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Zenith’s strong results

In another sign that the Workers Comp world has gotten much better as of late, Zenith Insurance announced yesterday that it’s earnings had jumped from $26 million from Q1 2004 to $39 million in Q1 2005. Zenith is primarily a workers comp writer, with both primary and reinsurance lines, both of which showed improvement.
Most striking was the combined ratio, a measure of the ratio of total claims and administrative costs to premium. The latest quarter showed a combined ratio of 84.9% for the primary workers comp line, a stellar result by any measure.
Also notable was the increase in premium written of 29%.
Zenith has long been noted as a carrier that refuses to cut prices to build share, and the results of that intelligent approach are now apparent. Their one gap has been a lack of focus on the managed care side, a situation that appears to be on the mend. If Zenith can bring the same discipline and focus to managing medical expenses that it exemplifies in underwriting, results should improve even more.
What does this mean for you?
While all looks rosy, now is the time to watch warily for signs of cost-cutting and lax underwriting, harbingers of a decline in profitability and potentially a return to a softer market. While Zenith is one of the few carriers to avoid this type of suicidal behavior, do not be surprised if other carriers decide they want more volume, and start cutting prices. Unfortunately, workers comp writers seem quite unable to make a good time last

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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