Published: March 21, 2008 09:28 pm         

BrickStreet posts $185 million profit in 2007, president says

BrickStreet President Greg Burton says the days of large profits could be coming to an end for the private company, which now has a monopoly on the state workers’ compensation business.

“The workers’ compensation market will open to competition this summer and, given the competition, our overhead is going to increase because our premium levels are going to go down,” he said. “Then add on that we’re going to start paying taxes in the future, this level of profit probably won’t happen again.”

BrickStreet reported $185 million in earnings for calendar year 2007.

Now the company is asking the state Insurance Commission for approval to pay an extra $50 million to $60 million toward BrickStreet’s debt to the state. Burton says the state loaned the new company $200 million in 2006.

“Paying off the surplus note early is beneficial to everyone,” he said. “Early payoff of the note can help eliminate the old fund liabilities of the state faster, which improves our overall business climate.”

Burton says improved claims handling, fewer overall claims being filed and eliminating fraud and abuse from the system are some of the factors for the huge profit.

He said investment and related income accounts for about $61 million of the surplus. A change in the 2006 reserve estimates contributed about $85 million and BrickStreet had a $39 million underwriting gain.

“Privatization is working as intended,” he said.

Burton says the company should also have a good year in 2008, but refused to forecast earnings past this year.

“It’s hard to say that far in the future,” he said. “How many policies will we maintain? It is kind of hard to tell at this point.”

Burton added that 23 companies have secured a certificate of authorization or made other workers’ compensation filings with the state insurance commissioner. Several others have shown an interest as well, according to Burton.

“That doesn’t mean they will all come into the market, but it shows they have an interest,” he said.

In February 2005, the move from a state-run system into the private market began in West Virginia. Change was initiated by the state because the former system had accumulated unfunded liabilities of more than $3.1 billion. Prior to the change, West Virginia was one of only five states with a monopolistic state fund.

— E-mail: fpace@register-herald.com