# Dividends

## Rewarding Members

For the past 29 consecutive years, the Kentucky AGCSIF has rewarded over $200 million in dividends to its qualifying members.

## What is a dividend?

By definition, a dividend is a share of surplus allocated to a policyholder in a participating insurance policy. Simply put, if the Fund takes in an excess amount of premium over liabilities for a given policy year, the excess premium may be distributed in the form of a dividend to those members who qualify. The Fund waits four (4) years to return a dividend for a given policy year. In doing so, the Fund can more accurately determine the level of liabilities in a given policy year. Once the liabilities have been accurately determined, the Board of Trustees reviews the feasibility of a dividend distribution.

## Am I eligible?

In order to be “ELIGIBLE” for a dividend return, a member must meet the following criteria:

- must have been a Fund Member in the year for which the dividend is being paid and;
- must be a current member at the time in which the dividend payment is made and;
- must have had a loss ratio of less than 100% for the year for which the dividend is being paid and;
- must be current in all of their payment obligations to the Fund and to their Trade Association

## When are dividends returned?

Historically, dividends have been paid in the month of March.

## The Fund Approved Dividend Formula

Kentucky AGCSIF “DIVIDEND PLAN (FORMULA)”

- Determine the total amount of dividend to be paid.
- Determine employers that are eligible for a dividend:
- Must be current members (must be current in all of their obligations to the Fund and to the association to which they belong).
- Their premium exceeds their losses (paid and reserved) for the dividend year.

- Determine the sum of all eligible employers’ excesses (sum of each employer’s premiums minus their losses).
- Determine the DRF (Dividend Return Factor) by dividing #1 result by #3 result.
- Determine each member’s dividend by multiplying its excess by the DRF.
- Determine each member’s Funding Commission tax refund by multiplying the dividend by the appropriate Funding Commission tax rate (ex: 9%).
- Determine the total amount to be returned to each member by adding #5 and #6.
**Example**:

Total Dividend to be paid = $8,500,000

Sum of all eligible employers’ excesses (premiums minus losses) = $15,000,000

DRF = 0.5667 (8,500,000/15,000,000)

Member’s excess = $5,000

Member’s dividend = $2,833.50 (0.5667 * $5,000)

Tax refund = $255.02 (assume 9% Funding Commission rate for dividend year)

Member’s total dividend refund = $3,088.52 ($2,833.50 + $255.02)