The California State Fund says yearly net income increased 176 percent in 2012—evidence that its three year restructuring plan is bearing results, says the company's CEO.
The state's largest provider of workers' compensation reports 2012 net income of $359 million, up $229 million from 2011.
The program reported a combined ratio of 137.7, an improvement of 20.5 points. The results allow the insurer's board to pay a $100 million dividend to qualifying policyholders.
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"We implemented significant changes to our operations and business processes in order to fulfill our role as the fair-priced leader," says President and CEO Tom Rowe. "I am proud to report that at the end of 2012, we began to realize our vision of a more effective State Fund, and that we are on a sustainable path to become the competitive, agile carrier envisioned by our core mission."
With the changes State Fund has implemented, Rowe says the insurer reduced its annual fixed expense by $150 million compared to 2009, and it expects to achieve additional annual savings in excess of $300 million by the end of 2014.
State Fund will introduce a new tiered rating system in 2013—a first for the insurer—and a rate reduction of 7 percent. The tiered rating system, says Rowe, will improve pricing-accuracy risks and produce rates "that more fairly reflect the risk characteristic and experience of each policyholder."
The rate reduction, he adds, reflects the impact of recently initiated state reforms to workers' comp.
State Fund, formally the State Compensation Insurance Fund, established by the state legislature in 1914, is the largest provider of workers' comp in the state. In 2011, the program began restructuring by cutting 25 percent of its staff and consolidating office space.
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