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� the formula. This approach recognizes cities that have been long-time members and that have been � most successful in avoiding and controlling losses. , As shown in the chart below, there's been some considerable variation in the dividend amounts . , LMCIT has been able to return to members in recent years. This is largely due to the increased amount of risk LMCIT has retained in order to reduce reinsurance costs. A reduction in reinsurance costs makes it possible for LMCIT to lower premium charges. However, because LMCIT retains more risk, it also means LMCIT's loss costs vary more from year to yea.r. That in turn translates into more variability in the amount of dividends LMCIT is able to return. LMCIT Property/Casualty Dividends: $194 Million Since 1987 S14,000,000 S12,000,000 Slo,000,000 $a,000,000 S6,000,000 $a,000,000 $z,000,000 50 '87 :88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 'D3 '04 '05 '06 '07 '0$ '09 '10 It's also im ortant to note there's never a arantee divid n w'll e r e • p gu a e d i b eturn d from one year to the next. A dividend return depends on members' loss experience. A good example is the series of large property losses that occurred over the last few months due to severe weather events. It can take several years until claims are settled and LMCIT knows what actual Ioss costs wi11 be for any particular claim. There may still be quite a bit of claim development on the recent property losses and it's possible they'll reach into LMCIT's safety margin during the 2011 coverage year. It's possible that at this time next year actual incurred losses will be at a higher level than projected. This means that if LMCIT uses its margin to pay for these property losses, there's less money to be returned as a dividend. And of course, there's no way to tell what kind of losses may occur from now until this same time next year. Background on P/C Rates Property and liability losses are the biggest pieces of LMCIT's expense picture, and play a large ' role in determining total premium costs paid by member cities. The 3 percent increase in liability I rates for the coming year reflects the increases seen in liability loss costs. Last year liability losses ! accounted -for 56 percent of P/C loss costs. Three categories within liability account for the largest j shares of loss costs - Iand use, police, and employment. Liability rate increases are largely driven by the following factors: ' • Land use litigation is the biggest single element of liability loss costs (24 percent). During ' 2006-2008 costs averaged $3.4 million annually. Land use litigation costs during 2009 were just over $2 million; but unfortunately 2010 has had several expensive land use claims. . 2 � I .