Administaff Notes New Workers’ Comp Program

August 26, 2003

Administaff, Inc., a Professional Employer Organization, has selected member insurance companies of American International Group, Inc. (“AIG”) to provide statutory workers’ compensation coverage for all of its corporate and worksite employees throughout the United States.

The one-year program is effective Sept. 1, and includes a $1 million per- occurrence deductible. The program will be funded through monthly premium payments and additional collateral of approximately $13 million. Total costs of the program are projected to increase approximately 20 percent from current levels, which is consistent with the company’s previous guidance.

“Managing the safety of employees is a top priority at Administaff, and we are very pleased to work with an A++ rated carrier to establish the most cost- effective and secure structure for our workers’ compensation insurance program,” said Richard Rawson, Administaff president. “This new structure provides an important level of control that will enable the company and our clients to directly benefit from our efforts to produce favorable safety and claims experience.”

The new workers’ comp program is a customized, loss-sensitive plan. First, the structure of the program protects premiums paid into the plan by establishing a restricted claims reserve fund to be used solely for the reimbursement of claims paid by the carrier, up to the deductible limits of the program. Second, if safety and loss-control efforts result in lower than expected claims, the company and its clients would directly benefit without relying on future dividend payments or carrier concessions. Third, this structure enables the company to successfully manage risk, control costs and maximize its return on the capital invested to collateralize the program.

As a result of a comprehensive feasibility study conducted by AON the structure of the new program includes the formation of Administaff Captive Insurance Companies, Ltd. (“ACIC”), a wholly- owned Bermuda-based licensed subsidiary of Administaff. PricewaterhouseCoopers, the company’s tax advisors, provided consulting services related to the formation of ACIC, which will be managed by International Advisory Services, Ltd. Actuarial services will be provided by Tillinghast-Towers Perrin. The financial results of ACIC will be audited by the company’s independent auditor, Ernst & Young LLP, and reported in the consolidated results of Administaff.

Administaff operates 38 sales offices in 21 major markets. For additional information, visit Administaff’s Web site at

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