CRM First Quarter Reflects Self-Insured Group Closings in N.Y.

May 7, 2008

Workers’ compensation insurance firm CRM Holdings, Ltd. reported that net income increased 71.7% to $5.0 million, from $2.9 million a year ago, but fee income plummeted due in part to the closing of CRM’s self-insurance groups in New York.

Total revenues were $37.7 million, up from $34.7 million in the first quarter of 2007.

Fee-based management services revenues declined to $3.8 million from $9.5 million a year ago. The company said this decline resulted from a decrease in the number of New York self-insured groups managed by the company, lower insurance rates in California and reduced commissions on excess insurance policies placed with Majestic.

The company’s group membership in New York fell to 1,466, and premiums under management dropped to $37.6 million on March 31, 2008, compared to 2,082 and $116.7 million, on March 31, 2007. The decline reflects the closure of a number of the company’s self-insured groups. The company said that revenue from the management of New York self-insured groups will be substantially eliminated during the second quarter of 2008, due to the termination of all of CRM’s New York self-insured groups as of April 1, 2008.

According to Daniel G. Hickey, Jr., chief executive officer, the fee-based business in New York is in run-off mode as trusts in the state close down “in response to declining rates and difficult economics.”

Hickey said, however, that the self-insured group business in California “turned in a solid performance in a very competitive market.”

CRM provides primary workers’ compensation insurance to employers in California, Arizona, Florida, Nevada, New Jersey, New York, and other states. The company reinsures some of the primary business underwritten and provides excess workers’ compensation coverage for self-insured organizations. CRM is also a provider of fee-based management services to self-insured groups in California and New York.

Net earned premiums from primary insurance and reinsurance increased 41.8% to $32.4 million from $22.8 million a year ago.
Twin Bridges, the company’s reinsurance subsidiary, accounted for much of the increase with $14.8 million of net earned premium, up from $6.0 million in the first quarter of 2007.

Net earned premium at Majestic, the company’s primary insurance subsidiary, was $17.5 million, compared to $16.9 million a year ago. the company said the change in the relative performances of the two divisions is largely accounted for by Twin Bridges’ reinsuring a 40% quota share of Majestic’s primary insurance business.

At Twin Bridges, the loss ratio was 37.1%, compared to 32.0% a year ago. Majestic’s loss ratio was 52.4%, compared to 65.9% in the same quarter last year.

The combined ratio for Twin Bridges during the first quarter of 2008 was 66.1%, compared to 60.0% in the same quarter the prior year. The combined ratio for Majestic was 86.8%, down from 100.1% a year ago.

Source: CRM Holdings, Ltd.

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