MICH. LAUNCHES RATE INQUIRY:
Michigan Office of Financial and Insurance Services (OFIS) Commissioner Linda Watters has launched the first phase of her investigation into rising home and auto rates in Michigan. Watters issued a letter of inquiry to insurance companies writing home insurance policies in Michigan. A similar letter to insurance companies writing auto policies is forthcoming. The inquiry requires insurance companies to provide OFIS with rating information for the accident/calendar year 2001 and 2002. Insurance companies have until Feb. 17 to submit their data. A final report analyzing the data will be issued early this summer. The more than 100 homeowners insurance carriers that operate in Michigan are already gathering the information, a state industry lobbying group said. The industry's response to the state's "data call" primarily means reformatting and resubmitting data already provided to OFIS as part of annual statements and rate filings the industry is required to file by law, the Insurance Institute of Michigan said in a statement. While homeowners insurance rates have increased 10 to 30 percent during the past few years, rates are not arbitrary. They are a true reflection of insurance losses, the group said.
FEDS CAN USE STOLEN SEGAL FILES:
The legal defense of Michael Segal, the former owner of Chicago-based Near North Insurance Brokerage Inc., was dealt a major blow by a federal judge presiding over Segal's trial on charges of embezzling more than $20 million from his company's premium fund trust. U.S. District Court Judge Ruben Castillo refused to grant Segal's attempt to get a hearing on whether computer files that were stolen from Near North company by a former employee were obtained in violation of the law by federal prosecutors. Segal's lawyers had argued that federal prosecutors may have pursued or requested the stolen information, thus making it an illegal search and rendering the physical evidence of Segal's wrongdoing inadmissible. Castillo denied the hearing, however, saying he saw no evidence the government had engaged in such actions. Segal and his brokerage have pleaded innocent to the charges of fraud and corruption. An exclusive interview with Segal was featured in the Jan. 12 premiere issue of Insurance Journal Midwest, available online at www.insurancejournal.com.
ST. PAUL BOOSTS MED-MAL RESERVES:
The St. Paul Cos. announced that the company expects fourth-quarter net income of 19 cents to 21 cents per share and operating earnings per share of zero cents to 2 cents. In the quarter, the company recorded a charge of $350 million pretax or $228 million after-tax, equivalent to 98 cents per share, to increase reserves for its health-care business, which is in runoff. The St. Paul's ongoing business continued to perform well in the fourth quarter, with net written premiums of $1.86 billion, up approximately 25 percent from fourth quarter 2002, and a statutory combined ratio of 89.5. For full-year 2003, the company expects net income of $2.70 to $2.72 per share and operating earnings per share of $2.53 to $2.55. Ongoing business results for the year included net written premium growth of approximately 24 percent to $7.33 billion and a statutory combined ratio of 91.7. In previous disclosures, the company indicated that it was continuing to monitor its medical malpractice reserves by tracking emergence of newly reported claims, development on known claims, and the observed case redundancy ratio (the amount by which claims are settled below case reserves), and that additional reserving actions may be necessary if the required redundancy ratio rose above 45 percent. In the fourth quarter, while development and emergence met expectations, the observed redundancy ratio indicated the need for a reserve action. As a result, the company has established reserves to significantly decrease required redundancy levels for the remaining duration of the health-care business runoff. The announced merger of the St. Paul and Travelers remains on track to close in the second quarter of 2004.
RSA TO DISSOLVE S.D. CLAIMS OFFICE:
Due to corporate restructuring, Royal & SunAlliance has announced that they will dissolve their telephone claims operation of 55 employees in Milbank, S.D. A statement released by the South Dakota Governor's Office of Economic Development touted the location and employees as a "unique opportunity" for another company to exploit. "Located three hours west of Minneapolis in a class A seven-story multiple use building featuring very reasonable rental rates and a full range of client services," according to the statement, which said all 55 employees are licensed in auto and property claims servicing in all states except Rhode Island and Wyoming. To learn more, call Bruce Lyon, at the Governor's Office of Economic Development in Pierre, S.D., (800) 872-6190.
GALLAGHER UPS DIVIDEND:
Itasca, Ill.-based brokerage giant Arthur J. Gallagher & Co. announced that its board of directors declared a quarterly cash dividend on the company's common stock of 25 cents per share payable April 15, 2004, to shareholders of record as of March 31, 2004. The company also announced its move to a predominantly independent board of directors. Gallagher's board will now consist of six outside directors and two management directors, Robert E. Gallagher, chairman, and J. Patrick Gallagher Jr., president and CEO. This change in board composition is the latest in a series of governance initiatives Gallagher has undertaken to demonstrate its continued commitment to maintaining high standards of corporate governance. In 2003, the company formed an independent nominating and governance committee to join with its already independent audit and compensation Committees. Gallagher also adopted a set of corporate governance guidelines designed to codify this commitment. Simultaneous with this board change, Gallagher announced the formation of an executive management committee comprised of six of its senior executives. This committee will report to the CEO and work closely with the board in setting the company's strategic direction.
PROGRESSIVE'S Q4 PROFIT JUMPS:
Mayfield Village, Ohio-based vehicle insurer Progressive Corp. reported fourth-quarter 2003 net income of $357.8 million, or $1.63 per share, 135 percent higher than last year's $152.2 million, or 69 cents per share, in the fourth quarter. Included in net income are net realized losses on securities of $3 million, or 1 cents per share, for the fourth quarter 2003, and net realized losses of $37.1 million, or 11 cents per share, for the same period last year. Net premiums written and earned increased 21 percent and 23 percent to $2.9 billion and $3 billion, respectively, as compared to the fourth quarter last year. During the fourth quarter 2003, the company produced a GAAP combined ratio of 85.9, compared to 93.3 in the same period last year. Recurring investment income was $121.3 million before taxes and $90.5 million after taxes, compared to $113.5 million before taxes and $82 million after taxes for the fourth quarter 2002. See the "operations summary" for further information, which is included in the complete quarterly release.
