Market Analyst Summarizes Calif. Results in 2002 NAIC Report on W.C. Profitability

In late January 2004, the National Association of Insurance Commissioners (NAIC) released its “Report on Profitability by Line by State” for 2002. The NAIC report provides complete, direct income statement data for every line of insurance for every state compiled from insurer annual statements filed with the NAIC each December for the preceding calendar year. It includes breakdowns of all elements of underwriting results, as well as investment income, pretax gain or loss, federal income taxes, after tax gain or loss, surplus and percentage after tax rate of return on surplus.

Because NAIC has published this report for many years, and because it is compiled by an objective source, this report is a valuable tool for tracking the profitability of various lines of insurance over time. Veteran market analyst and consultant Fred Hill reviewed and summarized the 2002 results for the Institute. Mr. Hill’s first analysis breaks out workers’ compensation industry results for California, the 44 other states without monopolistic state funds, and for the nation as a whole; his second analysis compares results from the ten largest states (based on earned premium), the remainder of the states, and the nation. The NAIC data show that despite double-digit premium growth, California workers’ compensation insurers have not turned a profit since eking out a 1 percent return on surplus in 1998, and while workers’ comp insurers in most states managed to return to positive ground in 2002, in California they had an after tax loss of $1.4 billion (a negative 11.5 percent rate of return) — by far the worst results in the country.

Click here to download Hill’s analyses in Acrobat format, which include charts and tables displaying 1993 through 2002 data as reported by the NAIC.