BBSI announces a new insurance program that
Also completes $ 53 million transfer of additional claim liabilities
VANCOUVER, Washington, July 06, 2021 (GLOBE NEWSWIRE) – Barrett Business Services, Inc. (âBBSIâ or the âCompanyâ) (NASDAQ: BBSI), a leading provider of business management solutions and l ‘one of the largest employers’ organizations (PEOs) in the United States, has announced that effective July 1, 2021, it has entered into a new workers’ compensation program in which it will no longer maintain any risk of loss arising from workers’ compensation claims.
The new program allows for premium adjustments based on the overall performance of the portfolio. If the claims progress favorably, BBSI can participate in savings up to a maximum of $ 20 million for a twelve month insurance period. If the claims evolve unfavorably, the additional premium is capped at $ 7.5 million for a twelve-month insurance period. This structure limits downside risks while continuing to allow BBSI to benefit from its best underwriting, risk mitigation and claims management practices.
Approximately 82% of BBSI’s workers’ compensation risks are covered by this new program.
There is no expected impact on workers’ compensation expenses from eliminating claim retention, as the premium for the new program matches the existing loss accrual rate it replaces. The agreement includes a multi-year commitment until June 2023.
BBSI also announced that it has entered into a Loss Portfolio Transfer (LPT) agreement to effectively remove an additional $ 53 million of overdue workers’ compensation claims obligations from its balance sheet. This transaction primarily includes claims incurred in 2018 and reduces BBSI’s unpaid workers’ compensation liabilities by approximately 15%. The LPT results in a corresponding reduction in restricted cash and investments of $ 52 million and a transaction gain of $ 1 million.
BBSI is not exposed to an unfavorable development on these claims, but the agreement allows to participate in a favorable future development. As a reminder, in June 2020, the Company entered into a similar LPT to remove workers’ compensation claims obligations for claims incurred between February 1, 2014 and December 31, 2017.
These transactions will result in a one-time increase in cash and unallocated investments of approximately $ 13 million in July 2021, with additional cash benefits to be realized over the life of the program.
âThis milestone is the culmination of many years of hard work as we implemented our long-term risk reduction strategy into our business model,â said Gary Kramer, President and CEO of BBSI. âThe ability to complete these transactions, including another significant LPT, is yet another testament to the quality and consistency of our workers’ compensation program. We are proud to now bring even more predictability to our financial results while continuing to provide the same exceptional service to our SMB clients.
Statements in this press release regarding future events or performance, including expectations regarding the effects of reductions in workers’ compensation claims liabilities and loss retention levels, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from future results expressed or implied by these forward-looking statements. Such factors relating to the Company include our ability to retain existing customers and attract new customers, difficulties associated with integrating customers into our operations, economic trends in our service areas, the potential for significant discrepancies by in relation to future workers ‘compensation claims, changes in the regulatory environment for workers’ compensation in our primary markets, security breaches or failures in the Company’s computer systems, collectability of accounts receivable, changes in effective tax rates on salaries and federal and state tax rates, carrying amounts of deferred tax assets and goodwill (which may be affected by our future operating results), the impact and potential changes to the law on patient protection and affordable care, escalating costs medical and other healthcare legislative initiatives on our business, the effect of conditions in the global capital markets on our investment portfolio, and the availability of capital, borrowing capacity on our revolving credit facility or letters of credit necessary to meet government security deposit requirements to maintain our status as a self-insured employer qualified for workers’ compensation coverage or our frontal insurance program. Additional risk factors affecting our business are discussed in point 1A of Part I of our 2020 Annual Report on Form 10-K and in subsequent reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Although forward-looking statements help provide complete information about the Company, readers should be aware that forward-looking statements are less reliable than historical information. The Company assumes no obligation to update or revise any forward-looking statements in this press release to reflect events or changes in circumstances that occur after the date of this press release.
BBSI (NASDAQ: BBSI) is a leading provider of business management solutions, combining human resource outsourcing and professional management consulting to create a single operational platform that sets it apart from its competitors. The Company’s integrated platform relies on expertise in payroll processing, employee benefits, workers’ compensation coverage, risk management and workplace safety programs, and human resources administration. BBSI’s partnerships help businesses of all sizes improve the efficiency of their operations. The company works with more than 7,500 clients across all industries in 40 states. For more information, please visit www.bbsi.com.