Minneapolis-based RTW, Inc. a provider of products and services to cost-effectively manage both insured and self-insured workers’ compensation programs, reported net income for the fourth quarter ended Dec. 31, 2002 of $8.1 million, or $1.57 per basic and diluted share, compared to a net loss of $23.3 million, or $4.53 per basic and diluted share in the fourth quarter of 2001, as revised.
For the year ended Dec. 31, 2002, RTW reported net income of $14.3 million, or $2.78 per basic and diluted share, compared to a net loss of $25.2 million, or $4.89 per basic and diluted share for 2001, as revised.
J. Alexander Fjelstad, president and CEO of RTW, noted, “We are very pleased with our financial performance in the fourth quarter and for the year ended December 31, 2002. In 2002 we focused on positioning RTW for sustainable profitability by emphasizing our case and claims management capabilities and focusing on writing business at the right price. These efforts proved very successful in 2002 as seen in our results. Pricing on policies renewing in 2002 increased 8.7% over the prior year, claims frequency continues to trend downward, and we continue to aggressively manage claims to closure. Given the upward trend in pricing, the trend of lower claim frequency and our emphasis on aggressive claims management, we expect to continue to be profitable going forward.
“After announcing our strategic initiative of extending our workers’ compensation services to self-insured employers and other alternative markets, we wrote our first account in September and added two additional accounts in the fourth quarter. Our early assessment of these new markets is validating this strategic decision, and we are now seeing opportunities for RTW to grow fee-based income profitably in the self-insured and alternative markets.”
The year-end 2002 results include favorable adjustments to unpaid claim and claim settlement expenses, including, $3.0 million from reducing the accrual for the Minnesota Special Compensation Fund, and $5.3 million resulting from a reduction in unpaid claim and claim settlement expenses due to favorable development of 2001 and prior accident year reserves. Additionally, the 2002 results reflect: (i) a $3.3 million benefit from the excess of actual income tax refunds over amounts recorded by the Company in 2001 due to Federal tax law changes relating to the period of net operating loss carry-back, (ii) an additional refund totaling $475,000 relating to revising the accounting for a reinsurance agreement, and (iii) reinstating previously written down deferred tax asset amounts. The 2001 results included: (i) a $7.7 million increase in claim and claim settlement expenses to reflect strengthening of 2000 and prior accident year reserves due to unfavorable claims experience in 2001, (ii) the write down of the deferred income tax asset totaling $14.0 million recorded in the fourth quarter of 2001, and (iii) a $2.1 million refund received from the Minnesota Workers’ Compensation Reinsurance Association representing a distribution of excess surplus.
Total revenue for the year ended Dec. 31, 2002 was $67.1 million, compared to $95.7 million recorded in 2001. The decrease in total revenue is primarily attributable to the company’s successful actions to decrease premiums in force, including exiting unprofitable regions, to appropriately size the company to its available surplus. Included in total revenue is investment income of $5.1 million in 2002, compared to $6.4 million in 2001, and net realized investment gains of $1.7 million in 2002, compared to $1.2 million last year.
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