Sierra Health Services Closes Transaction to Sell Workers’ Comp Subsidiary

Sierra Health Services Inc. announced that effective March 31, 2004, and after receipt of applicable regulatory approval, it has closed the transaction to sell its workers’ compensation subsidiary, California Indemnity Insurance Co. Inc. (CIIC) to Folksamerica Holding Co. Inc.

Folksamerica is a subsidiary of White Mountains Insurance Group Ltd., a Bermuda-based insurance holding company. CIIC and its subsidiaries were engaged in writing workers’ comp insurance in nine western and mid-western states. CIIC’s subsidiaries include Commercial Casualty Insurance Co., Sierra Insurance Company of Texas and CII Insurance Co.

Sierra received $13.7 million in cash at the closing, subject to potential adjustments of the closing date balance sheet. The deal also includes a contingent payment of up to $62.0 million, plus accrued interest, payable to Sierra in January of 2010. The contingent payment can be increased or decreased depending on favorable or adverse claim and expense development from the date of closing through Dec. 31, 2009 and other offsets based on certain agreements between the parties.

As of the closing, a third-party claims administrator (TPA), GAB Robins, has been engaged to administer claims for a period of 15 years. Under the terms of this agreement, GAB Robins will provide certain claims services for CIIC and its related subsidiaries.

Pursuant to the terms of the agreement among GAB Robins, Sierra and Folksamerica, Sierra will be responsible for this administrator’s costs and for providing certain transition services for varying terms to CIIC. Folksamerica will reimburse Sierra for these costs from an account consisting of the unallocated loss adjustment expense (ULAE) reserves and accrued liabilities as of the closing, a percentage of premiums earned after the closing, plus accrued interest on the ULAE reserves.

Sierra’s Nevada-based workers’ compensation TPA, Nevada Administrators, will continue to operate as a subsidiary of the parent company and is not included as part of the Folksamerica transaction.

Sierra Health Services Inc. is a Las Vegas-based diversified health care services company that operates health maintenance organizations, indemnity insurers, military health programs, preferred provider organizations and multi-specialty medical groups. Sierra’s subsidiaries serve more than 1.2 million people through health benefit plans for employers, government programs and individuals.

Folksamerica is a multi-line broker market reinsurer and a wholly owned subsidiary of White Mountains Insurance Group Ltd. With $1 billion in capital, the company ranks among the top U.S. broker market reinsurance companies.

Topics Workers' Compensation Medical Professional Liability