Printer Friendly

CII FINANCIAL ANNOUNCES REVIEW OF WORKERS' COMPENSATION LOSS RESERVES

CII FINANCIAL ANNOUNCES REVIEW OF WORKERS' COMPENSATION LOSS RESERVES
 BURBANK, Calif., Dec. 10 /PRNewswire/ -- CII Financial Inc. (AMEX: CII) ("the company") announced today that as a result of unanticipated increases in the frequency and severity of "stress and strain" type claims in the fourth quarter of 1991, the company commissioned an interim review of its workers' compensation loss reserves. In the company's third quarter earnings press release, the company indicated that should its efforts be unsuccessful in combating and defending itself against abuse and potential fraud in the California workers' compensation system, actuarial assumptions for determining the adequacy of loss reserves would need to be changed in order to account for the frequency and severity of such claims. The company also stated that adequate rates remain essential to the continued health, profitability and stability of the workers' compensation insurance industry in California.
 The preliminary results of the actuarial study indicate that reserves for all workers' compensation claims as originally estimated are currently inadequate based upon the following:
 1. The increased frequency in the number of stress claims. The length and severity of the recession in California have not only reduced the payroll base and the number of employed workers but also have appeared to have stimulated the abuse of the California workers' compensation system as an alternate source of income during unemployed periods.
 2. The increased medical costs associated with forensic examinations associated with litigation of claims. The California Workers' Compensation Institute has stated that litigation for workers compensation claims has increased 17 percent from 1989 to 1991. Forensic medical expense represents more than half of the company's litigation costs. These developments are serious obstacles to the company's ability to combat abusive claims.
 The company's independent actuary has estimated, based upon current trends, paid loss development patterns, and other actuarial loss reserving techniques, that an actuarial bulk loss reserve of $20 million will need to be established at year-end Dec. 31, 1991. The company intends to follow the final recommendation of its actuary. The company believes that the establishment of such a reserve is prudent if not absolutely necessary, to position the company for future growth. The escalating overuse and additional fees for forensic medical, the malingering of claimants, absences of full time jobs to return to, the substitution of workers' compensation for employment wages and the unemployment benefits in a deepening recession and the unknown final cost of stress and strain claims primarily in the six-county area of Southern California dictate a conservative approach to reserve establishment.
 The foregoing developments are exacerbated by the California insurance commissioner's refusal to approve any portion of a rate increase for adverse loss development to be effective Jan. 1, 1992. The workers' compensation insurance rating bureau in state of California had recommended a rate increase of 10.1 percent for adverse loss development. None of this rate increase was approved by the California insurance commissioner.
 As a result of these developments, the company intends to accelerate its current strategy of changing its geographic mix of business. This strategy is to increase business written in Northern California and significantly reduce business written in Southern California other than in the San Diego area. As a result of the above-mentioned spiraling costs, and inadequate rates, the company has an accelerated program to substantially reduce its presence in the six-county area of Southern California (Los Angeles, Orange, San Bernardino, Riverside, Ventura and Santa Barbara) where its loss development is most severe. Additionally, the company is emphasizing its efforts to develop additional business for the areas of San Diego, San Joaquin and Sacramento valleys and the San Francisco Bay Area.
 Where new business is written in the Southern California area, the company may apply certain premium surcharges on a per policy basis. The company intends to continue the expansion of its profitable insurance premium finance business and to pursue writing workers' compensation in other states where there may be profit potential.
 The company continues to be financially sound in this period of financial uncertainty as evidenced by its continued generation of positive cash flow and estimated ratio of business written to statutory capital and surplus of approximately 1.4-to-1 as of Dec. 31, 1991.
 CII Financial Inc. is a financial services holding company whose insurance subsidiaries are California Indemnity Insurance Co. and Commercial Casualty Insurance Co. Through these subsidiaries, the company is engaged in writing workers' compensation insurance in California. These insurance companies service workers' compensation accounts of all sizes but concentrate on small- to medium-size companies.
 Based in Burbank, the company's insurance subsidiaries service Northern California through a Sacramento regional office and California's Inland Empire through an office in San Bernardino County. Policies are sold through a network of approximately 450 independent insurance agents and brokers in California. The company also finances insurance premium loans through CII Premium Finance Co.
 -0- 12/10/91
 /CONTACT: Joseph G. Havlick, chairman, president & CEO of CII Financial, 818-846-5297/
 (CII) CO: CII Financial Inc. ST: California IN: INS SU:


SE-KJ -- LA010 -- 0834 12/10/91 08:01 EST
COPYRIGHT 1991 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Dec 10, 1991
Words:837
Previous Article:LASERSCOPE NAMES WISMER VICE PRESIDENT-NORTH AMERICAN SALES AND EDUCATION
Next Article:BERGEN BRUNSWIG REPORTS FIRST QUARTER RESULTS
Topics:


Related Articles
CII FINANCIAL ANNOUNCES REVIEW OF WORKERS' COMPENSATION LOSS RESERVES
CII FINANCIAL ANNOUNCES REVIEW OF WORKERS' COMPENSATION LOSS RESERVES
CII FINANCIAL REPORTS SUBSTANTIAL FOURTH QUARTER LOSS, REFLECTS CRISIS IN CALIFORNIA WORKERS' COMPENSATION
CII FINANCIAL INC. REPORTS LARGE FIRST QUARTER LOSS
CII FINANCIAL INC. REPORTS SHARPLY REDUCED FOURTH QUARTER LOSS
CII FINANCIAL INC. POSTS SHARP TURNAROUND IN FIRST QUARTER INCOME
CII FINANCIAL INC. ANNOUNCES FINANCIAL RESULTS FOR THE SECOND QUARTER AND FIRST HALF OF 1995
S&P Removes SCIF and Zenith Rtgs from WatchNeg.
California Indemnity Insurance Partners With Sierra Health and Life to Offer Health Care Organization Services to California Employers.
S&P Assigns Maine Employers Mutual Ins. 'BBBpi' Rating.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters