COLUMBIA, Mo.—Executives of Missouri Employers Mutual Insurance Co., the state’s largest workers compensation insurer, told a state Senate panel that they are considering redistributing part of its reported $163 million surplus to policyholders.

The Missouri Senate Government Accountability Committee asked the Columbia, Mo.-based insurer to testify following fraud and theft charges levied against two of its former board members, as well as the abrupt June termination of its former CEO.

The ex-CEO is former Missouri Gov. Roger Wilson and the former board members are Karen Pletz and Doug Morgan, according to reports.

Sen. Jim Lembke, the committee’s chairman, said the negative media attention “perked our interest” and the panel wanted to know whether MEM was “living up to a standard of being a good steward of the people’s money.”

During the hearing Monday, Sen. Lembke also asked company officials whether some of MEM’s surplus could be redistributed to policyholders in the form of lower premiums or paid out as dividends.

Jim Owen, MEM’s interim CEO, told the panel that the company was meeting with its rating agency, A.M. Best. Co. Inc., and the state insurance department to see what amount could be returned to policyholders without risking the company’s A- rating.

Independent auditors, attorneys

Mr. Owen also said the company has brought in independent auditors and attorneys to gauge the impact of the alleged infractions on the company’s core business. Additionally, the company agreed to let the state’s auditor conduct a one-time examination of its finances.

The Missouri Legislature created MEM in 1993 with a $5 million loan from the state, which Mr. Owen said the company has long since repaid. The company does not receive any other state contributions, but it is afforded a federal tax exemption due to the composition of its board of directors, three of which are confirmed by the governor.

As the hearing began, Sen. Lembke wondered if the time had come for the state to remove itself from the company's corporate governance, thereby ending its tax exemption.

But Mr. Owen told the committee that Missouri Employers Mutual needs the connection to the state government to continue to exist.