Rhode Island officials believe they are just a few weeks away from obtaining a letter of intent from a buyer for the troubled Pawtucket Mutual Insurance Co., after almost nine months of rehabilitation efforts.
“We have no intent of going into liquidation,” Marilyn Shannon McConaghy, director of business regulation, told Insurance Journal. She is the rehabilitator for the financially-strapped insurer and its subsidiary, Narragansett Bay Insurance Co.
McConaghy said there has been heightened interest in the company over the past month and there are several serious potential buyers. She credits the renewed interest in the company to the steps the state has taken to restore financial stability and to the quality of the company’s workforce.
On Dec. 16, McConaghy filed a report with Rhode Island Superior Court Judge Michael Silverstein indicating that time and money were running out. The companies’ surplus was in danger of falling below $3 million. At the start of February, McConaghy told Judge Silverstein that she believed she could come into court with a letter of intent within weeks, thereby avoiding a “run-off” or liquidation.
As she has throughout the process, McConaghy remains upbeat, although she said she is aware that “the devil is in the details” of any final proposal. She said it is likely any deal will involve selling off one of the two buildings owned by the insurer.
Pawtucket Mutual is domiciled in Rhode Island and writes in 12 states, mostly in the Northeast. It has an experienced independent agency force of about 300 writing its largely personal lines book of business. Since the rehabilitation was ordered in May 2003, the company has stopped writing business except for certain renewals in Rhode Island and New York.
The companies’ problems stemmed not only from capital depletion and lowered investment income but also from weather-related losses. The court has already approved a plan to convert Pawtucket to a stock company to facilitate a sale if necessary.