CYPRESS U CRITICAL UPDATE #1

Benefit Captives

Andrew Clayton, Pareto Captive Services

Pareto Captive Services

Cypress U - aka the "U"

April 5th, 2016

Confidential

About Pareto• ~ 300 captive members

• Approximately $350m in FI equivalent

• Approximately $95m in stop loss premium

• Approximately 32,000 enrolled employees

• Approximately 70,000 enrolled lives

• 98% member retention

Additional Stats that Prove We're Cool...(at least we think we're cool)

• Added 100 new members last year– Expect to significantly exceed that this year

• 80%+ of members were fully insured transitions

• And for the consultants in the room... – 50% of members were new business to our

consultant partners

CONFIDENTIAL

Pareto Captive Member Locations

A Spec on a Flea on the A$@...

• Employer stop loss marketplace is approximately $12b to $13b

• Fully insured marketplace for the mid market (50 to 500 ee's) is approximately $600b to $700b...

Captive Value Proposition

CONFIDENTIAL

Group Captive Value Proposition

1) Group captive is the shock absorber thatreduces the year-to-year volatility and risk ofbeing self-insured.

2) Allows employer to focus on reducing costof healthcare.

More Insurance

• No lasers– Ad infinitum– Covers claims/claimants after entering program

• Banded renewal rates– Largest stop loss increase was 25%

“Multi year stop loss policy with lower increases and much better protection and stability”

We've solved the insurance distraction, now lets focus on the

actual costs...

CONFIDENTIAL

Pareto 2.0 Differentiators

• Pareto Rx Consortium– Members are averaging 10% to 20% savings

– Members can choose their formularies and plan designs

• MCCI– Member Cost Containment Index

• Springbuk– Data analytics and predictive modeling

CONFIDENTIAL

CONFIDENTIAL

2015 Summary ResultsCaptive:

Contrarian Entry Date: 1/1/2014

Employer Snapshot: Midwest Laboratories

12

MCCI

Construct

Experience

75

Stop Loss PremiumTotal Employees

72%

Undeveloped Captive Loss Ratio

Gross Experience Score

Modified Experience Score

0.84 0.92

$127,305

| |

Cypress

Administrator Specific Deductible

$25,000

General Section Score:

Overall MCCI Score Relative MCCI

0.85572.26

Hospital Section Score:

Primary Care Section Score:

Prescription Section Score:

Employer Section Score:

1.25

20.14

30

10.48

10.4

Results and Efforts Impact Renewals

CONFIDENTIAL

SOLUTION: FUTURE SPEND/PREDICTION

Final Thoughts

CONFIDENTIAL

The Captive Simplified - Philly Style

• Fully insured bad

• Self-insurance good, but bumpy

• Captive is a shock absorber

• Get control

• Lower costs