Process and methodology of determining and then implementing up-to-date and appropriate compensation and benefits programs at TWIA History Since 2003, TWIA has retained Compensation and Organization Solutions, inc." to: * Diennially compare TWIA Compensation and Benefits Programs with its competitive marketplace, and * revise andlor update TWIA compensation programs in accordance with the results of those comparisons " Compensation and Organization Solutions is a 20+ year Austin based Compensation Consulting Company with a subspecialty n residual market property and casualty associations, including TWA, {he Texas Property and Casualty Guaranty Association (TPCIGA) and the Texas Medical Liability Insurance Underwriting Association (TMLIUA). Market Comparison and Compensation Program updates have been conducted in 2003, 2005, 2007 and 2009 Qblective of TWIA Compensation and Benefits Programs Market Comparisons and Updates TgubPort TWik's continued abilty to attract, motivate and retain productive employees by ensuring that SEU S salaries and benefits are market competitive as well as appropriate for the organization's strategic objectives, structure, employee demographics, and culture Process and Methodology 1. Market Comparison TWIAS competitive marketplace consists of P & C companies, similar residual insurance related associations, and applicable general business organizations (Finance, IT, office staff jobs). A. Identify applicable surveys to use and obtain market data Pay Data Surveys utilized in 2009 ‘+ NAMIC (National Association of Mutual + Watson Wyatt 2009 Office Personnel Survey Insurance Companies) 2008 Salary Survey + Culpepper 2009 High Tech Technical Survey * Property Casualty Insurers Association of (for IT jobs) ‘America 2009 Survey ‘+ Robert Half 2009 Accounting and Finance * Watson Wyatt 2008 Report on Property & Salaries Survey Casualty insurance Management Compensation Survey ‘+ Bureau of Labor Statistics Benefits Data Surveys utilized in 2009 * NAMIC (National Association of Mutual Insurance Companies) 2009 Salary Survey * Texas Property and Casualty Guaranty Association 2009 Compensation and Benefits Suvey + Watson Wyatt Survey Report on Employee Benefits 8. Compare TWid‘s current pay and benefits with market data Each survey's data cuts were selected and where appropriate adjusted to align with TWIA's type of company, scale, and scope (factors included net written premiums, employee size, single state, etc ) eat Page 1Compensation Programs Process and Methodology Compare TWIA's current pay and benefits with market data (continued) Market Comparison - Pay + Base Pay + Incentive Bonuses * Total Cash Compensation (Base and Incentive Bonus) Market Comparison - Benefits + Health Care and Related Benefits * Defined Contribution Plans + Paid Time Off + Defined Benefit (Retirement) Plans > Sick Leave + Severance Programs > Vacation > Holidays C. Report on findings and conclusions from market analysis Market Comparison Findings ~ Pay + TWIA's pay programs and salaries are competitive, Market Comparison Findings — Benefits + TWIAs benefit programs are competitive + Update Compensation and Benefits Programs based on Market Comparison Results A. Base Pay Salary Ranges Adjust Salary Ranges to reflect market results and add a leadilag % increase to accommodate the growth of the market over the following year. 8. Performance Based Merit increase Program Performance based merit increases are considered annually. ‘The 2008 merit increase % for a fully satisfactory performance is 3%. C. Base Pay Review and Adjustments if appropriate Compare employees’ post merit increases positions in new salary ranges wit their individual job range experience (entry, fully, advanced) and the job range placement criteria for their respective jobs. Determine if any adjustments are appropriate and if so, schedule those to be made. pase Page 2Compensation Programs Process and Methodology D. TWIA's Variable Pay Cash incentives Programs True market competitiveness is based on “Total Cash Compensation’. Total Cash Compensation is the sum of base pay and variable pay incentive cash bonuses. Base pay is a fixed cost. Variable pay is a performance based cash payment, based on resulls. Variable pay incentive payouts vary depending on the results achieved by the organization, the department and individuals. Eight in every 10 organizations (80%) are using variable pay, WorldatWork 2010-2011 Salary Budget Survey, TWIA has historically had conservative base pay ranges and individual salaries for its employees. In order to keep competitive and to avoid the cost of turnover, itis important to structure the total cash compensation program in a way that makes fiscal sense for TWIA, Cost of turnover Turn Over Costs at ‘Average Salary | Average Cost of 1.8 to 2.5+ X Annual for Jobs in this | Turnover for ONE Base Salary Job Category _| Category Job in this Category 25+ Executive $100,000 $250,000 20 Director $80,000 $160,000 20 Manager $70,000 $140,000 “| 18 Professional $60,000 $80,000 15 ‘Support $30,000 $45,000 Keeping base pay conservative and adding a conservative performance based variable pay annual licentive plan results in @ conservative and fiscally effective total cash compensation package that attracts, motivates, engages and retains the right employees. TWIA incorporated a variable pay incentive cash bonus component into its total cash compensation Programs for the various employee groups as follows: Executive: General Manager: 2003 Executive: Vice Presidents: 2007 IT project based variable pay incentive bonus: 2006 Other employees’ incentive bonus: 2008 &. TWIA's Benefit Programs TIA benefits programs are market competitive. The only changes recommended at this time are those that may result from budget based decisions. 3. Results of Compensati jenefits Programs Market Comparisons a IWIA's 2010 Compensation and Benefit Programs are aligned with the competitive market and with TWIA's Strategic business objectives, organizational structure, employee demographics, and culture. 2e6i1 Page 3Emplovee 2009 Bonus Paid Date 2010 Bonus Paid Date Albertson, Dawn 735.00 oWi42010 815.00 o1nano11 Allen, Shauna 935.00 01/14/2010 2,305.00 oW/t42011 Alvarado, Andrea 365.00 o1/1a72011 ‘Angelo, Amber 620.00 01/14/2010 665.00 01/14/2011 Arthur, Laura 875.00 01/14/2010 Arman, Scott 4235.00 02/18/2010 Aversa, Vicki 1,880.00 02/182010 1,935.00 02/03/2011 Aversa, Vicki 1,875.00 08/192010 Barta, Amanda 3,630.00 01/14/2010 5,085.00 o1via’2011 Bauer, Jennifer 710.00 01/14/2010 730.00 01/14/2011 Bergeron, Rachel 1.16000 o1/142010 798.00 1/14/2011 Beverly, Amanda 1,155.00 01/14/2010 1,195.00 olvia011 Boles, Jarrell 645.00 o1via2010 2,000.00 oi/i4/2011 Boley, Robert 4,420.00 02/18/2010 4,440.00 02/09/2011 Boley, Robert 4910.00 08/192010 Bryant, John 910.00 oWi4/2010 940.00 o1ia/2011 Caldwell, Gayle oWia2010 86000 01/14/2011 Cantu, Alex 1,690.00 o1/i472011 Camichael, Janna 1,005.00 o1/142010 1,035.00 owiar2011 Chase, David 350.00 01/14/2010 855.00 oW/i4/2011 Cox, Jef ovia010 2,475.00 ovvia2011 Cox, Linda D1/142010 1,195.00 owig2011 Craig, Sonia 3,510.00 ovi42010 3,720.00 oi/142011 Davidson, Jessica 880.00 91/14/2010 635.00 1142011 Davis, Russell 2290.00 0/14/2010 2,370.00 ow/1472011 Dean, Courtney 3,080.00 ov/i42010 3,325.00 owiar2011 Detcheverry, Mil 130.00 08/1972010 2,530.00 92/03/2011 Deviney, John 3,970.00 08/192010 Doerr Gail 905.00 01/14/2010 935.00 ov/i42011 Dugan, Robert 2,605.00 02/18/2010 3,075.00 02/03/2011 Dugan, Robert 3.25000 08/19/2010 Eagan, Paul 2,970.00 (2182010 02/03/2011 Eagan, Paul 081192010, Ehrler, Pat 01142010 Engells. Mary 01142010 1,405.00 oW/14/2011 Engells, Michelle 335.00 01/142011 Erickson, Steve 02182010 3,030.00 02032011 Erickson. Steve 081192010 Espinoza, Erin 02182010 1,750.00 02032011 Espinoza, Erin 08192010, Falan, Linda 305.00 01/14/2011 Figueroa, Rebecca 1145.09 01/142010 790.00 0V/142011 Floyd, Rani 1210.00 0142010 835.00 01/142011 Fondren. Lisa 300.00 01/14/2011 Fowier, Susie 750.00 01142010 1,740.00 ov/14/2011 Frank. Tina 4065.00 01142010 3,185.00 91142011 Fmmka, Rebecca 800.00 01142010 875.00 oV/i4/2011 Gawick. Kristina 480.00 01/14/2011 Gonzeles. Cynthia 2480.00 02182010 2,680.00 0203/2011 Gonzeles. Cynthia 2875.00 08192010 Grim, Paul 240.00 01/14.2010 810.00 01/14/2011 ‘Querrero, Viviana 505.00 01/142010 950.00 1/14/2011 Guthrie, Sondra 1930.00 01142010 1,080.00 oW/142011 Hamlet. Steve 02182010 2.35.00 02/03/2011 Hamlett, Steve 08192010 Harrell. Jay 1265.00 01142010 2,108.00 ov/t4/2011 Harris, Mary Ann 1,045.00 017142010 1,075.00 ovi42011 Harthcock, Rebecca 385.00 01142010Emplovee 2009 Bonus Paid Date 2010 Bonus Paid Date Hetlums, Brandy 805.00 01/14/2010 83000 oW/iar2011 Hernandez, Adela 865.00 01/14/2010 $95.00 o1/i4n2011 Hernandez, Carolina 1,240.00 01/14/2010 1,280.00 owiarz011 Hemandez, Lorenzo 325.00 o1/142010 1,550.00 owiar2o11 Herrera, Gerismisa 2,120.00 oWa2010 1,475.00 01/4/2011 Herrera, Nicole 35000 o1/142011 Hinkle, Donna 8,873.12 12/2572009 12,615.00 1223/2010 Hohmann, Kay 4,935.00 01/14/2010 «3,870.00 -—oivian2011 Houston, Danica 800.00 o1iai2010 Hudman, Megan 500.00 oWian011 Hunt, Trisha 137000 11472010 1,610.00 o1/nar2011 Jahren, Kristin 755.00 1/14/2010 Johnson, Cindy 820.00 01/14/2010 1,085.00 owtarzo11 Johnson, Roosevelt 4,170.00 01/14/2011 Jones. Opal 2,260.00 01/14/2010 1,615.00 01/14/2011 Jones, Tammy 91000 oWidro10 940.00 o1/1472011 Jordan, Latoy'a 545.00 1/14/2011 Knarr, William 2,745.00 o1/142010 Koehl, Wes 1,055.00 01/14/2010 1,450.00 o1iar011 Kramer. Robert 137000 oi/1472010 1.41000 oiiar2011 Lago, Renee 1,370.00 01/14/2010 1.42000 owian01i LeBlanc, Neil 995.00 oWian2011 Ledwik, Mike 3,255.00 01/14/2010 3,405.00 owtai2011 Lehman, Brad 1,300.00 01/14/2010 2,010.00 owiar2011 Madzinski, Deborah 885.00 1/4010 960.00 oWiazoi1 Marlatt, Carrie 480.00 01/1472011 McClanahan, Darrell 2,950.00 01/14/2010 4,100.00 o1viaz011 ‘McFarlin, Kevin 2525.00 1/14/2010 2,610.00 owvia2011, McFarlin. Shannon 1,500.09 o1/1472011, McGinnis. Shauna 83000 01/14/2010 1,925.00 o1/t42011 McHiale. Laura 1,470.00 91/14/72010 1,520.00 oWvarz011 Meek, Danny 92000 01/1472010 1,430.00 0W/14.2011 Melvin, Shelton 790.00 1/14/2010 835.00” 01/14/2011 Mena, Eduardo 2145.00 02/18/2010 2,890.00 02032011 ‘Mena. Eduardo 1,790.00 08/19/2010 Mickan, Janice 1,065.00 01/14/2010 1,640.00 1/14/2011 Mogek. Elsie 2,530.00 cW/14/2010—— 3,700.00 01/142011 ‘Montoya-Garza, Maria 137000 ci/14/2010 1,625.00 01/142011 Morales. Jerry 71500 1/14/2010 Morales, Roberta 735.00 i/ia/2010 2,980.00 04/14/2011 Morawiec. Wand 773.00 01/14/2010 795.00 01/14/2011 Murphy. Jim 6,958.00 12/23/2009 10,565.00 12232010 Myers. Kevin 980.00 01/14/2010 1,200.00 01/142011 Neddeau, Nate 2,220.00 O1/142010——*1.550.00 01142011 Nichols, Davi 1,390.00 02/18/2010 1.775.009 02032011 ‘Nichols. David 1,490.00 081192010 Oliver. Jim 98,456.00 1223/2009 88,161.00 12/23/2010 Patel, Shoby 1,360.00 01/142010 935.00 01/14/2011 Pawiuk. Paul 2.70.00 02/18/2010 -2.075.00 02/03/2011, Pavuk, Paul 2795.00 08192010 Pits. Laura 1,435.00 02182010 4,395.00 02032011 Pitts, Laura 3,285.00 08192010 Prescott, Jeanne 137500 01/14/2011 Presiey. Jim 2420.00 08/192010 2,815.00 02032011 Ramirez. Lupe 3,280.00 01/142010 2570.00 01/142011 Ramirez, Raymond 375.00 01/14/2010 885.00 01/14/2011 Ray. Michael 2,733.00 01142010 «3,015.00 ov142011 Rech, Jeff 1,345.00 01/142010 1,470.00 ovi4/2011Emplovee 2009 Bonus Paid Date 2010 Bonus Paid Date Renshaw, Alan 2,195.00 01/14/2010 2,270.00 orniar20n1 Renshaw, Susan 25,965.86 12/23/2009 18,813.00 1223/2010 Resehke, Christine 3380.00 017142010 2,620.00 oiianoui Resnick, Greg 2,170.00 oW/42010 1,570.00 owia2011 Richardson, Jo 2215.00 02/18/2010 1,800.00 02/03/2011 Richardson, John 242000 8/19/2010 Rickman, Justin 39000 o1/i4/2010 75.00 oWiar2011 Rocha, Joey 1,080.00 2/18/2010 Rodriguez, Milo 47000 1/4010 Romero, Norma 415.00 017142010 860.00 01/4/2011 Rose, Kendra 1,065.00 01/14/2010 735.00 oW/t4r2011 Ryan, Sarah 1,260.00 oW/1472010 Schiller, Susan 1425.00 o1/142010 985.00 01/14/2011 Scrimpsher, Jason 1955.00 1/4/2010 2,045.00 oiia2011 Scrivens, Linda 3,440.00 01142010 4,800.00 owviar2011 Sedlock, Greg 26.842.00 1223/2009 21,758.00 12/23/2010, Sepeda, Michele 635.00 01/14/2010 1,045.00 1/4/2011 ‘Sher, Stacy 2490.00 o1/id2010 2.69000 owiar2o11 Sigwald, Peggy 790.00 oi/142010 1,940.00 owiar2011 Sileox, Elaine 690.00 oW/i4r2010 710.00 01/14/2011 ‘Sommers, Misty 340.00 01/14/2010 875.00 oWia2011 Spencer, Linda 845.00 01/14/2010 Stefano, Savannah 470.00 o1/1472010 Stout, Russell 2,840.00 01/142010 2,940.00 ov/ta2011 Stuewe. Wendy 1,250.00 01/142010 1,340.00 ov/igi2011 Talbert. Lee 3203.94 1272372009 4.43000 12/23/2010 Taylor, Jeannette 1,440.00 01/1872010 1,490.00 91/14/2011 Todd, Tracy 775.00 oWl4r2010 91000 oW/i42011 ‘Twichell, Jon 1,770.00 02/1872010 Vanderwall. Laura 1.22500 02/18/2010 2,000.00 02/03/2011 Vanderwall, Laura 270.00 08/192010 Warren, Reggie 10,672.89 03/18/2010 22,135.00 1223/2010 Weaver, Debra 850.00 01/14/2010 875.00 01/14/2011 Webb. Roger 2,430.00 02/1872010 Webb. Roger 2,890.00 08/19/2010 Weber, Davie 10,334.00 1223/2010 White. Danna 1,730.00 02/18/2010 1,890.00 021032011 White, Danna 41,830.00 08/19/2010 Williams, Kim 990.00 O1/i42010 1,525.00 1142011 Williams, Mike 02/18/2010 1,165.00 02/03/2011 Williams, Mike 08/192010 Wipf. Randy 1223/2009 24,602.00 122322010 Witherspoon, Jana 011472010 ‘Wyatt, Kim o1ig2010 1,165.00 04/14/2011 ‘Yows, Greg 02/18/2010 790.00 02/03/2011 Yows. Greg 2,700.00 08/19/2010 Zearfoss. Terr 860.00 01/14/2010 915.00 01/14/2011