BusinessReport.com

Company of the Year [over 100 employees]: Louisiana Workers’ Compensation Corporation

Total employees: 300+

Year opened: 1992

Annual payroll: $18.2 Million

Accomplishments: $45 million in dividends and 7.6% reduction in premium rates for 2007.

When Louisiana Workers’ Compensation Corporation was formed in 1992 by the Louisiana Legislature to fill an ominous void left by a collapsing workers’ compensation insurance market, many predicted failure.

That didn’t happen. Not only did LWCC succeed in bringing stability back to the market a decade ago, in the intervening years it has retooled itself into a competitive machine that in December 2007 delivered its best dividends ever—$45.5 million, or about 30% of its net earnings. The money will be distributed among LWCC’s 20,000-plus policyholders/owners—business owners around the state. The milestone dividend payout beats LWCC’s previous record of $23.2 million in April 2007.

The group also managed to lower its rates by 7.6% in the aggregate for 2007. Since 1992, it has lowered rates by 40%. Although created by state government, LWCC is a private company, not a quasistate agency as some people think.

“This was the most unique startup that we’ve probably ever witnessed in Louisiana,” says Kristin Wall, the company’s CEO. “We literally transitioned over some 25,000 policyholders overnight, and had to have systems in place. That was quite an undertaking.”

The idea was for LWCC to bring stability to the market and foster competition in the industry. It did that. By 1998, the market—which earlier in the decade had scared off one insurer after another—was back with bells on. LWCC had to learn to compete, which partly entailed shrinking its staff—from around 450 employees then to just over 300 now.

Wall, who has been with LWCC since its inception, has shepherded the company through major changes since becoming CEO in March 2006. Central to this makeover has been better communication among the organization’s various components, extending to the agents who sell LWCC’s business, policyholders, health care providers and even injured workers themselves. Much of the business that used to be done by telephone is now done face to face.

“Communication has come a long way,” Wall says. “It’s so important. It’s a journey, and once you become very purposeful about communications you realize you’ll never get there fully.”

Another big change has been the move to a specialization model when it comes to claims. Rather than having one person handle a claim from stem to stern, which is how things were done for years, specialists now handle various aspects of a claim—from investigation and payment determination to resolution and closure. It’s a much smarter way to do business, Wall says, noting that technology has also been a big part of the revamp.

And was it changes like these that allowed LWCC to hand in such a stunning performance last year? Well, yes, but it had a little help: Not only was 2006-07 the best year in LWCC’s history, it was the best year for the entire U.S. property and casualty industry since 1988, Wall says. LWCC rode the wave and rode it well, though it won’t necessarily get the same chance next year.

Then there was the influence of hurricanes Katrina and Rita, which changed everything. The state lost 8,000 businesses. LWCC lost 1,000 policyholders. But then suddenly everybody was in the construction business.

“At the same time, other opportunities were created for businesses to grow in Louisiana and, buddy, they grew,” Wall says. “Businesses grew last year. Payrolls grew. People made more money.”

Payrolls grew because of the boom in construction, oil and gas and related industries, and grew even more because of a labor shortage that became acute after the storms. The premiums LWCC charges, meanwhile, are based on the size of a company’s payroll. At the same time, claims fell; Wall says it’s human nature that, when there’s real money to be made, people would rather work than convalesce. While payroll and premiums rose, risk grew much more slowly—which equaled record dividends and slashed premiums.

Wall also is glad the company took a hard look at its $1.2 billion in invested assets a couple of years ago to make sure they were being managed prudently. It turned out LWCC’s equity market exposure wasn’t huge. Still, what if the market fell off a cliff? What if something dreadful happened in Asia or the United States? To be safe, LWCC switched over to more of a fixed-income portfolio, which in the end spared the company a great deal of pain. About $15 million of the $45.5 million in dividends came from selling off the equity portfolio.

“Which is why I talk about effective conversations,” Wall says. “We could have not had that conversation, and all those conversations that ensued. I wish I could say it was my idea.”