State Fund's 2006 year-end financial statements are awaiting final approval by the Department of Insurance and will be posted upon the Department's release. This process has been suspended by agreement during our internal review. We apologize for this inconvenience and will make them available at the earliest possible time.

Letter to Policyholders From Larry Mulryan

Dear State Fund Policyholder,

State Fund has faced many daunting challenges in our 93-year history, but challenging times aren’t unique to our organization. What stands out about State Fund’s history is that for almost a century we have overcome a myriad of challenges while never losing sight of our mission to provide California employers with a ready and reliable market for workers’ compensation insurance, to promote safe workplaces, and to help injured employees return to the workforce.

In 2006 State Fund grappled with significant changes in the way we do business, major shifts in the marketplace, and intensive scrutiny of our management practices. Despite these concerns, State Fund maintained solid financial footing and continued to provide stability to the California workers’ compensation system.

Once released, the end-of-year financial report will reveal that our financial performance in 2006 was solid and that the California workers’ compensation insurance market can continue to count on State Fund to serve as bedrock for future stability.

As State Fund navigated through a more competitive marketplace, questions arose regarding our payments of administrative fees for policyholder group insurance programs. These questions led two members of our Board of Directors to step down and later resulted in the departure of State Fund’s president and a vice president. In March of 2007 I was brought in by State Fund’s Board of Directors as an Interim President and CEO. Since then, State Fund has worked closely with the Department of Insurance, outside counsel, and other experts to conduct a review of our operations, including a thorough examination of the group programs. 

I am pleased to say that, during a time when such events could prove distracting, State Fund remained committed to producing positive results for our policyholders and their injured employees. For 2006 these results included:

• An additional 24.4% cumulative rate reduction for policyholders.
• Full implementation of our Electronic Claims File project – increasing efficiency for our claims adjusters.
• Continued enhancements to State Fund Online – our complete online product serving brokers, policyholders, and associations.
• More than 100 seminars statewide as part of State Fund’s Employer Education Series that focused on important safety topics, such as heat-illness prevention, ergonomics, and utility safety. Several of our seminars were conducted in partnership with Cal/OSHA, the Public Utilities Commission, and other leading experts in the field of occupational safety and health.

We also took the opportunity to look inward and make significant improvements to our organizational structure. We have made great progress in efforts to:

• Restructure and bolster our leadership team.
• Tighten our internal controls.
• Strengthen our corporate governance.
• Reformulate our group administrative fee program.

I want to thank all our policyholders for your forbearance during this period of transition. State Fund employees, brokers and agents, the medical community, and other partners also deserve thanks for their hard work providing coverage to California employers and benefits to their injured employees, and for promoting safe workplaces.

State Fund has hired a permanent President, Janet Frank, who comes to us with a wealth of experience gained through a long and successful career in the insurance industry. While there will be much work still to do when she assumes State Fund’s presidency, Janet Frank will take the helm of a State Fund with solid financial strength, improved corporate governance, and greater accountability. I am confident that under her leadership State Fund will remain a cornerstone for California employers and their employees in the vital role we have played for nearly 100 years.

Sincerely,

Lawrence E. Mulryan