NU Online News Service, March 12, 3:18 p.m.EST

California's workers' compensation fund, the State CompensationInsurance Fund, reported net income for 2009 increased 91 percentover 2008 despite a combined ratio exceeding 160.

In a report to more than 4,000 California brokerages doingbusiness with State Fund, Doug Stewart, interim president and chiefexecutive officer, said the state's largest provider of workers'comp insurance ended 2009 with $1.25 billion in net premium earnedand $143 million in net income.

The net income figure for 2009 is significantly higher than the$75 million in net income that State Fund earned in 2008.

Mr. Stewart said in a statement, "I'm particularly pleased withour financial and operational performance this past year given thechallenges we face."

He credited the fund's financial condition to a "conservativeand steady-handed approach" that "has allowed us to maintain astrong capital base while making needed investments in ourorganization." He added that its performance was helped by itshighly rated investment portfolio.

Despite the gain in net income, company's loss adjustmentexpense (LAE) ratio increased 46 percent in 2009, up from 36.7percent in 2008, contributing significantly to a 161.5 percentcombined ratio in 2009.

Mr. Stewart attributed this increase to legacy issues from 2001to 2006, when many carriers either became insolvent or left theCalifornia market. He said the fund assumed an unusually highmarket share of workers' comp policies during that period.

In the future, he said, "We expect these ratios to return tomore traditional levels over the next few years as these claims areresolved."