Record earnings help to further slash SIIS debt

Thursday, Sept. 12, 1996 | 11:59 a.m.

CARSON CITY -- The State Industrial Insurance System, on the brink of insolvency in 1992, posted record earnings of $363 million in fiscal 1996, according to a new financial statement.

The long-term debt, which had reached $2 billion four years ago, has been shaved to $1.35 billion, says the firm of KPMG, which prepared the annual financial statement for SIIS.

The report was to be presented today to a legislative committee that oversees the operation of SIIS.

The committee is trying to determine what type of surcharge must be imposed and on which companies in order to erase the unfunded liability of SIIS, which is faced with new competition from major insurance companies.

Assembly Co-Speaker Lynn Hettrick, R-Minden, chairman of the committee, said there are about a dozen recommendations on how to pay off the long-term debt, but he said he wants to hear the recommendations from SIIS and others.

A recommendation on the surcharge probably won't come until two more committee meetings.

SIIS General Manager Douglas Dirks said the unfunded liability of will continue to go down, "but I don't expect it to go to zero."

SIIS writes policies for about 44,000 employers in Nevada. Large companies such as casinos can run their own programs to cover workers injured on the job, and smaller companies can join in coalitions to provide the protection.

The KPMG financial report said the earnings for the fiscal year were $87 million over the previous year and the largest increase ever recorded by the agency. The total market value of the investment portfolio of SIIS is above $1 billion and has grown by 71 percent since 1992.

At that time, SIIS was forced to sell off some of its assets to meet the payments to injured workers. Because of the cutbacks in benefits by the 1993 and 1995 Legislatures, total claims expenses for 1996 were just under $250 million, or a drop of 43 percent since 1992. It's the lowest level of claims expense since 1990.

For the fourth consecutive year, the average claims expense fell, according to KPMG. Last year it was about $2,700 per claim. In 1992, the average claim expense was about $4,300.

Dirks said the improved financial conditions come at a time when SIIS is starting sweeping reforms. It has reorganized its claims department, is installing a paperless claims management program and has stressed programs to prevent fraud.

"Given our aggressive commitment to change, I am confident that SIIS can and will be the insurer of choice for most Nevada businesses," said Dirks, talking about the advent in 1995 of competition from private companies.