Message From the President
Since our beginning more than 100 years ago, two things have been constant: State Fund has been a reliable resource for California employers and workers, and change has been a driving force in the workers’ compensation industry. Through it all, State Fund has been dedicated to our purpose of providing fairly priced workers’ compensation insurance to California businesses, to helping make workplaces safe, and to restoring injured workers.
Millions of hardworking Californians rely on the security and certainty that State Fund offers employers, and the California economy is impacted by the services we provide. That’s why we work with employers to help them manage their risks by watching for accident trends and by providing safety expertise and compliance assistance to help them keep their workers safe on the job. We also continually seek ways to improve our operations, reduce expenses, and get the most out of our investments in order to maintain fairly priced workers’ compensation insurance.
In 2014, we commemorated State Fund’s centennial, and reflected on our history to help us define our future. We implemented several initiatives to strengthen our ability to achieve our purpose of providing fairly priced workers’ compensation insurance to California businesses, to helping make workplaces safe, and to restoring injured workers. These included:
- • Establishing a more conservative reserving posture, increasing our overall loss and loss adjustment expense (LAE) reserve position by $250 million and increasing reserves for the company’s self-insurance program by $16 million. This decision significantly strengthened State Fund’s long-term financial position but created a short-term impact to the combined ratio. Had State Fund not taken this action, it would have exceeded financial targets for the year.
- • Providing a free online training program for physicians in our medical network to offer guidance and practical tips on opioid prescriptions and alternatives for chronic and acute pain as a result of workplace injuries.
- • Continuing implementation of tiered rating and a broadening of State Fund’s pricing structure to allow more accurate rating on an individual policyholder’s risk. This included a plan to discontinue group insurance discounts in 2015 because the tiered rating plan more effectively prices individual risks throughout our book.
We wrote approximately 139,000 policies in 2014, a six percent increase over the previous year. Net premiums earned of $1.669 billion were 53 percent more than in 2013.
While all of these actions put us on the right track – to maintain our financial strength and benefit our customers in the years ahead – they also required an investment in time and resources that are reflected in our 2014 financials.
- • Net income was $37 million.
- • Policyholders’ surplus grew by $22 million to $6.4 billion.
- • Loss and LAE ratio was 118 percent.
- • Underwriting expense ratio was 25 percent.
- • With the reserve strengthening actions, our combined ratio was 143 percent.
- • Net investment income was $656 million.
- • We declared a $37 million dividend for the 2014 policy year.
We are committed to serving California’s businesses across all industries. And most importantly, we understand that to be the best value in California, we must continue to evolve, adapt, and innovate in order to effectively serve all of our stakeholders – policyholders, brokers, and employees.
Looking ahead, we will regularly examine the issues that affect our industry, such as fraud and security, and provide insightful solutions. We will maintain public trust, preserve our financial health, and deliver on the promises we’ve made.
As the largest provider of workers’ compensation in California, it is our responsibility to constantly evaluate how we are performing, respond accordingly, and help lead change. We continue to act with integrity and evolve to assure that we will be here the next 100 years for California.
Vernon Steiner, President and CEO
Disclaimer statement: Under California law it is unlawful for an insurer to promise the future payment of dividends under an unexpired workers' compensation insurance policy or to misrepresent the conditions for dividend payment. Dividends are payable only pursuant to conditions determined by the Board of Directors or other governing board of the Company following policy expiration. It is a misdemeanor for any insurer or officer or agent thereof, or any insurance broker or solicitor, to promise the payment of future workers' compensation dividends. Past dividend performance is no guarantee of an insurer's future dividend performance.