Minnesota-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 first quarter ended March 31, 2003 of $564,000, or $0.11 per basic and diluted share. The first quarter 2003 results include a $300,000 reduction in projected claim and claim settlement expenses resulting from favorable development of claims for 2002 and prior accident years.
J. Alexander Fjelstad, president and CEO of RTW, noted, “We are very pleased with our financial performance in the first quarter of 2003. Throughout 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 continue to prove to be successful as seen in our results. Claims frequency continues to trend favorably relative to our expectations and we continue to aggressively manage claims to closure. Given the trends in rate, the trend in claim frequency and our continued emphasis on aggressive claims management, we expect to continue to be profitable going forward.”
Net income for the first quarter of 2002 was $2.7 million, or $0.52 per basic and diluted share and included a one-time $3.0 million reduction in claim and claim settlement expenses resulting from reducing the accrual for the Minnesota Special Compensation Fund (SCF). The SCF accrual decrease resulted from legislative changes in Minnesota in March 2002.
Fjelstad also pointed out that, “On April 1, 2003, the A.M. Best financial rating for our wholly-owned insurance subsidiary, American Compensation Insurance Company (ACIC), was upgraded from a B- to a B due to improved capitalization and operating performance in 2002. The Company increased the capital and surplus to $26.8 million in 2002 from $19.5 million in 2001 as a result of improved operations in 2002. This upgrade is a very positive action from Best and confirms the commitment that we made in 2002 to improve operations, increase profitability and increase the capital and surplus in ACIC. We believe that the rating improvement affirms the actions that we have taken to date. We expect that the rating upgrade will improve our ability to write certain business in our markets, in addition to our belief that our product and service provide significant benefits that our policyholders cannot obtain elsewhere.”
Premiums in force at March 31, 2003 decreased to $48.7 million from $54.2 million at December 31, 2002 and $68.8 million at March 31, 2002 due primarily to the closure and runoff of business in its Missouri and New England regions.
Gross premiums earned followed the decrease in premiums in force decreasing 27.0 percent to $13.0 million in the first quarter of 2003 from $17.8 million for the same period in the prior year. After reflecting premiums ceded under reinsurance treaties, premiums earned decreased by 34.4 percent to $11.1 million for the quarter ended March 31, 2003 from $17.0 million reported in the first quarter of 2002. Premiums ceded under excess of loss treaties increased significantly in 2003 due to rate increases for excess of loss reinsurance coverage in the company’s non-Minnesota regions while its Minnesota cost decreased only slightly, also it lowered its retention in all of its regions in 2003 by purchasing increased excess of loss coverage in order to further reduce volatility in the results.
For the first quarter, total revenue was $12.4 million, compared to $19.8 million last year. Included in total revenue for the quarter is investment income of $1.2 million, compared to $1.4 million last year. Additionally, in the first quarter of 2002, the company recorded net realized investment gains totaling $1.5 million; no realized investment gains or losses were recorded in the first quarter of 2003.
In 2002, the company sold and repurchased new taxable securities in its portfolio to take advantage of net operating loss carry-forwards generated in 2001 and 2000.
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