According to a report from A.M. Best the Highlands Insurance Group, based in Lawrenceville, New Jersey, “is considering filing a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code because of bank debt due at the end of the month and insurance subsidiary losses, according to a filing with the U.S. Securities and Exchange Commission.”
KPMG, the accounting firm which audited the annual report filed Monday, indicated that due to the substantial bank debt, and the weakness of Highlands capital, it had doubts concerning the company’ s continued viability. It reported net losses for last year of $341.6 million.
A.M. Best noted that ”
Highlands Group’s only significant sources of funds are dividends and tax-sharing payments from its subsidiaries, but no payments are expected from the insurance subsidiaries because of orders issued by state insurance regulators and losses incurred by the subsidiaries in 2001 and 2000.”
Highlands indicated that its losses stemmed principally from business workers’ compensation, general liability, commercial multiple peril and commercial auto liability. The group also saw losses related to asbestos and environmental claims of $14.8 million for 2001; $7.8 million for 2000 and $1.8 million for 1999.
The group’s operating companies are already under supervision by the insurance departments in Texas and Wisconsin, and, according to Best’s report, “a state insurance commissioner could look to place the company’s insurance subsidiaries that are under their jurisdiction in rehabilitation or liquidation, Highlands Group said. If that happened, Highlands Group would lose control of that subsidiary.
The companies have already ceased writing new business, and are accepting renewals on policies only in cases where they are required to do so.
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