GVHR » Topics » We rely on one financial institution to handle direct deposit payroll. Should this financial institution delay or stop processing these transactions, our business could suffer.

These excerpts taken from the GVHR 10-K filed Mar 16, 2009.

We rely on one financial institution to handle direct deposit payroll. Should this financial institution delay or stop processing these transactions, our business could suffer.

 

We currently have a banking relationship with one financial institution to electronically transfer all of our payroll that is delivered to client employees by direct bank deposit through the automated clearing house, or ACH, system with this bank.  If this bank were to terminate its services, delay the processing of transfers or cease operating and we were not able to obtain these services in a timely manner or on acceptable terms from other banks, our business could materially suffer.

 

Our short-term results may be negatively impacted due to changes in health insurance claims, state unemployment tax rates and workers’ compensation rates, which we may not be able to immediately pass through to our clients.

 

Health insurance costs, workers’ compensation and employment practices liability insurance rates and state unemployment taxes are primarily determined by our claims experience and comprise a significant portion of our actual costs. Should we experience a significant increase in claims activity, due to the current economic downturn or otherwise, we may experience a substantial increase in our health insurance premiums, unemployment taxes, or workers’ compensation and employment practices liability insurance rates. Our ability to pass such increases through to our clients on a timely basis may be delayed and our clients may not agree to the increases, which could have a material adverse effect on our financial condition, results of operations and cash flows.

 

Our insurance-related loss reserves may be inadequate to cover our ultimate liability for losses and as a result our financial results could be materially and adversely affected.

 

We maintain loss reserves to cover our liabilities for the costs of our health care and workers’ compensation programs. These reserves are not an exact calculation of our liability, but rather are estimates based on a number of factors including but not limited to actuarial calculations, current and historical loss trends and payment patterns, the number of open claims, developments relating to the actual claims incurred, medical trend rates and the impact of acquisitions, if any. Variables in the reserve estimation may be affected by both internal and external factors, such as changes in claims handling procedures, fluctuations in the administrative costs associated with the program, economic conditions, fiscal policies, interest rates, legal determinations and legislative and regulatory changes. Although our reserves estimates are regularly refined as historical loss experience develops and additional claims are reported and settled, because of the uncertainties of estimating loss reserves, we cannot assure you that our reserves are adequate, and actual costs

 

15



Table of Contents

 

and expenses may exceed our reserves. If our reserves are insufficient to cover actual losses we may incur potentially material charges to our earnings.

 

Our results of operations may be adversely affected if insurance coverage for workers’ compensation or medical benefits is not available or if we lose relationships with our key providers or if our key providers are unable to pay our claims.

 

As part of our full range of services, we offer medical benefits coverage and workers’ compensation insurance to our clients. We depend on a small number of key providers for the majority of our medical benefits and workers compensation coverage, including AIG CI, BCBSF/HOI, UnitedHealthcare and Aetna. If any of our insurance providers discontinue coverage or cease operations, the time and expense of providing replacement coverage could be disruptive to our business and could adversely affect our operating results, financial condition and cash flows. Replacement coverage could lead to client dissatisfaction and attrition (especially since most clients may terminate with either 30 or 45 days notice) due to the lack of continuity between coverage providers and the difference in the terms and conditions of their respective coverage plans. In addition, if at any time we are unable to renew our existing policies on financial terms and premium rates acceptable to us, our ability to provide such insurance and benefits to our clients would be adversely impacted, which could lead to significant client attrition, and our results of operations could be adversely affected. Our inability to renew existing policies may jeopardize compliance with state regulatory requirements and subject us to fines and extra costs to satisfy the state requirements or, at worst, eliminate our ability to provide services in those states. The loss of our ability to provide services, even for a short period, would negatively impact our image with our clients and could lead to the termination of our service agreements and our results of operations may be adversely affected. Additionally, disruptions in the financial markets, exposure to sub-prime mortgage securities and adverse action by rating agencies could adversely affect the financial stability of certain insurance companies.  As a result the ability of the insurance companies to pay claims could be significantly impaired.

 

We are required to provide significant cash collateral or letters of credit for our obligations to our insurance providers and the amount of cash or letter of credit necessary to provide that collateral may increase in the future.

 

Our workers’ compensation provider and one of our primary health care insurance providers require cash collateralization of our insurance plans either by way of a cash deposit or delivery of a letter of credit.  In the future our other health care insurance providers may require cash collateral or letters of credit as a condition of renewing their respective programs. The extent of such requirements is dependent upon several factors such as our financial condition, as well as the workers’ compensation and health insurance claims experience of our clients.  We have little control over our clients’ claims experience except in the decision to initially accept and retain such clients. These collateral requirements may affect our need for capital, as well as our profitability. We may not be able to raise or provide the additional capital or collateral, if needed. In addition, we may be required to post additional collateral for the benefit of our insurance providers as a result of growing our business, which amounts could be significant, and may cause a significant amount of our cash to be restricted from other uses.  We may not be able to raise, access or provide the additional capital or letters of credit as collateral, if needed which could materially adversely impact our results of operation, financial condition and cash flows.

 

Our workers’ compensation coverage is provided by AIG CI.  Our workers’ compensation receivable from AIG CI represents a significant concentration of credit risk.  If AIG CI were unable to pay our claims or return our excess loss fund collateral that comprises our workers’ compensation receivable, our results of operation, financial condition and cash flows would be materially and adversely affected.

 

As of December 31, 2008, we have a net workers’ compensation receivable from AIG CI of $115.3 million for premium payments and the related accrued interest receivable on those payments made to AIG CI for program years 2000-2008 in excess of the present value of the estimated claims liability.  If AIG CI were to cease operations or otherwise default on their obligations, we may not be able to recover our receivable and the payment of our claims could be significantly impaired. This would have a material and adverse effect on our results of operations, financial condition and cash flows.

 

Disruptions in the financial markets, the current economic downturn, exposure to sub-prime mortgage securities and adverse action by rating agencies could adversely affect the financial stability of certain insurance companies.  As a result, the ability of the insurance companies to pay claims could be significantly impaired. AIG has been negatively impacted by the current economic crisis.  However, AIG has publicly stated that its regulated member insurance company subsidiaries remain well capitalized and financially secure and current insurance agency ratings are strong.  We do not believe that the current financial condition of AIG will have a material adverse effect on the ability of its regulated insurance company subsidiaries to pay out claims or return excess collateral.

 

16



We rely on one financial institution to handle direct
deposit payroll. Should this financial institution delay or stop processing
these transactions, our business could suffer.



 



We currently have a
banking relationship with one financial institution to electronically transfer
all of our payroll that is delivered to client employees by direct bank deposit
through the automated clearing house, or ACH, system with this bank.  If this bank were to terminate its services,
delay the processing of transfers or cease operating and we were not able to
obtain these services in a timely manner or on acceptable terms from other
banks, our business could materially suffer.



 



Our short-term results may be negatively
impacted due to changes in health insurance
claims, state unemployment tax rates
and workers’ compensation rates, which we may
not be able to immediately pass
through to our clients.



 



Health
insurance costs, workers’ compensation and employment practices liability
insurance rates and state unemployment taxes are primarily determined by our
claims experience and comprise a significant portion of our actual costs.
Should we experience a significant increase in claims activity, due to the
current economic downturn or otherwise, we may experience a substantial increase
in our health insurance premiums, unemployment taxes, or workers’ compensation
and employment practices liability insurance rates. Our ability to pass such
increases through to our clients on a timely basis may be delayed and our
clients may not agree to the increases, which could have a material adverse
effect on our financial condition, results of operations and cash flows.



 



Our insurance-related loss reserves may be
inadequate to cover our ultimate liability
for losses and as a result our
financial results could be materially and adversely
affected.



 



We
maintain loss reserves to cover our liabilities for the costs of our health
care and workers’ compensation programs. These reserves are not an exact
calculation of our liability, but rather are estimates based on a number of
factors including but not limited to actuarial calculations, current and
historical loss trends and payment patterns, the number of open claims,
developments relating to the actual claims incurred, medical trend rates and
the impact of acquisitions, if any. Variables in the reserve estimation may be
affected by both internal and external factors, such as changes in claims
handling procedures, fluctuations in the administrative costs associated with
the program, economic conditions, fiscal policies, interest rates, legal
determinations and legislative and regulatory changes. Although our reserves
estimates are regularly refined as historical loss experience develops and
additional claims are reported and settled, because of the uncertainties of
estimating loss reserves, we cannot assure you that our reserves are adequate,
and actual costs



 



15
















Table
of Contents



 



and expenses may exceed our reserves. If our reserves
are insufficient to cover actual losses we may incur potentially material
charges to our earnings.



 



Our results of operations may be adversely
affected if insurance coverage for
workers’ compensation or medical
benefits is not available or if we lose
relationships with our key providers
or if our key providers are unable to pay our claims.



 



As
part of our full range of services, we offer medical benefits coverage and
workers’ compensation insurance to our clients. We depend on a small number of
key providers for the majority of our medical benefits and workers compensation
coverage, including AIG CI, BCBSF/HOI, UnitedHealthcare and Aetna. If any of
our insurance providers discontinue coverage or cease operations, the time and
expense of providing replacement coverage could be disruptive to our business
and could adversely affect our operating results, financial condition and cash
flows. Replacement coverage could lead to client dissatisfaction and attrition
(especially since most clients may terminate with either 30 or 45 days
notice) due to the lack of continuity between coverage providers and the
difference in the terms and conditions of their respective coverage plans. In
addition, if at any time we are unable to renew our existing policies on
financial terms and premium rates acceptable to us, our ability to provide such
insurance and benefits to our clients would be adversely impacted, which could
lead to significant client attrition, and our results of operations could be
adversely affected. Our inability to renew existing policies may jeopardize
compliance with state regulatory requirements and subject us to fines and extra
costs to satisfy the state requirements or, at worst, eliminate our ability to
provide services in those states. The loss of our ability to provide services,
even for a short period, would negatively impact our image with our clients and
could lead to the termination of our service agreements and our results of
operations may be adversely affected. Additionally, disruptions in the
financial markets, exposure to sub-prime mortgage securities and adverse action
by rating agencies could adversely affect the financial stability of certain
insurance companies.  As a result the
ability of the insurance companies to pay claims could be significantly
impaired.



 



We are required to provide significant cash
collateral or letters of credit for our obligations to our

insurance providers and
the amount of cash or letter of credit necessary to provide that collateral may

increase in the future.



 



Our
workers’ compensation provider and one of our primary health care insurance
providers require cash collateralization of our insurance plans either by way
of a cash deposit or delivery of a letter of credit.  In the future our other health care insurance
providers may require cash collateral or letters of credit as a condition of
renewing their respective programs. The extent of such requirements is
dependent upon several factors such as our financial condition, as well as the
workers’ compensation and health insurance claims experience of our
clients.  We have little control over our
clients’ claims experience except in the decision to initially accept and
retain such clients. These collateral requirements may affect our need for
capital, as well as our profitability. We may not be able to raise or provide
the additional capital or collateral, if needed. In addition, we may be
required to post additional collateral for the benefit of our insurance
providers as a result of growing our business, which amounts could be
significant, and may cause a significant amount of our cash to be restricted
from other uses.  We may not be able to
raise, access or provide the additional capital or letters of credit as
collateral, if needed which could materially adversely impact our results of
operation, financial condition and cash flows.



 



Our workers’ compensation
coverage is provided by AIG CI.  Our
workers’ compensation receivable from AIG CI represents a significant concentration
of credit risk.  If AIG CI were unable to
pay our claims or return our excess loss fund collateral that comprises our
workers’ compensation receivable, our results of operation, financial condition
and cash flows would be materially and adversely affected.



 



As of December 31, 2008, we have a net workers’ compensation
receivable from AIG CI of $115.3 million for premium payments and the related
accrued interest receivable on those payments made to AIG CI for program years
2000-2008 in excess of the present value of the estimated claims
liability.  If AIG CI were to cease
operations or otherwise default on their obligations, we may not be able to
recover our receivable and the payment of our claims could be significantly
impaired. This would have a material and adverse effect on our results of
operations, financial condition and cash flows.



 



Disruptions in the financial markets, the current economic downturn,
exposure to sub-prime mortgage securities and adverse action by rating agencies
could adversely affect the financial stability of certain insurance
companies.  As a result, the ability of
the insurance companies to pay claims could be significantly impaired. AIG has
been negatively impacted by the current economic crisis.  However, AIG has publicly stated that its
regulated member insurance company subsidiaries remain well capitalized and
financially secure and current insurance agency ratings are strong.  We do not believe that the current financial
condition of AIG will have a material adverse effect on the ability of its
regulated insurance company subsidiaries to pay out claims or return excess
collateral.



 



16














We rely on one financial institution to handle direct
deposit payroll. Should this financial institution delay or stop processing
these transactions, our business could suffer.



 



We currently have a
banking relationship with one financial institution to electronically transfer
all of our payroll that is delivered to client employees by direct bank deposit
through the automated clearing house, or ACH, system with this bank.  If this bank were to terminate its services,
delay the processing of transfers or cease operating and we were not able to
obtain these services in a timely manner or on acceptable terms from other
banks, our business could materially suffer.



 



Our short-term results may be negatively
impacted due to changes in health insurance
claims, state unemployment tax rates
and workers’ compensation rates, which we may
not be able to immediately pass
through to our clients.



 



Health
insurance costs, workers’ compensation and employment practices liability
insurance rates and state unemployment taxes are primarily determined by our
claims experience and comprise a significant portion of our actual costs.
Should we experience a significant increase in claims activity, due to the
current economic downturn or otherwise, we may experience a substantial increase
in our health insurance premiums, unemployment taxes, or workers’ compensation
and employment practices liability insurance rates. Our ability to pass such
increases through to our clients on a timely basis may be delayed and our
clients may not agree to the increases, which could have a material adverse
effect on our financial condition, results of operations and cash flows.



 



Our insurance-related loss reserves may be
inadequate to cover our ultimate liability
for losses and as a result our
financial results could be materially and adversely
affected.



 



We
maintain loss reserves to cover our liabilities for the costs of our health
care and workers’ compensation programs. These reserves are not an exact
calculation of our liability, but rather are estimates based on a number of
factors including but not limited to actuarial calculations, current and
historical loss trends and payment patterns, the number of open claims,
developments relating to the actual claims incurred, medical trend rates and
the impact of acquisitions, if any. Variables in the reserve estimation may be
affected by both internal and external factors, such as changes in claims
handling procedures, fluctuations in the administrative costs associated with
the program, economic conditions, fiscal policies, interest rates, legal
determinations and legislative and regulatory changes. Although our reserves
estimates are regularly refined as historical loss experience develops and
additional claims are reported and settled, because of the uncertainties of
estimating loss reserves, we cannot assure you that our reserves are adequate,
and actual costs



 



15
















Table
of Contents



 



and expenses may exceed our reserves. If our reserves
are insufficient to cover actual losses we may incur potentially material
charges to our earnings.



 



Our results of operations may be adversely
affected if insurance coverage for
workers’ compensation or medical
benefits is not available or if we lose
relationships with our key providers
or if our key providers are unable to pay our claims.



 



As
part of our full range of services, we offer medical benefits coverage and
workers’ compensation insurance to our clients. We depend on a small number of
key providers for the majority of our medical benefits and workers compensation
coverage, including AIG CI, BCBSF/HOI, UnitedHealthcare and Aetna. If any of
our insurance providers discontinue coverage or cease operations, the time and
expense of providing replacement coverage could be disruptive to our business
and could adversely affect our operating results, financial condition and cash
flows. Replacement coverage could lead to client dissatisfaction and attrition
(especially since most clients may terminate with either 30 or 45 days
notice) due to the lack of continuity between coverage providers and the
difference in the terms and conditions of their respective coverage plans. In
addition, if at any time we are unable to renew our existing policies on
financial terms and premium rates acceptable to us, our ability to provide such
insurance and benefits to our clients would be adversely impacted, which could
lead to significant client attrition, and our results of operations could be
adversely affected. Our inability to renew existing policies may jeopardize
compliance with state regulatory requirements and subject us to fines and extra
costs to satisfy the state requirements or, at worst, eliminate our ability to
provide services in those states. The loss of our ability to provide services,
even for a short period, would negatively impact our image with our clients and
could lead to the termination of our service agreements and our results of
operations may be adversely affected. Additionally, disruptions in the
financial markets, exposure to sub-prime mortgage securities and adverse action
by rating agencies could adversely affect the financial stability of certain
insurance companies.  As a result the
ability of the insurance companies to pay claims could be significantly
impaired.



 



We are required to provide significant cash
collateral or letters of credit for our obligations to our

insurance providers and
the amount of cash or letter of credit necessary to provide that collateral may

increase in the future.



 



Our
workers’ compensation provider and one of our primary health care insurance
providers require cash collateralization of our insurance plans either by way
of a cash deposit or delivery of a letter of credit.  In the future our other health care insurance
providers may require cash collateral or letters of credit as a condition of
renewing their respective programs. The extent of such requirements is
dependent upon several factors such as our financial condition, as well as the
workers’ compensation and health insurance claims experience of our
clients.  We have little control over our
clients’ claims experience except in the decision to initially accept and
retain such clients. These collateral requirements may affect our need for
capital, as well as our profitability. We may not be able to raise or provide
the additional capital or collateral, if needed. In addition, we may be
required to post additional collateral for the benefit of our insurance
providers as a result of growing our business, which amounts could be
significant, and may cause a significant amount of our cash to be restricted
from other uses.  We may not be able to
raise, access or provide the additional capital or letters of credit as
collateral, if needed which could materially adversely impact our results of
operation, financial condition and cash flows.



 



Our workers’ compensation
coverage is provided by AIG CI.  Our
workers’ compensation receivable from AIG CI represents a significant concentration
of credit risk.  If AIG CI were unable to
pay our claims or return our excess loss fund collateral that comprises our
workers’ compensation receivable, our results of operation, financial condition
and cash flows would be materially and adversely affected.



 



As of December 31, 2008, we have a net workers’ compensation
receivable from AIG CI of $115.3 million for premium payments and the related
accrued interest receivable on those payments made to AIG CI for program years
2000-2008 in excess of the present value of the estimated claims
liability.  If AIG CI were to cease
operations or otherwise default on their obligations, we may not be able to
recover our receivable and the payment of our claims could be significantly
impaired. This would have a material and adverse effect on our results of
operations, financial condition and cash flows.



 



Disruptions in the financial markets, the current economic downturn,
exposure to sub-prime mortgage securities and adverse action by rating agencies
could adversely affect the financial stability of certain insurance
companies.  As a result, the ability of
the insurance companies to pay claims could be significantly impaired. AIG has
been negatively impacted by the current economic crisis.  However, AIG has publicly stated that its
regulated member insurance company subsidiaries remain well capitalized and
financially secure and current insurance agency ratings are strong.  We do not believe that the current financial
condition of AIG will have a material adverse effect on the ability of its
regulated insurance company subsidiaries to pay out claims or return excess
collateral.



 



16














These excerpts taken from the GVHR 10-K filed Mar 17, 2008.

We rely on one financial institution to handle direct deposit payroll. Should this financial institution delay or stop processing these transactions, our business could suffer.

        We currently have a banking relationship with one financial institution to electronically transfer all of our payroll that is delivered to client employees by direct bank deposit through the automated clearing house, or ACH, system with this bank. If this bank were to terminate its services or to delay the processing of transfers and we were not able to obtain these services in a timely manner or on acceptable terms from other banks, our business could materially suffer.

We rely on one financial institution to handle direct deposit payroll. Should this financial institution delay or stop processing these transactions, our business could suffer.





        We currently have a banking relationship with one financial institution to electronically transfer all of our payroll that is delivered to client employees by
direct bank deposit through the automated clearing house, or ACH, system with this bank. If this bank were to terminate its services or to delay the processing of transfers and we were not able to
obtain these services in a timely manner or on acceptable terms from other banks, our business could materially suffer.





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