CII Net Up, but Insurer Cautions About Claims

CII Financial Inc., a workers compensation insurer based in Burbank, said its third-quarter earnings soared 80% from a year earlier. But it warned that certain workers’ compensation claims could drag down its future results.

In the quarter that ended Sept. 30, CII’s net income climbed to $3.1 million from $1.72 million a year earlier, and its revenue rose 24% to $28.7 million from $23.1 million.

The company’s net income for the first nine months of 1991 doubled from a year earlier, to $8.98 million from $4.46 million, and its nine-month revenue increased 27%, to $79.6 million from $62.6 million.

CII, whose main unit is California Indemnity Insurance Co., said the rising number of “stress and strain” injury claims by workers has forced the company to form a special unit to “scrutinize” such claims for potential fraud. But if that action does not end “these abuses,” CII might have to boost its loss reserves “to account for the frequency and severity” of these types of claims, the company said.

That unsettled Wall Street, and CII’s stock plunged $2.75 a share, or 15%, to $15.75 after CII’s announcement last week. The stock closed Monday at $15.625 a share in American Stock Exchange composite trading.