West Virginia’s Brickstreet Posts 2007 Earnings

Company Leadership Wants to Accelerate Repayment of State Loan

Charleston, WV  (CompNewsNetwork) - BrickStreet President and CEO Greg Burton today announced the West Virginia workers' compensation insurer will report $185 million in earnings for calendar year 2007. The profit was reported yesterday in the company's annual filing with the West Virginia Offices of the Insurance Commissioner.

In addition, BrickStreet has asked the Insurance Commissioner for approval to pay an extra $50 million to $60 million toward BrickStreet's debt to the state. To create the new private company in 2006, the state loaned BrickStreet $200 million in the form of a surplus note.

“We will make a $40 million note payment on July 1 as scheduled. If we receive approval from the Offices of the Insurance Commissioner, BrickStreet intends to make an additional payment of at least $50 million to $60 million before the end of the year. While we must make sure our decisions are based on sound actuarial practices, paying off the surplus note early is beneficial to everyone –once the note is completely paid off, as a mutual insurance company, we may be able to return a portion of the profits to policyholders in the form of dividends. And early payoff of the note can help eliminate the Old Fund liabilities of the state faster, which improves our overall business climate,” Burton said.

According to Burton, the current interest rate on the 10-year note is 1.5 percent. The terms of the note call for the interest rate to increase to the prime rate on January 1, 2009. The proposed prepayment will be made closer to the time the interest rate increase is scheduled.

“The remaining earnings will be used for reserves, to ensure that we have adequate reserves today to pay claims for tomorrow's injured workers, which will help set us on firm financial footing for the future,” Burton added.

Additionally, because of the transition from a state fund to a private market, BrickStreet is currently benefiting from a tax-exempt status. This status will change at the end of 2008 and the company will begin paying a 35 percent tax rate in 2009. As the market opens for competition, BrickStreet will experience higher underwriting costs and, with the loss of taxexempt status, it will be difficult for BrickStreet to sustain these profit levels in the future.

However, if the company experiences continued, positive financial performance, it plans to make additional prepayments on the note next year. If the company is allowed to make the prepayment, the balance at the end of 2008 will be less than $100 million. “Again, once the note is paid off, BrickStreet may be able to pay dividends to policyholders,” Burton said.

“Thanks to the leadership of Governor Manchin, the Insurance Commissioner, the Legislature and BrickStreet's Board of Directors, privatization is working as intended. Over the past two years, the workers' compensation market place has experienced an overall reduction in rates, claims handling has been improved tremendously, injured workers are receiving care and their indemnity checks faster than ever, and there has been more emphasis placed on eliminating fraud from the workers' compensation system. All of these factors have helped both the business climate as well as the injured workers. BrickStreet is a West Virginia company and this is evidence that we are succeeding in West Virginia,” Burton said.

BrickStreet is a West Virginia-based, private mutual insurance company founded on January 1, 2006 to offer workers' compensation insurance to West Virginia businesses. For additional information and graphic illustrations about the 2007 earnings, visit BrickStreet's press room at www.brickstreet.com.

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