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State Compensation Insurance Fund’s 2018 Annual Report is now available. Important financial highlights include:

— Net income of $187 million, up from $40 million the previous year.
— Earned net premiums of $1.3 billion.
Combined ratio of 134.7 percent – about 15 points lower than the previous year of 149.4 percent.

A combined ratio of more than 100% means that an insurance company had more losses plus expenses than earned premiums and lost money on its operations. The combined ratio is essentially calculated by adding the loss ratio and expense ratio. The loss ratio is calculated by dividing the total incurred losses by the total collected insurance premiums. The lower the ratio, the more profitable the insurance company and vice versa.

By comparison, in 2015 the WCIRB reported a state wide combined ratio of below 100%, the first report below that level since 2007. By 2017 it reported a state wide combined ratio of 91%. Thus, by comparison the SCIF ratio of $134.7 percent is an expensive outlier.

State Fund’s premium slightly increased in 2018. The increase of premium was due to the net effect of the increase of premium audits, and the decreases in premium rates and policy counts.

State Fund had a $460 million underwriting loss in 2018 compared to a $658 million underwriting loss in prior year. The 2018 underwriting loss decreased due to an additional $217 million LAE reserves strengthening for prior accident years in 2017.

In 2018, net investment income and realized gain on sale of equity decreased by $46 million mainly due to the abnormally higher capital gains realized in 2017 as a result of the termination and portfolio liquidation of an equity portfolio manager.

The board of directors did not declare dividends for 2018 and 2017. State Fund realized a net income of $187 million and $40 million for years ended December 31, 2018 and 2017.

“State Fund’s financial position remained strong in 2018, allowing us to continue to deliver on our purpose – providing fairly priced workers’ compensation insurance, helping keep workplaces safe, and restoring injured workers,” said Vern Steiner, President and CEO.

In his president’s letter accompanying the financial report, Steiner also discusses how State Fund is driving improvements in a number of business areas including a new Innovation Design Center, an expanded workplace safety website, and enhanced online policy services.