IHOP 2008 Annual Report Download - page 114

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
9. Captive Insurance Subsidiary (Continued)
sheet includes the following balances related to the captive insurance subsidiary as of December 31,
2008:
• Franchise premium receivables of approximately $0.7 million included in receivables related to
captive insurance subsidiary.
• Cash and equivalents and long-term investments restricted for the payment of claims of
approximately $5.6 million are included in restricted assets related to the captive insurance
subsidiary.
• Loss reserve related to captive insurance subsidiary of approximately $4.5 million. The current
portion of approximately $3.3 million was included in other accrued expenses and the long-term
portion of approximately of $1.2 million was included in other non-current liabilities.
Loss reserve estimates are established based upon third-party actuarial estimates of ultimate
settlement costs for incurred claims (which includes claims incurred but not reported) using data
currently available. The reserve estimates are regularly analyzed and adjusted when necessary.
Unanticipated changes in the data used to determine the reserve may require us to revise our
estimates.
The short-term portion of the reserve is computed by applying a percentage, based on historical
claims payment activity, against the total captive claims asserted as provided by the actuarial firm. The
short-term amount is deducted from the total reserve balance and the remainder is the long-term
portion. This estimate is reviewed on a quarterly basis and is adjusted as needed.
The activity in the loss and loss adjustment reserve, which included Applebee’s and participating
franchisees, is summarized in the table below:
December 31, December 31,
2008 2007
(In thousands)
Reserves, beginning of the year ........................... $7,009 $ —
Reserves assumed from acquisition ........................ — 7,622
Claims incurred ...................................... 445 (464)
Claims paid ......................................... (2,997) (149)
Reserves, end of the year ............................... 4,457 7,009
Less current portion ................................... (3,257) (3,809)
Long-term portion .................................... $1,200 $ 3,200
100