It has no competition and a captive client base, but BrickStreet Mutual Insurance Co. has derived the vast majority of its earnings in the past two years from its federal tax exemption.

The workers compensation insurer's annual report, filed with the state Insurance Commission this week, reveals 2007 profits of $185 million, compared with $70.7 million in 2006. Over those two years, it has avoided paying $194 million in taxes - equal to 76 percent of its profits - under the three-year tax exemption secured by the state.

"We continue to provide better customer service, and we got injured workers back to work faster in '07 than '06, but we also don't pay taxes right now," said Greg Burton, BrickStreet's president and chief executive officer.

The company was spun off from the state's Workers' Compensation Division in 2006, and it enjoys the tax break and monopoly status under the state legislation creating it three years ago.

The top executives' salaries were largely unchanged from 2006 levels, which represented huge increases from their salaries when holding similar jobs at Workers' Compensation.

Burton earned $183,373, down 5.75 percent from 2006. Christopher Howat, chief financial officer, took home $176,124, up 12 percent; Phillip Lynch, senior vice president for strategic planning, $163,821, up 3.3 percent; Philip Shimer, senior vice president for the strategic business group, $167,635, up 6.9 percent; Thomas Obrokta, general counsel, $173,498, down 3.8 percent; William Brotherton, deputy general counsel, $214,907, up 15 percent; Harry Mahler, senior vice president for insurance operations, $261,795, down 4.8 percent.

In all, at least nine BrickStreet executives earned more than $150,000.

Burton said the salaries were comparable to or lower than those of peers at similarly sized compensation insurers.

"We realize there are some people who look at us as a quasi-government organization," he said. "But we're not; we're a private company."

A chief executive at a compensation insurer with BrickStreet's claims and client portfolio would typically earn from $300,000 to $500,000 annually, Burton said.

"When our executive team came over from the state, we didn't want to get exorbitant pay," he said. "All that's been looked at."

An outside compensation consulting firm, Total Compensation Solutions of New York, analyzed BrickStreet and actually recommended higher executive salaries, Burton said. He said the company would not release that report.

"Our board is also very cognizant of the pay and makes sure we're compensated fairly," Burton said.

It has no competition and a captive client base, but BrickStreet Mutual Insurance Co. has derived the vast majority of its earnings in the past two years from its federal tax exemption.

The workers compensation insurer's annual report, filed with the state Insurance Commission this week, reveals 2007 profits of $185 million, compared with $70.7 million in 2006. Over those two years, it has avoided paying $194 million in taxes - equal to 76 percent of its profits - under the three-year tax exemption secured by the state.

"We continue to provide better customer service, and we got injured workers back to work faster in '07 than '06, but we also don't pay taxes right now," said Greg Burton, BrickStreet's president and chief executive officer.

The company was spun off from the state's Workers' Compensation Division in 2006, and it enjoys the tax break and monopoly status under the state legislation creating it three years ago.

The top executives' salaries were largely unchanged from 2006 levels, which represented huge increases from their salaries when holding similar jobs at Workers' Compensation.

Burton earned $183,373, down 5.75 percent from 2006. Christopher Howat, chief financial officer, took home $176,124, up 12 percent; Phillip Lynch, senior vice president for strategic planning, $163,821, up 3.3 percent; Philip Shimer, senior vice president for the strategic business group, $167,635, up 6.9 percent; Thomas Obrokta, general counsel, $173,498, down 3.8 percent; William Brotherton, deputy general counsel, $214,907, up 15 percent; Harry Mahler, senior vice president for insurance operations, $261,795, down 4.8 percent.

In all, at least nine BrickStreet executives earned more than $150,000.

Burton said the salaries were comparable to or lower than those of peers at similarly sized compensation insurers.

"We realize there are some people who look at us as a quasi-government organization," he said. "But we're not; we're a private company."

A chief executive at a compensation insurer with BrickStreet's claims and client portfolio would typically earn from $300,000 to $500,000 annually, Burton said.

"When our executive team came over from the state, we didn't want to get exorbitant pay," he said. "All that's been looked at."

An outside compensation consulting firm, Total Compensation Solutions of New York, analyzed BrickStreet and actually recommended higher executive salaries, Burton said. He said the company would not release that report.

"Our board is also very cognizant of the pay and makes sure we're compensated fairly," Burton said.

Board salaries were unchanged from 2006. Chairman Harry Tarsuk Jr. was paid $27,083, Stephen Glenn Roberts $26,122, Thomas Flaherty and Steven White, each $19,513, and David Rader, $19,451.

Last year's big surge in BrickStreet's earnings stems mainly from executives' decision to transfer $85 million from company reserves, or money set aside to cover possible claims, into the earnings column because actual claims turned out to be smaller than expected, Burton said.

"It takes about three years for claims to fully mature," Burton said. "We'll look at the end of '08 to see if reserves need to be adjusted further; time will tell."

A big chunk of that profit, as much as $60 million, may be applied toward the low-interest $200 million loan the state made to BrickStreet for startup costs, Burton said. BrickStreet had originally planned to pay $40 million toward the loan this year; the state Insurance Commission would have to approve of the larger-than-planned payment.

Once BrickStreet pays the loan off, it would consider spending some of its accumulated profit on dividends for policyholders, Burton said.

"We'll put it [last year's profit] into reserves for the future," he said. "If we continue to be profitable, it could go for dividends for shareholders; time will tell again on that."

Other sources of profit for BrickStreet last year were a $39 million underwriting gain and $61 million in investment income.

BrickStreet invests its reserves mainly in bond holdings, but it will be getting into the stock market this year, Burton said. Its assets are managed by Conning & Co., a Hartford, Conn.-based investment firm that specializes in investing for insurance companies.

Starting in July, BrickStreet will start competing for business from private insurers, though it will retain its monopoly for insuring state employees. In preparing for that big transition, the company spent $1.4 million last year on advertising, about as much as in 2006, Burton said.

"We feel we need to advertise," he said. "We had to educate the business community as well as the insurance-claimant community about the changes to the market."

Burton said he expected BrickStreet's big competitors to be American Insurance Group, State Farm, Travelers Group and Nationwide, among others.

"They've been advertising, and so we have to make sure [clients] remember BrickStreet," he said.

To contact staff writer Joe Morris, use e-mail or call 348-5179.