy Statement and in Section III Definitions. Please see PUB(MPI) 1-29 (a) for the full discussion. b) Please see PUB(MPI) 1-29 (a) for the implications of removing non-marketable bonds from the duration matching portfolio.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-79

PUB (MPI) 1-79

Part and VI INV Appendix 13 Page No.: 9 Chapter: PUB Approved 21. Asset Liability Management Study Issue No: Topic: Mercer ALM Study Sub Topic: New Asset Allocations – Stochastic Modelling and Analysis

Preamble to IR (If Any):

Following a thorough review of the relative merits of the asset classes noted above and after considering the purpose of each business line and MPI’s risk tolerance and return requirements, Mercer modeled multiple combinations of asset classes utilizing efficient frontier concepts as well as stochastic projections of both assets and MPI’s obligations utilizing the economic assumptions outlined in Appendix B.

Question:

Please provide any analysis from the stochastic modelling and stress testing that support the portfolio allocations, if necessary, with a request for confidentiality under Rule 13.

Rationale for Question:

To obtain and understand the stochastic modelling and results of the stress testing.

RESPONSE:

The analysis was provided in Part VI INV, Appendix 17, and is reproduced below for convenience.

As provided by Mercer:

Manitoba Public Insurance Page 1 of 7 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-79

The above excerpt is from the Phase Two Report Section 2 Key Recommendations. Based on the analysis, management recommended the following Policy portfolios for each business line and Pension obligations with the supporting analysis below.

CURRENT PROPOSED PROPOSED PROPOSED BASIC SRE/EXT PENSION RSR

MIX NAME IN BASIC.3 R - S - E.1 PENSION.1 Fixed Income 70% 100% 50% 40% Short-term Bonds (Prov.) 6.5% 0% 10% 0% Mid-term Bonds (Prov.) 12% 28% 10% 0% Long-term Bonds (Prov.) 29.5% 32% 0% 0% Short-term Bonds (Corp.) 0% 0% 0% 0% Mid-term Bonds (Corp.) 0% 9% 10% 0% Long-term Bonds (Corp.) 2% 11% 0% 20% MUSH Bonds 20% 20% 5% 0% Private Debt - Universe 0% 0% 15% 0% Private Debt - Long 0% 0% 0% 20% Public Equities 15% 0% 35% 35% Canadian Equity 10% 0% 12% 10% U.S. Equity 5% 0% 0% 0% All Country World Equity 0% 0% 13% 18% Global Equity (Low Volatility) 0% 0% 10% 7% Alternatives 15% 0% 15% 25% Real Estate 10% 0% 10% 15% Infrastructure 5% 0% 5% 10%

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Manitoba Public Insurance Page 3 of 7 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-79

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PUB (MPI) 1-80

Part and VI INV Appendix 16 Page No.: 11 Chapter: PUB Approved 21. Asset Liability Management Study Issue No: Topic: Investments Sub Topic: Completion of Recommendations Details

Preamble to IR (If Any):

Real Return Bonds (RRBs) have been designated by Mercer to have a strong ability to duration match the inflation-linked liabilities. MPI’s proposed Basic Portfolio is based on 100% fixed income securities. Previously the portfolio contained real estate investments as a hedge against inflation.

MPI has a long-term inflation forecast of 2.0%, which is based upon historical inflation and the Bank of Canada’s inflation target. RRBs were not considered for this reason, as well as because the real yields on RRBs are currently very low. In addition, the Dynamic Capital Adequacy Test (DCAT) report does not include a high inflation scenario as a significant risk.

Question: a) Given that the fixed income portfolio is set to back claims liabilities which are impacted by inflation risk, please explain how MPI proposes managing inflation risk with its proposed fixed income portfolio design. b) Please explain why MPI believes that inflation risk is not a significant risk requiring protection through the investment portfolio.

Rationale for Question:

To understand the new portfolio design.

Manitoba Public Insurance Page 1 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-80

RESPONSE:

a) The portfolio supporting Basic claims liabilities after February 28, 2019 will include only nominal bonds. Nominal interest rate risk is hedged instead of real interest rate risk. b) As stated in the Corporation’s Rate Application “MPI has a long-term inflation forecast of 2.0%, which is based upon historical inflation and the Bank of Canada’s inflation target.” Since the Bank of Canada (BoC) adopted its explicit inflation target in March 1991, inflation has averaged at 1.9%. The Corporation therefore believes that the risk of inflation significantly exceeding the BoC’s 2% inflation target is low. Further, given the low real yields currently available on Real Return Bonds (RRBs), the cost of obtaining protection from a high inflation scenario is substantial.

Mercer states at page 7 of the Phase 2 Report, that dollar and duration matching of liabilities is “challenging with RRBs. The Canadian RRB market consists of 15 issues of which only 7 are liquid and all are government issued. Further, RRBs are traditionally indexed to Canadian Consumer Price Index, while Basic Liabilities are indexed to other drivers.”

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PUB (MPI) 1-81

Part and VI INV Appendix 16 - Page No.: 50-53 Chapter: Appendix F (Efficient Frontiers) PUB Approved 21. Asset Liability Management Study Issue No: Topic: ALM Sub Topic: Efficient Frontiers

Preamble to IR (If Any):

Question: a) Please provide a narrative description of the results presented in the charts, and articulate how the selected portfolio mix represented the best alternative based on the risk reward profile for MPI. b) Please indicate how the relative charts and portfolio may change if Mercer's SIRF was used in the analysis, rather than the implied forward rate.

Rationale for Question:

To understand the ALM results related to the efficient frontiers.

RESPONSE:

As provide by Mercer: a) The following is a narrative description of the results presented in the charts.

Page 50: Basic Claims The Efficient Frontier is based on the Nominal Liability Benchmark for the Basic Claims liability. The frontiers shown are constrained to allow only the fixed income asset classes shown in the table, in order to achieve MPI’s objective of minimizing

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interest rate risk. The Current mix that currently applies to all business lines, the RSR and Pension fund includes equities and alternatives and therefore appears well above the constrained frontier. The blue efficient frontier includes fixed income asset classes in Current. The green efficient frontier includes the classes included in the blue efficient frontier and private debt and mortgages.

After analyzing the stochastic projections and summary results (see INV Appendix 17 Appendix B), Basic portfolio #3 was selected because it had the highest yield but did not include private debt. Private debt was not included in the Basic Claims portfolio in order to limit risk within the portfolio and because including private debt could complicate the duration matching strategy.

Page 51: Rate Stabilization Reserve The Efficient Frontier is based on asset only approach, given the nature of the RSR. The blue efficient frontier includes all asset classes in Current. The purple efficient frontier includes the classes shown in the table. After analyzing the stochastic projections and summary results (see INV Appendix 17 Appendix B), RSE.1 was selected because of the high Sharpe Ratio, high probability of positive real return, and relatively more upside than downside. In order for RSE.1 to place on the purple efficient frontier, a small private equity allocation is necessary. Given the size of that allocation and the materially more complicated oversight required, the slight improvement in moving to the purple frontier was not sufficient to warrant the implementation of a private equity mandate.

Page 52: Employee future benefits (primarily pension) The Efficient Frontier is based on the Nominal Liability Benchmark for the EFB liability. The blue efficient frontier includes all asset classes in Current. The purple efficient frontier includes the classes shown in the table. The Current mix which currently applies to all business lines, the RSR and Pension fund is aligned to the liability characteristics of each component weighted on the size of the liability and therefore Current is more aligned to BASIC claim liabilities rather than EFB liability and therefore Current appears suboptimal when only EFB liabilities are considered. For illustrative purposes, the CSSB asset mix was plotted. In order to move the CSSB plot closer to the frontier, we would need to improve the asset mix

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alignment with the liabilities (i.e., better duration match) and we would to use the additional asset classes which offer better expected rates of return and/or enhanced equity portfolio diversification. After analyzing the stochastic projections and summary results (see INV Appendix 17 Appendix B), Pension.1 was selected because it had the highest interest rate risk hedge, the probability of surplus and positive real return was not improved in Pension.2 or Pension.3 and relative to CSSB’s 5-year projection, Penion.1 has less volatility with similar return. b) The Operational Asset Liability Management Policy: ICWG Policy #1, Effective March 23, 2016, states that the objective of this policy is to “minimize the Corporation’s interest rate risk, the duration matching portfolio will closely match the claims liabilities in both dollar amount and duration.”

Accordingly, the specifics of an interest rate forecast are unlikely to impact portfolio construction unless the forecasts were significantly different (i.e. perhaps one forecasted a significant rise in base rates and the other forecasts a significant decline in base rates) AND the portfolio construction included significant emphasis on minimizing convexity risk.

Given the duration matching objective, the use of Mercer's interest rates forecast rather than the implied forward rates would not have impacted the proposed portfolio.

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PUB (MPI) 1-82

Part and VI INV Appendix 17 Page No.: 1 Chapter: PUB Approved 21. Asset Liability Management Study Issue No: Topic: ALM Sub Topic:

Preamble to IR (If Any):

IFRS 17 requires the discount rate for establishing claims liability to be based on the observable market rates of expected future returns.

In the 2018 GRA MPI indicated it was still assessing the full implications of IFRS 17. MPI anticipates it will provide an assessment of the impacts once the review is complete.

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Question:

In light of IFRS 17, please discuss how the accounting changes required in IFRS 17 in determining the discount rate will impact the effectiveness of the current proposed portfolio on mitigating interest rate risk.

Rationale for Question:

To understand the impact of changes in accounting standards on interest rate risk.

RESPONSE:

MPI’s evaluation of the proposed changes to IFRS 17 is still in progress. MPI continues to collect information on this topic with the intention of receiving an external opinion on the expected impact of IFRS 17.

At this time, the Corporation cannot commit to having an external impact analysis of IFRS 17 by October 2018.

Please note that the application of IFRS 17 for reporting periods must start on or after January 1, 2021. MPI will apply IFRS 17 for the fiscal year beginning March 1, 2021.

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PUB (MPI) 1-83

Part and VI INV Appendix 17 Page No.: 3 Chapter: PUB Approved 8. Performance of the Investment Portfolio Issue No: 21. Asset Liability Management Study Topic: Investments Sub Topic: Inflation Volatility Assumption

Preamble to IR (If Any):

The inflation volatility assumption was 2.6%.

Question:

Please provide details on how the 2.6% inflation volatility assumption was arrived at.

Rationale for Question:

To understand the inflation volatility assumption.

RESPONSE:

As provided by Mercer:

Our inflation volatility assumption is based on our analysis of historical data on Canadian inflation going back to 1992. The historical distribution of inflation has tails fatter than a lognormal distribution (high kurtosis). It is also asymmetric (it is skewed to the right). Another key characteristic of inflation is its high serial correlation. Simply put, years of high inflation tend to be followed by years with similarly high inflation, and the same with periods of low inflation. Because of serial correlation, the modeled annualized volatility of a future period increases with the length of the period. 2.6% volatility corresponds to the compounded annualized volatility over the next 10 years.

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PUB (MPI) 1-84

Part and VI INV Appendix 17 Page No.: 4 Chapter: PUB Approved 21. Asset Liability Management Study Issue No: Topic: ALM Sub Topic:

Preamble to IR (If Any):

Question:

Please explain how the portfolio composition changes relative to the efficient frontier, based on utilization of Mercer's interest rate forecast versus the implied forward rates. (i.e., would the use of Mercer's interest rate impact the proposed portfolio from 100% fixed income for Basic, or would it alter the relative distribution among fixed income instruments?)

Rationale for Question:

To understand the impact of utilizing Mercer’s standard interest rate forecast on the optimization of the Basic investment portfolio.

RESPONSE:

Please see the response to PUB(MPI) 1-81(b).

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PUB (MPI) 1-85

Part and VI INV Appendix 17 Page No.: 21-25 Chapter: Attachment B PUB Approved 21. Asset Liability Management Study Issue No: Topic: Investments Sub Topic: Minimum Risk Portfolios Assumptions

Preamble to IR (If Any):

Question:

Please provide a narrative description of the results of the asset mix analysis presented on pages 21 to 23 that support Mercer's portfolio recommendation.

Rationale for Question:

To understand the results of the asset mix analysis.

RESPONSE:

As provided by Mercer:

Page 21 The Current mix applies to all business lines, the RSR, and Employee Future Benefits (EFM) fund. The asset mix is fixed in light of the Basic Claims liabilities and given the duration matching policy, all suggested asset mixes are 100% fixed income. Basic.1 illustrates the impact of no MUSH and minimizing risk. Basic.2 continues to use only provincial bonds but also includes the 20% MUSH which is based on the illiquid nature of the existing investments. Basic.3 includes corporate bonds for yield enhancement. Basic.4 includes private debt for further yield enhancement.

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Page 22 Current and alternative asset mixes are compared based on the return and risk metrics developed at the beginning of the project. Note that Current includes equities and alternatives and therefore is not directly suitable for the Basic Claims liabilities. Basic.3 has the highest 1-year Median Surplus and 5-year Median Surplus, as well as, the highest probability of 5-year positive real return.

Page 23 Current and alternative asset mixes are compared based on the projected surplus in 1 year. Note that Current includes equities and alternatives and therefore is not directly suitable for the Basic Claims liabilities. Basic.3 has the highest 1-year Median Surplus while the 1 in 40 year downside (the 2.5th percentile) is tolerable.

Manitoba Public Insurance Page 2 of 2 August 8, 2018 2019 GRA Information Requests – Round 1 PUB (MPI) 1-86

PUB (MPI) 1-86

Part and VI INV Appendix 17 Page No.: 3 Chapter: Attachment E PUB Approved 21. Asset Liability Management Study Issue No: Topic: Investments Sub Topic: Min/Max Asset Allocation Constraints

Preamble to IR (If Any):

The portfolios based upon Mercer’s standard interest rate forecast had 66% to 78% bond allocations with durations of 4.4 to 7.1 years; these portfolios had relatively low hedge ratios (43% to 69%).

The portfolios based upon the forward curve all had durations of 10.3 years and 100% hedge ratios.

Question:

a) Please explain how the forward curve interest rate forecast was determined and provide illustrative supporting calculations. b) Explain why the forward curve interest rate forecast approach was utilized for modelling purposes, rather than Mercer’s Standard Interest Rate Forecast (SIRF). c) Please advise as to the composition of the optimal portfolio for Basic utilizing Mercer’s SIRF. d) Please provide a narrative description of the comparative risk return metrics and the results of the modelling in Attachment E (Current Asset Classes Only). e) Please file the chart and related data table detailing its placement relative to the efficient frontier in similar format to that presented in Appendix 16 page 50, using Mercer’s SIRF.

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Rationale for Question:

To understand the assumptions and details underlying the determination of the minimum and maximum constraints.

RESPONSE: a) Please see the response to PUB(MPI) 1-35. b) Mercer’s standard interest rate forecast assumed a rapid reversion to the long- term mean for interest rates, similar to the chartered banks forecasts. The Corporation believed that the more modest increase in interest rates reflected in Mercer’s forecast based upon the forward curve was more realistic. Use of Mercer’s standard interest rate forecast resulted in capital losses for the fixed income holdings. As a result of using the standard interest rate forecast, Mercer recommended minimal allocations to fixed income assets and reducing the duration of the fixed income holdings, which was not consistent with the Corporation’s desire to hedge its exposure to interest rate changes. c) Please see the response to PUB(MPI) 1-81 (b). d) As provided by Mercer:

The efficient frontier is based on the Nominal Liability Benchmark for the Basic Claims liability. The frontier shown is constrained to allow currently used asset classes (provincial bonds, corporate bonds, MUSH bonds, Canadian equity, US equity, private equity, real estate and infrastructure). In addition, there was a 10% minimum allocation to MUSH bonds and 15% maximum allocation to alternatives. Portfolio B was selected to show what changes might be made to reduce the surplus volatility without reducing the expected return. Portfolio C was selected to show what changes might be made to increase the expected return without increasing the surplus volatility. Portfolios D and E were showing the impact of adding corporate bonds (higher expected return, but also higher risk). The Current portfolio appeared not very efficient (below the efficient frontier)

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because no duration constraint was imposed on the frontier and given Mercer’s SIRF (forecasting rising interest rates), the fixed income allocation on the frontier was dominated by mid-term bonds (except in the very low risk area. e) As provided by Mercer:

The following chart illustrates the efficient frontier corresponding to the chart presented in Appendix 16 page 50, but using Mercer’s standard interest rate forecast in place of the assumptions based on implied forward rates. Note that the related data table would be identical, since the composition of the plotted portfolios has not changed.

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