As the May 1 anniversary of its receivership nears, Pawtucket Mutual Insurance Co. remains under state control not writing any new or renewal business but still handling claims. Rhode Island officials have not yet given up hope of finding a buyer and are now hoping to close a deal by the end of June.
As she has from the start of the company’s troubles, Rhode Island Director of Business Regulation Marilyn Shannon McConaghy remains committed to attracting a buyer to bid on the value of the company’s multi-state licenses, agency force, experienced employees and headquarters operation in her state.
McConaghy told Insurance Journal she has extended the bid process to May 21, which is about a week after she expects to receive the latest audited financial report on the Pawtucket and its subsidiary, Narragansett Insurance Co., from Ernst & Young. If all goes as planned, she hopes to identify a winning bidder by May 28, proceed with court approvals including a conversion to a stock company if required as part of the purchase, and close a deal by June 30, 2004.
“This remains an economic development opportunity,” McConaghy said, citing the benefits to the state of keeping jobs and attracting another provider into the insurance marketplace.
She maintains there are no “downsides” to the state continuing to seek a buyer as financial reports indicate that its reserves are adequate and the insurer could be run-off if needed without reaching into the state’s guaranty fund or assessing other insurers.
One of the other reasons McConaghy hasn’t given up her quest to find a buyer is that parties continue to express interest. She said there remain a number of prospective acquirers “each with a different scenario” that have filed letters of intent.
She declined to identify the names of possible suitors.
Pawtucket Mutual is domiciled in Rhode Island and writes in 12 states, mostly in the Northeast. It boasts an 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.
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.
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