Firm Seeks Larger Slice of Workers’ Comp Pie : Insurance: Stanley Braun’s ex-boss took a company public with a flourish. Now Braun wants to do the same for Pac Rim Holding Corp.

If anyone has seen for himself how money can be made and lost in the insurance business, it’s Stanley Braun.

Between 1976 and 1984, Braun was an executive of Mission Insurance Group in Los Angeles, then one of the nation’s biggest providers of workers’ compensation insurance and a company that made a disastrous move into the reinsurance business. The year Braun left, Mission incurred a $198-million loss, and in 1985 it was declared insolvent and seized by regulators in one of the state’s biggest insurance failures.

Yet as Mission was crashing, Braun--who disclaims any role in Mission’s problems--was tapped to be president of Burbank-based Fairmont Insurance Co., another workers’ compensation insurer then headed by Joseph G. Havlick. Shortly thereafter, Fairmont was sold to Transamerica Corp. for $132 million of Transamerica stock, including about $7.5 million and $1 million that went to Havlick and Braun, respectively.

Both used those profits to start separate workers’ compensation insurers. Havlick formed CII Financial Inc. in Burbank, successfully took it public last year, watched its stock soar and earned more riches for himself.

Now, Braun is trying to do the same. Braun, 53, is founder and president of Pac Rim Holding Corp. in Encino, whose main operating unit is Pacific Rim Assurance Co. Since beginning operations in late-1987, Pac Rim has been profitable and growing rapidly, and last week Braun took it public.

Pac Rim sold 2.75 million common shares for $7.25 apiece Friday, raising $19.9 million for the company before underwriting fees. In its first day of over-the-counter trading, the stock rose to $7.75 a share as 1.5 million shares changed hands, and on Monday it closed at $7.25 a share.

Because the stock is just reaching the public, Braun declined comment on Pac Rim’s strategy beyond what is in the company’s prospectus, which states that Pac Rim wants the cash mainly to enlarge its business.

Pac Rim already has expanded quickly under its own inertia. In just its third full year in business, Pac Rim reported 1990 revenue of $74.1 million, up 79% from $41.4 million the previous year. Its profit last year was $4.8 million, nearly double the $2.6 million earned in 1989.

Braun tried to take Pac Rim public during 1990, but his timing was inopportune. Pac Rim announced the offering in August--the same month Iraq invaded Kuwait. The stock market went into a slump that lasted through October, and the initial public offerings of Pac Rim and many other companies were shelved.

The environment is kinder this time around. With the stock market having gained about 14% this year, the IPO market is reawakening and Pac Rim tried again.

Braun, as Pac Rim’s biggest stockholder, had owned 9.9% of its shares but the sale diluted his stake to 7%. Still, his remaining holdings now have a current market value of about $4.6 million.

Even before the stock sale, Braun hadn’t scrimped on his own pay. Last year, Pac Rim paid him $721,324 in salary, plus a $212,849 bonus and fringe benefits totaling $110,580--or $1.05 million in total compensation, or roughly 20% of the company’s total 1990 profit.

Compared with other insurance executives, Braun is very highly paid. Heidrick & Struggles, an executive compensation consulting firm in Los Angeles, said its most recent nationwide survey of chief executives’ wages in the property/casualty insurance field--in 1987--showed the average salary to be $259,800.

And lest there be any doubt that Braun is the one who makes Pac Rim go, the company has an $8.7-million “key man” life insurance policy should he die.

Despite Braun’s success with Pac Rim to date, the company remains a second-tier player in the $8-billion workers’ compensation market in California, the nation’s largest. Roughly 450 companies overall are licensed to provide workers’ comp coverage in the state, where the biggest insurer is the State Compensation Insurance Fund, a state-operated but self-supported agency with annual revenue approaching $2 billion.

Employers by law must provide insurance for workers injured on the job, and minimum rates and benefits of that insurance are in effect set by the state Department of Insurance. But in practice, workers’ compensation insurers do charge different rates.

That’s because they offer rebates, known as “policyholder dividends,” to their customers at the end of each policy year depending on how well the employer keeps its safety record high and its workers’ compensation claims low.

Some insurers have griped lately that high medical and legal costs are making the workers’ comp business in the Los Angeles area simply too expensive. But Pac Rim claims its profitable growth reflects its narrow focus of insuring mostly service businesses--restaurants, convalescent homes and the like--and light manufacturers in Southern California only, and by keeping a tight lid on costs.

The company’s executives also “are extraordinarily good at risk selection,” meaning they’re fussy about signing clients whose injury claims stay relatively low, said Dale Debber, chief executive of Data Control Corp., a Tarzana firm that provides the industry with trade data and that counts Pac Rim among its clients.

By contrast, it was Mission Insurance Group’s desire in the mid-1980s to enlarge its focus that contributed to that company’s demise. Mission expanded from its successful workers’ comp lines into the reinsurance business, whereby it shared risks with other insurance companies in exchange for sharing the policyholders’ premiums.

The reinsurance operation was Mission’s undoing, which in turn marked one of the biggest failures of renowned Cincinnati financier Carl H. Lindner, whose American Financial Corp. owned nearly 50% of Mission and at one point pumped $75 million into the company in a failed bid to keep it afloat.

When he left in 1984, Braun was executive vice president of Mission and president of its workers’ compensation unit, Mission Insurance Co. In an interview last week, Braun said he was responsible for workers’ comp only and that Mission’s reinsurance unit “was the problem. That drove the entire group down.”

Braun said the reinsurance unit did not report to him and that he was never named in any legal actions against Mission stemming from its collapse. Braun also said he resigned because he was dissatisfied with Mission’s diversification and wanted to run a company involved in workers’ comp only.

Why did Mission’s reinsurance effort fail? The industry then was marked by severe price-cutting, which slashed everyone’s profit margins and left Mission and others vulnerable to major claims. But state regulators and others placed much of the blame on certain of Mission’s reinsurance partners who failed to make claim payments. The state Insurance Department has been in court trying to collect about $300 million it contends is owed to Mission by the other companies.

Larry Becker, a former Mission general counsel, said “the position taken by the state Insurance Department was that Mission’s downfall in great part was due to the failure of its reinsurers to meet their obligations on a timely basis. Obviously, Mr. Braun didn’t have anything at all to do with that.”

PAC Rim Holding At A Glance Pac Rim Holding Corp. is the Encino-based parent company of Pacific Rim Assurance Co., which provides workers compensation insurance in California. The company, which began operating in late-1987, focuses on insuring light manufacturing and service businesses. Pac Rim also has a branch office in San Bernardino. For fiscal years ended Dec. 31; In millions