Table Of Contents
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OUR MISSION MONTANA'S INSURANCE CARRIER CHOICE
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LetterfromtheChairmanoftheBoard oj c
2002KeyFinancialHighlightsMontanaStateFundFacts Financials AuditorandActuarialLetters
ReportofManagement; BoardofDirectors/ExecutiveStaff
KMAN
OnbehalfoftheBoardofDirectors,itgives
megreatpleasuretosharewithyouthe
accomplishmentsofMontanaState
,
FundforFY2002.Throughoutthepast i
year,theinsurancemarketnationally
copedwithpriceincreasestocustomers,
declininginvestmentincomeand
increasedlosses. '
Inthistypeofbusinessenvironment,a r,^
competitivestatefundmustbeastabilizing^fDrcein
themarketplace.Itisofparamountimportancetothe
businessesinMontanathatthereisareliable,stable
workers'compensationsysteminplaceforthis
essentialandmandatorycoverage.MontanaState
Fundisthatorganization.Weunderstandthecritical
roleweplayintheeconomicandsocialwellbeingof
thecitizensofourstate.Itisa responsibilitythatwe
gladlyaccept,andit'swhatseparatesusfromthe
otherinsurancecarriersthatoperateinMontana.
Bymaintainingourfinancialstrengthandstability,
wecontinuetodeliverthehighestqualityworkers'
compensationinsuranceatcompetitiveprices.
Throughpartnershipswithourstakeholders,we
haveimprovedourservicetoourcustomers.
MontanaStateFundisadynamicorganizationthatis
constantlyfinetuningitselftomaintainourstatusas
Montana'sinsurancecarrierofchoiceandindustry
leaderinservice.
Thankstoouremployees,agents,and,most
importantly,ourpolicyholdersformaking2002
anothersuccessfulyear.Iwouldalsoliketothankthe
Boardmembersfortheircommitmenttothepeopleof
Montana.TheBoardandstaffoftheMontanaState
Fundcompriseagreatteam,andit'sapleasuretobe
abletoservewithallofyou.
HerbertLeuprecht, Chairman
IVehave
protected
Montana Byanymeasure,2002wasa compensationcoverage.During industry,itisreallyacontingent
businesses challengingyearforworkers' timeslikethese,theroleofa liabilityfund.Whilesurplus
througha compensationinsurers.The competitivestatefundtakeson generatesinvestmentincome
depression,
combinationofrisingmedical evengreatersignificance. thatbenefitsourpolicyholders
twoworld
warsand81 costs,decreasedinvestment MontanaStateFund(MSF) ontheirpricing,italsoserves
Cat-Criz income,higherreinsurance existstoprovideallbusinesses asareserveforanyfutureloss
games.
rates,andincreasesinclaim withcompetitivelypriced contingencies.Bymaintaining
Montanais
ourhome, losseshasresultedindeclining coverageandtop-of-the-line adequateresen^/esanda
andweare profitsandupwardpressureon service.Wehaveprotected strongsurplusbasedon
heretoserve pricing.Nationally,insurance Montanabusinessesthrougha insuranceindustrybest
thepeople carriersarestillcomingtogrips depression,twoworldwarsand practices,wecontinuetobe
ofourstate.
withtheaftershocksofthe 8iCat-Grizgames.Montanais astrongandlong-term
tragiceventsofg/nandthe ourhome,andwearehereto viablecarrier,committedto
impactsthatcontinuetoripple servethepeopleofourstate. Montanabusinesses.
throughoureconomy.
DuringFY02,wesawournet Forthefourthconsecutiveyear,
PositiveResultsin earnedpremiumgrowby24.8%, ourBoardofDirectorswasable
aDifficultMarket exceeding$92million.Our todeclareadividendforour
investmentincomeforthe eligiblepolicyholderswith
Montanacomprisesamere periodonceagainshowedan superiorsafetyrecords.
4/iothsof1%ofthenational increasebytopping$33million Inlightofthechallenges
workers'compensationmarket. fortheyear.Giventheturmoilin facingtheinsuranceindustry,
Whentimesgettoughinthe thefinancialmarkets,wedonot thisisasignificantresult
insuranceindustry,carriersoften expecttosustaintheseresults Since1998,$28millionhasbeen
finditnecessarytoconcentrate intothefuture.Lossreserves givenbacktoMontana
theirresourcesintheircore increased$20.5millionto businessesin
markets.Inthepastseveral $346.4million.Duringthis dividendsand
years, carrierswithdrewfrom sametime,we improved returnedpremiums.
ourstate,leavingMontana oursurplusby$7.6million. I Since1994,overall
businesseswithfeweroptions Oftenreferredtoas"surplus > premiumrates
forpurchasingworkers' intheinsurance havedecreased
inMontanaby38%.Duetothe creation.Wehavetransitioned environmentofteamwork,
marketconditionsoutlined fromatraditional creativityandtrust.
above,aswellasrecognizingan organizationalconfigurationto
additional$9millioninadverse onethatisadaptedtothe Thetruemeasureofwhowe
lostdevelopmentinFY02,we needsoftheinsuranceindustry. aregoesbeyondourfiduciary
founditnecessarytoincrease WeembarkedonPhaseIVof responsibilities.Weare
ourratesbyamodestamount. ourinternalrestructuringthat Montanans,andrecognizehow
anticipatethatforthenear weimplementedinNovember fortunatewearetocallthis
I
term,thistrendwillcontinueas 2000andarealreadyseeing placeourhome. MontanaState
wecopewiththechallenges improvementsinefficienciesin Fundplaysauniqueand
confrontingallworkers' anumberofoperationalareas. importantroleinourstate.
compensationcarriers.Fornow, Inourmostrecentpolicy- Asapublicentityandthe
employersneedtorecognize holders'survey,wesawa guaranteedmarket,we
thatpricesforcoveragewill markedimprovementinhow acknowledgetheobligation
increase.Itthereforebecomes ourcustomersviewMSF. wehavetoour908,000
incumbentonallofustodo AsMontana'seconomic citizens.Awell-runorganization
whatwecantoprevent structureundergoesanother isconstantlyfinetuning
accidentsintheworkplace. evolutionarychange,we itself,respondingtothe
Byincreasingourinvestmentin continuetofillourcriticalrole currentandanticipated
safetymanagementthrough astheguaranteedmarket. marketenvironment.
stationingourconsultants Wewillcontinuetomake Byincreasing
ourinvestment
acrossthestate,andoffering OurVisionforMontana improvementstoour insafety
freesafetytrainingseminars, organizationalstructurein management
M5Fiscommittedtodoingall Ourvisionasanorganizationis ordertomeettheformidable through
stationingour
itcantoreduceaccidents. thatMontanaStateFundis challengesthatlieahead. consultants
committedtothehealthand Workingcloselywithour acrossthe
FineTuningOurOrganization economicprosperityof BoardofDirectors,wewill state,and
Montana.Weaccomplishthis ensurethatMSFisproperly offeringfree
safetytraining
MontanaStateFundhasgone byprovidingsuperiorservice, positionedtomaintainour seminars,MSF
throughnumerousstructural leadership,withcaring competitivenessin iscommittedto
improvementssinceour individualsworkinginan themarketplace. doingallitcan
toreduce
accidents.
Ourvisionalsodifferentiates Duringthesetoughfinancial increasepremiumstoreplace
usfromotherworkers' times,somemayfeelthatitis surplususedforotherpurposes.
compensationinsurancecarriers appropriatetodivertour
inMontana.Weexisttoprovide policyholdersurplustothe Wehavenointerestin
Montanaemployersandtheir GeneralFund.Theintegrityof representingotherlinesof
employeeswithcompetitively oursurplusmustbepreserved. insurance.Ourvisionfocuses
pricedcoverage,andtoserve Onthiswearequiteadamant. onourcommitment,andin
themnomatterwhatchallenges Theroleofsurplusforan thatwearededicatedto
facetheinsuranceindustry. insurancecompanyservesasa providingthebestpossible
contingentliabilityfund,which workers'compensation
Ourfinancialstabilityiskeyin safeguardspolicyholdersand coverageinMontana.
allowingustoprovideMontana injuredemployeesfromadverse
businesseswithaviablechoice developments.Thesefunds Byfosteringanenvironment
forpurchasingtheirworkers' shouldonlybeusedforthe thatfocusesoncreativityand
compensationcoverage.Top- purposesforwhichtheywere trust,wetrulyhavebecomethe
ratedinsurancecompanies collected.Wearetakinga insurancecarrierofchoiceand
maintainadequatereserve leadershiproleinprotectingthe industryleaderinservicein
levelstoprovideprotectionfrom interestsofour26,000+ Montana. Ourgreatest
unanticipatedlosses.Sincethe customersandthethousands satisfactioncomesfromthe
terroristattacksofg/n,thecosts ofinjuredemployeesweserve knowledgethatbyworking
forreinsurancenationwidehave onanannualbasis.Theyhave togetherwehavebeenableto
skyrocketed.ForMontanaState puttheirtrustinus,andwewill makeadifferencetothepeople
Fund,weexperienced vigorouslyopposeanyattempt whoweserve.
reinsurancecostincreases toredirectthesefundsfor
ofover300%,withgreaterlevels otherpurposes.Weknowcosts
ofexposure.Giventheseevents, areontheincreaseforworkers' CarlSwanson,President/CEO
ourstrongsurplustakesoneven compensationinsurancedriven
greatersignificance. primarilybymedicalcost
inflation.Wedonotwantto
employees
designedthis
newemployee
pintosignify
ourvisionand
commitment
toMontanans.
Wedealwithinjuredemployeesonadailybasis.
Weknowwhatitmeanswhenanindividualcan't
workduetoanunfortunateaccident.That'swhy
wehaveredoubledoureffortstohelpemployers
identifyandeliminatethecausesofaccidents
beforetheyhappen.Thereisnosubstitutefor
workplacesafety.Becauseunsafebehavior
contributestomorethan90%ofallinjuries,it's
essentialthatbusinessescommitthemselvesto
promotingthedevelopmentofasafetyculturein
theirorganization.
MontanaStateFundhastakenaproactive
approachtoprovideemployerswiththebest
possibletrainingandinformationavailable.We
knowthatasafeworkingenvironment
contributestoacompany'soverallsuccessand
thewell-beingofemployees.Oneofthekey
factorsthatcanhelpcontrolrisinginsurance
costsisaninvestmentinworkplacesafety.That's
whyweoffered36freesafetyworkshopsinFY02
acrossthestatetogiveemployersthetraining
theyneededtodevelopsafetyprogramstailored
tofittheirneeds.Ourworkshopsareopento
anyemployer,notjustMSFpolicyholders.The
safetyandwelfareofallMontanaworkersis
ourprimaryconcern.
Thisyearwewerealsoabletodeclareour
fourthconsecutivedividendforqualifying
policyholders.Thisismoneythatstaysin J
Montanaandisputbacktoworkinour
communities.Atthesametime,we
strengthenedoursurplusandreservessowe "Ik^nowthismight
cancontinuetooperateasalong-termviable " cliche,butmy
insurancecarriercommittedtothebusinesses
inourstate.Afinanciallystrongandstable lAjrCllIjjjjiiJiijiKiid*"
MontanaStateFundcontributestothegrowth ii\i\\'.'t:,nr:ird':i\\'\\'/di\
andeconomicprosperityofMontana.
nianb'df."
Rich Daniels - Injured
Employee Missoula, MT
-
PKOSPEKITy
Since1999,over$28millionindividendshavebeenpaid
topolicyholdersandputbacktoworkInour
communities.Whiledividendsaredependentonresults
andcannotbeguaranteed,MSFanticipatesthatour
strongfinancialconditionwillallowustosupportthe
continuationofthisprograminthefuture.
'4 'A
i'::iinpDftiint'iD/nenm^my
when
jderstai
workers*! KID!}
insuranceprogru,
yiontanaStateFunu <
adegreatstridesovertl
yearstoimprovetheir
^
customerservice.We
appreciatetheir
determinationand
dedicationtoMontana
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