Private equity firms Lee Equity Partners and Elements Health Investors completed a recap of Carisk Partners last week, marking one of the very few deals to be done over the last many months.

While this may be an indication that things may be moving, there are several reasons we aren’t likely to see a return to the halcyon days of a decade ago.

First, over the last two years Carisk is one of the very few companies to actually get a deal done. Several others tried and failed, mostly because:

a) sellers’ expectations were out of whack with what buyers would pay;

b) due diligence revealed softness in numbers &/or growth plans &/or management depth;

c) current debt service costs made a deal too costly; and/or

d) the property is/was too large (more at the mercy of industry trends than smaller entities, very hard to grow share when you are already huge)

Carisk has very experienced and quite effective management, terrific marketing, some of the best sales people in the industry, a strong culture and a coherent strategy for growth and expansion.

Second the structural issues inherent in workers’ comp, namely it is a highly mature, consolidating/consolidated industry with very low to negative growth make it less attractive than, say, generative AI.

Third, debt – which makes up most of the purchase price of pretty much every sale – is still expensive compared to rates over the last decade or so. Investors will eventually get over mid-to-high single digit interest rates, but haven’t yet.

Lastly, reality is work comp is just not that interesting: many execs are highly risk-averse if not downright lazy; innovation is frowned upon if not actively avoided; and complacency is rampant as is chronic under-investment in IT and human capital.

The few transactions that have closed – HomeCare Connect and now Carisk most prominent- are really solid companies with great management teams, solid track records and a clear path to substantial growth. The ones that didn’t close were…not.

That’s not to say some companies won’t test the waters, but don’t get caught up in rumors about this or that company getting sold or preparing for a sale or going to market or talking to investment bankers.

Bankers are ALWAYS talking up potential deals…it is how they gin up business – and the work comp rumor mill loves to help ’em out.

What does this mean for you?

A great company will always be valuable. 

disclosure – I have a (very small) financial interest in Carisk.

A farce.

Ok folks, I’m gonna get snarky here.

First, there’s the title. I think they meant “insurers” not “insurance”… the latter is quite consistent across all insurers

A while back PropertyCasualty360’s reported on a “rating” of workers’ comp insurers by Forbes Advisor, an entity which doesn’t appear to take its ratings very seriously.

Everyone loves lists – done right they can reward the best and force others to up their game while helping consumers pick the best offerings. Done poorly they mislead, provide zero value, and result in buyers making decisions based on useless/misleading/wrong criteria.

In this instance, Forbes’ understanding of what makes for a “good” insurer is about as deep as my understanding of quantum mechanics.

In fact, the article looks like it was created by a beta version of ChatGPT with zero editing by anyone who passed a high school English course. (I did try to contact the author but there’s no link or contact info other than a name on Forbes’ website, and I’m not going to waste even more of my time trying to track this guy down)

okay, the details.

From PropertyCasualty360 (who really ought to know better):

Forbes Advisor based 90% of the scores [sic] the level of upheld complaints made to state insurance departments and collected by the National Association of Insurance Commissioners. The remaining 10% of the scores were based on the financial strength assigned to the company by AM Best.

Well. I’ll spare you, dear reader, my minor criticisms and focus on the major ones.

1. What??? 90% of the “rating” is based on complaints which have little to nothing to do with how good a business partner a carrier is.
2. What about cost, dividends, time to first report of injury, claim closure rate, claim frequency, sustained return to work…Jesus there’s about a million criteria more important than complaints to regulators.
3. That said, a major driver of complaints would be certainly driven by claim volume…so the bigger the insurer, the more likely they would a) have complaints and b) the more complaints there would be. No discussion of this in the “survey.”
4. Sometimes people complain because they don’t want to go back to work, don’t like having to go to specific providers, want brand drugs instead of generics, and on and on. Sure some of these complaints would likely be dismissed by regulators, but others would likely not be “dismissed.”
5. Financial strength – well, given many carriers are A, A – or A+ rated, how useful is this? Might as well say “hey, only buy WC insurance from an A rated carrier!”
6. What about:
   1. customer satisfaction?
   2. injured worker satisfaction?
   3. broker rating (be careful, but a whole lot more useful than “complaints”)
   4. claim closure rate?
   5. medical provider satisfaction?
   6. Net promoter score?
   7. employee rating of their employer e.g. Glassdoor?
   8. best places to work ratings?

The result is a wholly useless exercise which may encourage clueless buyers to make bad decisions based on a “survey” which looks like nothing more than clickbait.

I’ve seen better/more useful/more credible ratings for the top home margarita blender kits, highest rated shoelaces and best pencil erasers.

What does this mean for you?

Another sign of the impending apocalypse. 

The Triangle Shirtwaist Fire was the horrific result of unregulated capitalism. 146 people – mostly women -burned to death or were smashed on the pavement nine stories below the factory floor when fire raged through their Greenwich Village workplace.

The mind reels when contemplating the last moments of the victims, who moments before had been looking forward to a Saturday night with friends and family, and a Sunday (gasp!) off work. When the fire below burst through the stairwells and floor it found bins of dry cotton, wooden worktables, beams, walls and floors.  There was no escape – the owners had locked the exit doors. The conflagration exploded in seconds, and women and men young and old were gone in moments.

And yes, this was foreseen, and preventable. This from David Drehle:

Despite the New York City fire commissioner’s well-publicized prediction that a deadly blaze in a high-rise loft factory was inevitable — and despite multiple small fires during working hours at the Triangle — the owners ignored a consultant’s advice to perform regular fire drills to train workers for an emergency. And they declined to enforce their posted rule against smoking near the highly flammable cotton scraps their workers snipped by the ton.

Long ignored, for over a century there was no memorial, no permanent reminder of the tragedy, no tribute to the mostly-immigrant women who died that awful day. That ended when Mary Ann Trasciatti and others’ relentless effort culminated in this…the steel runs along the building, listing names and ages of the victims and quotes from survivors. It will be completed early next year.

Good friend and colleague Rick Sabetta reminded me of this, and I am indebted to him.

What does this mean for you?

We would be well-advised to learn a lesson from days past, a lesson seemingly ignored by those looking to employ young kids in dangerous jobs and downplay the very real dangers of heat exposure in agriculture and logistics.

Old coal-fired electric plants are being converted to manufacturing, residential, office, and recreational uses. These are massive undertakings involving dismantling giant buildings; taking down crumbling smokestacks; removing hundreds of tons of asbestos; shredding hundreds of tons of steel, copper and aluminum; and hauling hundreds of truckloads of debris.

photo credit Daniel Lozada, NYTimes

Then there’s site remediation to clean up hazardous and dangerous residues from decades of processing and burning coal.

Developers estimate around 20 coal-burning plants are candidates for this type of re-development; many others may be taken down as well. A quick scan indicates a plurality of plants are located in Michigan, Texas, Indiana and Tennessee. 

Once the demolition and remediation is done, it’s time to build – and not just commercial and residential projects. One of the main attributes of these plants is they are tied into the grid, making them prime locations for green energy production in the form of solar and wind farms.

From the NYT:

In Illinois alone, at least nine coal-burning plants are on track to become solar farms and battery storage facilities in the next three years. [emphasis added] Similar projects are taking shape in Nevada, New Mexico, Colorado, North Dakota, Nebraska, Minnesota and Maryland. In Massachusetts and New Jersey, two retired coal plants along the coast are being repurposed to connect offshore wind turbines to the regional electrical grids [emphasis added]

Building and operating renewable energy projects has long been cheaper than fossil fuel plants. The barrier “is not economics anymore,” said Joseph Rand, a scientist at the Lawrence Berkeley National Laboratory, which conducts research on behalf of the U.S. Department of Energy. “The hardest part is securing the interconnection and transmission access.” [which is not an issue when old coal plants are re-purposed]

Which all translates to lots and lots of very well-paid workers doing risky work for years.

What does this mean for you?

More workers’ comp premiums and claims.