At the Louisiana Insurance Guaranty Association’s Dec. 3 meeting, the board of directors voted to approve LIGA’s budget for 2021. LIGA’s expenditures are expected to be a little more than $7.4 million more than revenue in 2021 according to the budget.
LIGA expected its expenditures to be nearly $6.95 million more than revenue in 2020, according to the budget approved last year by the board. For 2020, LIGA budgeted nearly $7.5 million in revenue and $14.4 million in expenditures with an expected reduction in assets of $6.9 million, but as the end of the year approaches, LIGA expects revenue to be $9.8 million and expenditures to be $8.2 million by the end of the year, an increase of $1.6 million in assets, an increase in the bottom line that is $8.5 million more than budgeted.
Since LIGA had no plans to assess member companies in 2020, distribution from liquidators was expected to be LIGA’s largest revenue source. Interest income was second. LIGA expects by the end of the year to receive $7.2 million in distributions from liquidators, $2.2 million more than the budgeted $5.0 million in distribution from liquidators for 2020. LIGA budgeted $5.0 million in distributions from liquidators for 2021.
LIGA expects to receive almost $2.74 million in interest income through the end of 2020, almost $14,000 less than the budgeted amount of $2.75 million. LIGA has budgeted $2.80 million in interest income for 2021. At the end of 2020, LIGA expects interest income to be offset by a $93,867 net loss in investments, a little less than the $119,596 net loss in investments budgeted for 2020. LIGA budgeted a gain in investment value of $26,275 in 2021.
LIGA expects 2021 revenue to be $2.1 million less than the $9.8 million that it expects year end 2020 revenue to be. LIGA’s budgeted revenue for 2021 is approximately $7.7 million.
On the expenditure side of its budget, LIGA expects to pay out $15.0 million for losses and expenses, both allocated and unallocated, for 2021, which means LIGA will use approximately $7.4 million of its assets during the year.
The $15.0 million in total expenditures budgeted for 2021 compares to an expected $8.2 million in total expenditures by the end of 2020, or approximately $6.2 million less than LIGA budgeted for 2020.
As one would expect for an organization created to pay claims, LIGA’s largest outlay is to cover the losses of insolvent admitted property/casualty insurance companies. LIGA estimates claims paid by the end of 2020 will be $5.1 million, nearly 43 percent off the $9.0 million budgeted for 2020. The association expects to pay $9.0 million in claims for 2021.
Second to claims on the allocated expenditure side of the income statement is attorney fees, that are expected to come in at $1.4 million by the end of 2020, approximately 44 percent less than the $2.5 million that was budgeted for 2020. LIGA budgeted $2.5 million for attorney fees in 2021.
During 2020, LIGA collected $368,024 from the Second Injury Fund and $170,818 in net worth recoveries. (High net worth claimants are barred by statute from recovering losses from LIGA.)
LIGA expects total allocated expenditures for 2020 to be $6.0 million less than the $12.3 million budgeted in 2020. The amount budgeted for 2021 is almost $12.99 million, $6.6 million more than the $6.3 million expected to be expended by the end of 2020. In LIGA’s budget, allocated expenditures include claims, unearned premium and loss adjustment expenses, such as examiner fees, outside claims expense, attorney fees and legal expenses.
By the end of 2020, LIGA’s anticipated claims payments will amount to 80.9 percent of total allocated expenditures, including claims. According to LIGA’s 2021 budget, claims payments will account for 73.1 percent of total allocated expenditures.
LIGA expects total unallocated expenditures for 2020 to be $263,940 less than the $2.14 million budgeted for 2020. LIGA has budgeted to spend $2.07 million on unallocated expenses in 2021.
The most expensive category of unallocated expenditures (basically overhead) is salaries, which LIGA expects to come in at $937,342 in 2020, compared to the $962,025 budgeted. LIGA has budgeted $997,700 for salaries in 2021, a 6.4 percent increase over the expected actual amount in 2020.
The second most expensive category of unallocated expenditures is data processing; LIGA expects to end 2020 having spent $392,296, compared to the $500,000 budgeted in 2020. LIGA’s board voted to budget spending $265,000 on data processing in 2021, a 32.4 percent decrease from the expected actual amount in 2020.
The next most expensive category of unallocated expenditures is employee benefits, on which LIGA expects to spend $133,757 by the end of 2020. LIGA budgeted $135,180 for employee benefits in 2020 and budgeted $139,500 in 2021, a 4.3 percent increase over 2020’s budgeted amount.
The board voted unanimously to approve LIGA’s budget for 2021.