Annual Report 2011 - SNL Financial

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Annual Report 2011 - SNL Financial

WORKERS’ COMPENSATION INSURANCE

The following table represents the operations of the workers’ compensation insurance segment for the years ended

December 31, 2011 and 2010 (in thousands).

2011 2010

Revenue:

Direct premiums written ........................................ $155,746 $126,843

Reinsurance premiums assumed ................................. 2,047 1,434

Ceded premiums written (1) ..................................... (45,779) (37,170)

Net premiums written .......................................... 112,014 91,107

Change in unearned premiums ................................... (8,346) (6,660)

Net premiums earned .......................................... 103,668 84,447

Net investment income ......................................... 3,317 2,421

Change in equity interest in limited partnerships ..................... (18) 891

Net realized investment gains .................................... 1,360 2,479

Total revenue ............................................ $108,327 $ 90,238

Expenses:

Losses and LAE incurred ....................................... $ 67,802 $ 59,275

Acquisition and other underwriting expenses ....................... 7,035 5,330

Other expenses ............................................... 16,844 15,416

Policyholder dividend expense ................................... 1,331 1,040

Total expenses ........................................... $ 93,012 $ 81,061

Income before income taxes ......................................... 15,315 9,177

Income tax expense ............................................... 5,083 2,849

Net income ...................................................... $ 10,232 $ 6,328

(1) Ceded premiums written include premiums ceded to the segregated portfolio cell reinsurance segment of $33,994 and

$28,798 for the years ended December 31, 2011 and 2010, respectively.

The workers’ compensation insurance ratios were as follows for the years ended December 31, 2011 and 2010:

2011 2010

Loss and LAE ratio ........................................................ 65.4% 70.2%

Expense ratio ............................................................ 23.0% 24.6%

Policyholder dividend expense ratio .......................................... 1.3% 1.2%

Combined ratio ........................................................... 89.7% 96.0%

Premiums

The increase in direct premiums written reflects new business of $32.8 million, an increase in audit premium, renewal

rate increases of 2.5%, and an increase in the renewal retention rate. Traditional and alternative market direct premiums

written totaled $121.7 million and $34.0 million, respectively, for the year ended December 31, 2011. Audit premium,

including the EBUB estimate, increased direct premiums written by $3.5 million in 2011, compared to a decrease of $2.2

million in 2010. The traditional book of business recognized audit premium from customers of $2.3 million in 2011,

compared to audit premium returned to customers of $467,000 in 2010. The renewal retention rate increased from 87.0% in

2010 to 88.6% in 2011.

Net Investment Income

The increase in net investment income primarily reflects an increase in invested assets, partially offset by a decline in

the average yield on the fixed income portfolio and a decline in short-term interest rates from 2010 to 2011. The average

yield on the fixed income portfolio was 3.04% as of December 31, 2011, compared to 3.52% as of December 31, 2010.

Net Realized Investment Gains

Net realized investment gains for the year ended December 31, 2011 include a decrease in the estimated fair value of the

Company’s convertible bond portfolio of $1.1 million, compared to an increase of $1.2 million for the same period in 2010.

Net realized investment gains in 2011 also include a gain of $959,000 related to the sale of an international equity fund that

the Company had impaired prior to 2011.

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