Business
BBSI Announces Transfer of $116 Million of Claims Liabilities and Renewal of Fronted Workers’ Compensation Program with Lower Retention Levels
VANCOUVER, Wash., July 06, 2020 (GLOBE NEWSWIRE) -- Barrett Business Services, Inc. (BBSI) (NASDAQ: BBSI), a leading provider of business management solutions
About this update from Barrett Business Services, Inc.
[{"type":"text","content":"VANCOUVER, Wash., July 06, 2020 (GLOBE NEWSWIRE) -- Barrett Business Services, Inc. (BBSI) (NASDAQ: BBSI), a leading provider of business management solutions and one of the largest professional employer organizations (PEO) in the U.S., announced today that it has entered into a loss portfolio transfer (LPT) agreement to effectively remove all outstanding workers’ compensation claims obligations for claims incurred on its fronted insurance program between February 1, 2014 and December 31, 2017. This transaction reduces BBSI’s outstanding workers’ compensation liabilities by approximately 27%.\n The LPT results in the immediate removal of $116 million of outstanding claims liabilities from BBSI’s balance sheet along with a corresponding reduction in restricted cash and investments. The transfer price of the LPT was approximately equal to the book value of the claims liabilities with no material gain or loss on the transaction. BBSI has no exposure to unfavorable claims development on these years, but the agreement allows for potential participation in future favorable development. BBSI also announced the renewal of its fronted program effective July 1, 2020. The renewed program includes a reduction in loss retention from $5 million per occurrence to $3 million and a multiyear commitment until 2022. As a result of the LPT and BBSI’s overall continued favorable claims experience, third-party collateral requirements have also been reduced significantly. These reductions will result in a one-time increase in unrestricted cash and investments at June 30, 2020 of approximately $48 million, with additional cash flow benefits to be realized throughout the program term. “We have made great strides in our workers’ compensation program over the last several years as demonstrated by our consistent and favorable claims experience,” said Gary Kramer, BBSI’s President and CEO. “This work and the quality of our program have created new opportunities for us to de-risk our model. By removing $116 million of claims liabilities from our balance sheet and lowering our retention on future claims, we are able to bring even more predictability and stability to our operations and financial results.” Forward-Looking Statements Statements in this release about future events or performance, including expectations regarding the effects of the reductions in w...