PE RFORMA NCE. Accident Fund Insurance Company of America 2008 Annual Report

Transcription

1 PE RFORMA NCE Accident Fund Insurance Company of America 2008 Annual Report

2 2 Accident Fund 2008 Annual Report LEADERSHIP Message from the President & CEO For many companies, 2008 was a challenging year. However, even though Accident Fund Insurance Company of America faced a difficult workers compensation market and a significant meltdown in the financial markets, we performed well a testament to the strength of our staff and the effectiveness of our approach to our business. I view these two components our team and our approach as the fundamental building blocks of our success as an organization. Over the years, we have carefully built an intelligent, hardworking and dedicated work force, with people who take pride in their work and understand what we are trying to accomplish. We have transformed ourselves, and we continue to transform and grow, demonstrating an increasingly strong ability to out-think and out-behave our competition. Our approach is relatively simple. With our agency partnerships at the center of everything we do, we provide the very highest quality service to policyholders and injured workers, while keeping a keen focus on the type and amount of risk that will provide the best overall return.

3 3 Our results speak for themselves, as you will see in this report. We continue to outperform our competitors in written premium and combined ratio; in 2008, we achieved an underwriting profit for the 11th time in the 14 years since we became a private company; and we continue to expand nationally. We have grown significantly in premium and geography both organically and through acquisition during the last several years. The Accident Fund Companies are now comprised of Accident Fund Insurance Company of America, United Heartland and CompWest. We were tested this year, and we will continue to be tested in the coming years. However, 2008 proved once again that we have the right model and have positioned our organization for continued success. Elizabeth R. Haar President and Chief Executive Officer We have transformed ourselves demonstrating an increasingly strong ability to out-think and out-behave our competition.

4 4 Accident Fund 2008 Annual Report Message from the Chair Accident Fund Insurance Company of America has a long tradition of success. From its roots as Michigan s state fund, to its purchase by Blue Cross Blue Shield of Michigan in 1994, to its emerging leadership in the workers compensation insurance industry, Accident Fund has excelled in partnering with independent agents to provide high-quality care for injured workers and superior value for policyholders for almost 100 years. During the last eight years, our enterprise has expanded and is now licensed in 49 states (plus the District of Columbia) and is the 10 th largest writer of workers compensation insurance in the nation, according to A.M. Best. That success on a national scale pays an important dividend right here in Michigan. Accident Fund plays a key role within the Blue Cross Blue Shield of Michigan enterprise, helping the Blues fulfill their social mission of providing the state s residents access to high-quality, affordable health care. These are a few of the impressive accomplishments of a strong management team with long-term vision and dedicated, talented team

5 5 members who strive day in and day out to outperform the competition and exceed customers expectations. In good times and in more challenging times, Accident Fund has demonstrated strong and steady performance that sets us apart in the industry. We will continue to build on our tradition and realize superior results no matter the economic and market conditions because we understand that success is achieved by executing on the fundamentals and running the business with a long-term view. James G. Agee Chairman of the Board Board of Directors James G. Agee (Chair) A. Barry McGuire Mark R. Bartlett Nancy P. McKeague Charles L. Burkett Iris K. Salters Patrick J. Devlin Gregory A. Sudderth A. Gregory Eaton Richard E. Whitmer Elizabeth R. Haar Lewin Wyatt Jr., D.O. Daniel J. Loepp

6 6 Accident Fund 2008 Annual Report Financial Overview While Accident Fund s financial performance was impacted by the economic recession and financial crisis, we performed very well in the key measures of premium growth, combined ratio, underwriting profit, premium retention and return on equity. Our consolidated GAAP operating income was $66.1 million. However, due largely to unrealized losses in our investment portfolio (77% of total losses were unrealized), we finished the year with a consolidated net loss of $30.7 million. In sum, we outperformed the workers compensation industry, and our financial position continues to be solid because we take a long-term view focused on underwriting profitability. FINANCIALS PE RFORMA NCE 2008 Financial Highlights Direct written premiums of $868.8 million, 23% over 2007 (large increase is partially due to the acquisition of CompWest, but all three companies premium grew) GAAP combined ratio, a measure of underwriting profitability, of 97.1% nine points better than A.M. Best s estimate of 106% for the workers compensation industry Underwriting profit of $25.5 million Return on equity was 6.6% For comprehensive financial reports, visit our Web site at

7 ACCIDENT FUND COMPANIES 7 The Accident Fund Companies We started helping Michigan employers as a state agency in 1912 and joined the Blue Cross Blue Shield of Michigan enterprise in Since that time we have grown steadily, expanding across the nation and are now licensed in 49 states plus the District of Columbia. The Accident Fund Companies include Accident Fund Insurance Company of America, United Heartland (United Wisconsin Insurance Company) and CompWest.. Partnering for Success Building strong partnerships is a core component of our business philosophy. Accident Fund works hard to build relationships with our agents, policyholders and injured workers. Agents Equipping agents with the tools they need to effectively conduct business and provide the best solutions and service for their policyholders makes the difference as to whether they choose Accident Fund as their carrier of choice. Offering cutting-edge technology, smart business solutions, face-toface interaction and competitive incentive packages, Accident Fund stands out as a best-in-class organization in the eyes of agents. PERFORMANCE Rated A (Excellent) by A.M. Best Nearly 100 years in the workers compensation industry Accident Fund has outperformed the industry by profitability and growth in three out of the last four years Increasing market share in 2008 The Accident Fund Companies market share increased or stayed the same in each of our core states. In Virginia, we are now in the top 10, despite only entering the state in We broke the top 5 in South Carolina and Wisconsin.

8 8 Accident Fund 2008 Annual Report Policyholders Bringing comprehensive safety services and tools to our policyholders is one of our top priorities. Our loss control team assists businesses in creating safety practices that protect employees and keep their losses and costs down. We are also industry leaders in providing online access to loss prevention information and materials to our policyholders. Injured Workers Our professional claims staff works with injured workers to assist them in their recovery, while helping contain medical costs. Partnerships with experts in the field, such as Centers of Excellence and Best Doctors, help us to provide the best possible care for our injured workers. Accident Fund Companies collaborate with Centers of Excellence, high-quality hospitals that demonstrate extensive expertise in performing a particular procedure, set of procedures or treating a particular disease or condition. We partner with Best Doctors, an internationally accredited organization and Harvard University School of Medicine affiliate, to ensure that catastrophic patients get the very best care and treatment options when Centers of Excellence are not available.

9 9 PERFORMANCE Accident Fund Companies 2008 Quick Facts Assets: $2.8 billion Shareholders Equity: $783 million Businesses Insured: 52,000+ Premium: $868.8 million Combined Ratio: 97.1% Growing for Success To prepare for continued growth and to offer the best facility for our staff, we are building a new national headquarters in downtown Lansing, Mich., with a scheduled move-in date of spring In October 2008, we celebrated the groundbreaking of our new building furthering our commitment to Michigan and to Lansing.

10 10 Accident Fund 2008 Annual Report ACCIDENT FUND COMPANY The Accident Fund Company Accident Fund Insurance Company of America is committed to serving the needs of our agents and customers. We work diligently to help employers create and maintain safe, productive workplaces. We strive to provide injured workers with strong, appropriate care and support them in returning to work as soon as possible. By diversifying our products and services nationally, we achieve results for our stakeholders, while always keeping our customers and communities top of mind. PE RFORMA NCE 2008 Claims Results Reduced average payment cycle time to days 10% reduction in medical loss costs $12.1 million in total savings ($3.6 million in general savings and $8.5 million in savings from hospital bill audits) Moved to a paperless claims environment Streamlined our subrogation efforts, resulting in $2 million in savings Established an in-house medical-management model, resulting in more than $3.3 million in savings

11 11 Reducing costs through greater efficiencies Partnerships affect every aspect of our business. In our Claims department, we saved millions of dollars in 2008 due to our collaborative efforts with vendors and as a result of other initiatives, despite rising medical costs (see 2008 Claims Results on left). By taking these steps, we will see savings long term, thus giving our company a strong foundation as we continue to expand and grow our business. Relationships reap rewards We could not achieve our level of success without the strong relationships we have with our agent partners. They are a highly valued, integral component to our success and helped us weather the significant challenges in Our annual agent meetings and agent advisory council meetings, which we hold across the country, allow us to get feedback directly from the people who work with our product daily. Our partners appreciate this one-on-one interaction and the chance to communicate their successes and concerns to us so we can improve our offerings and services for our customers. PE RFORMA NCE Accident Fund Company 2008 Quick Facts Businesses Insured: 48,000+ Premium: $541.5 million Combined Ratio: 98.1%

12 12 Accident Fund 2008 Annual Report Accident Fund Company s Core States Accident Fund Company Core States Arkansas Georgia Illinois Indiana Iowa Kansas Michigan Minnesota Mississippi Missouri Nebraska North Carolina South Carolina Tennessee Virginia Wisconsin Two core states added In 2008, the Accident Fund Company added two core states, Mississippi and Arkansas, for a total of 16. In 2009, we ll add Maryland and Texas.

13 13 KeenanSuggs: Setting the standard Our 2008 Agency of the Year, KeenanSuggs, set the standard for excellence among our 800 agents across the country. Based in Columbia, S.C. Partner since 2002 Written premium with Accident Fund: $3.6 million Cumulative loss ratio over five years: 38.4% Premium retention rate: 92% Policy retention rate: 85% KeenanSuggs was honored at Accident Fund s All Employee Meeting in January Pictured (L to R): John P. Brigman, Vice President; Andrew P. Goss, Vice President; Lynn Haynes, Marketing Manager; Thomas E. Suggs, President and CEO. Providing the right tools for agents We launched a new agent Web site in 2008 that provided enhanced navigation and was more responsive to our agents needs. Now agents can manage policies and claims, access reports, get up-to-date news and find the contacts they need from one convenient location. We also added a Knowledge Center that provides the forms, rates and product information agents use most. Not only is this a great enhancement for agents, but it also has made the Accident Fund Company employees jobs easier too.

14 14 Accident Fund 2008 Annual Report PERFORMANCE United Heartland 2008 Quick Facts Businesses Insured: 1,300+ Premium: $205.6 million Combined Ratio: 91.2% UNITED HEARTLAND United Heartland United Heartland joined Accident Fund in They focus on larger, more complex businesses who are looking for a workers compensation partner to assist in controlling workers compensation costs. This complements the Accident Fund Company s focus on small- and medium-sized accounts. United Heartland has added seven core states since 2005 and is now in a total of 12 core states. The company reached an important milestone in 2008, writing more than $200 million in direct written premium. The company currently has regional offices in New Berlin, Wis.; Rosemont, Ill.; and Charlotte, N.C. The regional offices help the company create stronger relationships with policyholders and business partners, and allow for more customized service. Going forward, United Heartland will continue advancing with these strategies, as they did in 2008: Continue to move into additional core states Move deeper into existing states Create more regional offices Build stronger relationships with policyholders, principals and producers In 2008, 97% of policyholders said they were satisfied overall with United Heartland, up from 94% in 2007.

15 15 United Heartland s Core States United Heartland Core States Illinois Indiana Iowa Kansas Minnesota Missouri Nebraska North Carolina South Carolina Tennessee Virginia Wisconsin

16 16 Accident Fund 2008 Annual Report COMPWEST CompWest CompWest Insurance Company joined Accident Fund in They are a superior provider of workers compensation insurance in the West, with plans to expand eastward. With more than 2,600 policyholders, the company found continued success in 2008 by maintaining focus on its target market employers with 10 to 400 employees in light- to medium-hazard industries. CompWest s Workers Compensation with Care philosophy influences every decision the company makes and shapes their relationships with policyholders by: Ensuring injured workers are cared for and able to stay at work or return to work Providing fast, personal attention to reduce claims litigation costs Collaborating on the rapid reporting of injuries to yield better treatment and increase premium savings PERFORMANCE CompWest 2008 Quick Facts Businesses Insured: 2,600+ Premium: $121.7 million Combined Ratio: 99.2% In a 2008 customer satisfaction survey, 92% of policyholders said they were happy with CompWest s overall service.

17 17 CompWest s Core States CompWest Core States Arizona California Colorado Idaho Nevada Oregon Utah

18 18 Accident Fund 2008 Annual Report COMMUNITY PE RFORMA NCE Accident Fund contributed almost $500,000 to 142 charitable organizations in While Accident Fund steadily strives to become a top workers compensation insurance company in the country, we recognize that we also need to be a leader in the community. By supporting organizations that make a positive impact on people s lives, Accident Fund lends strength and proves our dedication to each community in which we do business. United Way Our commitment to improving people s lives in partnership with the United Way is long-standing. In 2008, through special events donations, employee pledges and our corporate match, Accident Fund raised more than $225,000, continuing to help the United Way bring enrichment to the lives of those in need through improved health, financial stability and educational initiatives. National Kidney Foundation The National Kidney Foundation has led the battle against life-threatening disease since In 2008, Accident Fund employees joined employees at Blue Cross Blue Shield of Michigan, our parent company, to support the National Kidney Walk event held at the Detroit Zoo in May. Accident Fund CEO Liz Haar led more than 100 employee walkers and their families at the 2008 Kidney Walk in Detroit. American Red Cross In 2008, we encouraged employees to give blood to the American Red Cross by bringing the bloodmobile to our headquarters in Lansing, Mich., six times during the year.

19 19 Westran Insurance Scholarship Foundation Accident Fund is a proud coordinator and sponsor of the Roy Westran Memorial Insurance Industry Golf Outing each year. The outing benefits the Westran Insurance Scholarship Foundation, one of several scholarship programs we support to help students pursuing college degrees in the insurance field Outing Facts: Accident Fund donated approximately $20,000 in sponsorships, entrance fees and in-kind donations. Total raised: $50,000 Contributing to Communities An important part of our commitment to communities is the financial support we provide to charitable organizations. In fact, over the last five years, we have contributed more than $2 million to nonprofits, primarily in Michigan and Wisconsin, but also in other states in which we do business. Some of the organizations we supported in 2008: American Cancer Society Brain Injury Association of Michigan Cancer Association of Spartanburg Cty. Care Free Medical & Dental Clinic Children s Trust Fund Ele s Place Grand Rapids Wheel Chair Association Ingham Regional Healthcare Foundation Kent County Disability Advocates Kids Chance of South Carolina Lansing Economic Area Partnership LindenGrove Mercy Home for Boys & Girls Michigan State Medical Society Michigan State University Michigan s Children Olivet College Insurance Scholarship Ronald McDonald House Sparrow Foundation Special Olympics The Women s Center Waukesha Food Pantry Wisconsin Hunger Task Force

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