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all of the member cities, add up all of those remainders, and then calculate your city's remainder as a percentage of that total. Your city receives that percentage of the $9 million total that's available this year. This is the same formula we've used for many years. What's behind this year's dividend? Several factors were involved in producing the funds that are available to be returned this year: • As has been the case for the past several underwriting years, municipal liability and auto liability losses have been less than the projected losses which the premium rates for those years were designed to fund. We did, however, have an unusual string of large property losses this year. • There's a "safety margin":built into the LMCIT premium rates,.to cover the risk that losses might turn out to be greater than projected. When losses are less than projected, that margin isn't needed and can be returned as a dividend. • Earned premiums have been more than what we'd projected due to several factors: new members joining the program, existing. members deciding to add optional. coverages, and continued growth in cities' exposures. • LMCIT's fixed-income investments have gained in value somewhat as market rates have declined, so we've realized some capital gains on investments. • One word of caution -while the liability picture overall is good, an ongoing area of concern is the cost of litigation relating to land use regulation and development. Those litigation costs make up a significant part of the total municipal liability cost, and they've been quite volatile from year to year. Should we expect similar dividends in the future? For several years, we've been moving in the direction of strengthening LMCIT's financial reserves and fund balances, and at the same time reducing somewhat the size of the "safety margin" that's built into the.rates. If losses turn out to be at or below what we projected when we set the rates, that "safety margin" is where the surplus funds for dividends come from. Another factor to be aware of is reinsurance. While it maybe loosening a bit, the reinsurance market is currently more difficult than it's been for many years. One result of the current reinsurance market is that our costs have increased significantly, especially for property risks. It might in the future make economic sense for LMCIT to retain more risk rather than to reinsure it. To do so, we'll need to have a strong fund balance to support that retained risk. Again this year, the LMCIT Board further strengthened LMCIT's financial reserves so that we'd be able to handle increased risk if necessary, but it's possible we'd need to strengthen them even further in the future. That could mean retaining some funds that could otherwise be available to be returned as dividends.