Fourth quarter and 2004 annual earnings statements from leading California workers’ compensation insurance carriers are coming in, and profits are reportedly up by 25% to 36% over 2003 – and 2003 was already the most profitable year on record. Zenith and American Financial Group showed sharply higher profits from California workers’ comp insurance.
Zenith National Insurance Company, with California workers’ comp insurance representing almost two-thirds of its business, reported 2004 fourth quarter net income of $25.4 million, up 57% over the $16.1 million in 2003.
AIG, the state’s largest private workers’ compensation insurer, reported record profits of $11.05 billion for 2004, up 19% from 2003. This record profit came despite a 1300% increase in catastrophe losses from hurricanes, earthquakes and tsunamis. Excluding these catastrophe costs and investment gains, pre-tax income from insurance operations grew by more than 20% during 2004, with the fourth quarter showing an even faster 28.7% increase.
Zenith National Insurance Company reported 2004 fourth quarter after-tax net income of $43.7 million, more than double the $20.8 million profit in the fourth quarter of 2003. Profits for the entire year were up similarly, climbing from $67.0 million in 2003 to $119.0 million in 2004. Income (before taxes) from Zenith’s workers’ comp operations grew at an even faster rate in 2004, climbing more than 250% from $29.3 million in 2003 to $104.0 million in 2004.
American Financial Group, another top 10 workers’ comp insurer in California, reported that “solid underwriting profits” from its California Workers’ Comp business contributed to the record profits reported for 2004. Earnings from insurance operations were up 43% in the fourth quarter of 2004. The company reported sharply improved results following the recent reforms enacted in California. The percentage of California workers’ comp premium paid out in benefits and expenses dropped from 92.6% in the fourth quarter of 2003 to just 84.1% in 2004, giving the company a 16% profit even before considering investment income.
“Insurance carriers are reporting obscene profit levels while continuing to squeeze California businesses,” said David Schwartz, president of the California Applicants’ Attorneys Association (CAAA), whose members represent injured workers. “Injured workers are losing their cars, their homes, their good credit and in some cases, their lives because care and compensation has been drastically reduced. The takeaways from injured workers are going directly into insurance companies’ bank accounts. The governor and the legislature have taken away benefits from injured workers, benefits that are already too low. You can keep on cutting injured workers’ benefits down to zero, and without regulation insurance companies may not reduce premiums by a single dollar.”