BrickStreet report shows 2007 profit of $185 million

By Jessica Legge
Times West Virginian

FAIRMONT March 26, 2008 01:59 am

— Last week, BrickStreet Mutual Insurance Co. filed its annual financial report with the West Virginia Offices of the Insurance Commissioner.
The document showed a profit of $185 million for 2007, “which we’re really proud of,” said Gregory Burton, president and CEO of BrickStreet.
“We’re going to be able to build our reserves so that we have dollars set aside in the future to pay claims for injured workers that happen later on,” he said.
West Virginia’s workers’ compensation system changed from a state system to the private market when Gov. Joe Manchin signed Senate Bill 1004 into law in February 2005. Workers’ comp insurance in the state is under the regulation of the insurance commissioner and an industrial council.
BrickStreet, a start-up insurance company, officially began its operations on Jan. 1, 2006, as the first private company to offer workers’ compensation coverage to state businesses.
BrickStreet, which has a new headquarters in downtown Charleston, will remain the single source until July 1, when private insurance carriers that are licensed to do business in West Virginia can enter the market.
In 2006, BrickStreet got set up with a 10-year surplus note of $200 million from the state and has payments scheduled to settle the loan. BrickStreet has already paid $15 million to the insurance commissioner, and a payment of $40 million is slated for July 1.
When BrickStreet recently filed its financials, the company asked if it could pay more on the surplus note. If the insurance commissioner agrees, BrickStreet will instead pay $90 million to $100 million before the year is over.
“Once we get the surplus note paid off, we’re going to be able to possibly give dividends back to our policyholders,” Burton said.
The current interest rate on the note is 1.5 percent, but that rate will move to prime — 5.25 percent — on Jan. 1, 2009.
Burton said paying off the debt early will allow money to go into the Old Fund, which was set up to take care of all the liabilities before July 1, 2005, and help reduce that fund.
BrickStreet will remain tax exempt until the end of the year. Without this tax break, the company would have paid $195 million in taxes, which would have affected its profit considerably. In 2009, the company will start paying a tax rate of 35 percent.
“We think because of the leadership of Gov. Manchin and the Legislature and the insurance commission and BrickStreet’s board of directors that privatization is working in West Virginia, and we look forward to the market opening up on 7/1/08,” Burton said.
He said BrickStreet has gone through some organizational restructuring and is processing claims and investigating fraud more efficiently as a result. In 2007, more than 40,000 claims were reported. Also with the move to privatization, West Virginia’s workers’ comp rates have gone down and have come into line with other states.
E-mail Jessica Legge at jlegge@timeswv.com.