The New Jersey based MIIX Group, Inc., a provider of medical professional liability insurance services, announced a net operating loss for the fourth quarter ended December 31, 2002, of $63.7 million, or $4.77 per share, compared to a net operating loss for the fourth quarter ended December 31, 2001 of $162.8 million, or $12.01 per share. The Company posted an overall net loss for the fourth quarter of $65.4 million, or $4.89 per share, compared to a net loss of $168.4 million, or $12.43 per share, in the same period of 2001.
For the twelve months ended December 31, 2002, the Company incurred a net operating loss of $107.5 million, or $8.03 per share, compared with a net operating loss of $149.6 million, or $11.06 per share, during the twelve months ended December 31, 2001. The net loss for the year was $116.0 million, or $8.67 per share, compared to a net loss of $157.6 million, or $11.66 per share in 2001.
“The Company’s losses in 2002 are reflective of the turbulent legal and medical economic environments in the states where the Company wrote the majority of its business,” stated Chairman and CEO Patricia A. Costante. “Results reflect fourth quarter gross reserve adjustments of $85.1 million, which are directly attributable to the continuing upward trend of loss severities to unprecedented levels. The reserve adjustments associated with the New Jersey physician market primarily relate to accident years prior to 1999 when the Company undertook an effort to restructure its New Jersey program.”
“The continuing rise in loss severities in the fourth quarter to historically high levels follows loss and ALAE reserve adjustments made by the Company in the first quarter of $35.6 million and in the third quarter of $30.7 million,” she continued.
The bulletin noted that “In 2002, the Company received approval from the New Jersey Department of Banking and Insurance to be placed in voluntary solvent run-off. As a result of continuing discussions with the Department, the Company has agreed to certain limitations on operations. The limitations, among other things, require Departmental approval for payment of dividends by the Company’s insurance subsidiary, and for lending arrangements, investments and intercompany arrangements outside of the normal course of business, and require the Company to periodically provide the Department with information relating to its operations and finances. Additionally, the Company has received a 30-day extension to file its annual statutory financial statements. It is probable that the Department will initiate additional statutory actions subsequent to the filing of the annual statutory financial statements.”
MIIX said it now holds gross loss and loss adjustment expense reserves of $1.15 billion, a slight increase since September. It also indicated that the “The total inventory of known claims has continued to drop, from 8,853 at December 31, 2001 to 8,602 at September 30, 2002 to 8,139 at December 31, 2002. The overall inventory is down from 8,901 at its peak at June 30, 2002.”
“The Company took aggressive steps in the last two years to reduce costs and limit loss exposures,” Costante stressed. Fourth quarter underwriting costs were down more than 60% from fourth quarter 2001, reflecting cost reduction programs implemented earlier in the year, including employee lay-offs. She indicated, however, that “the severity of losses for claims and claims related expenses in years prior continue to take their toll. For example, the average MIIX payout per case in New Jersey has increased by 88 percent in the last five years.”
Costante noted that the Company would “continue its advocacy on behalf of meaningful tort reform, including caps on non-economic damages, more stringent requirements for expert witnesses, and a reduced statute of limitations for bringing suit, as the central long-term solution to the growing crisis in the medical professional liability insurance market. These reforms will bring stability to an environment characterized by volatile but ever increasing settlements and verdicts.”
“While future results, particularly with respect to loss reserves, cannot be predicted with confidence at this time due to rapidly changing conditions, the Company is striving to protect the potential value we believe exists. We intend to propose to the Department that the Company be allowed to expand its third party operations, including service and consulting arrangements with insurers and other healthcare providers,” she concluded.
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