S&P Lowers Millers Ins. Rating; Company Reveals Strategy for Recovery

September 19, 2000

Standard & Poor’s lowered its financial strength rating on The Millers Insurance Co. and its related pool member, The Millers Casualty Insurance Co. The companies are subsidiaries of Millers American Group based in Fort Worth.

Key rating factors include continued weak net underwriting results, a decline in surplus of nearly 70%, stock market equity exposure, volatile reserve levels, and a marginal Standard & Poor’s capital adequacy ratio. The rating is based on an interaffiliate pooling arrangement in which Millers Casualty cedes 100% of its direct written premiums, losses, and loss adjustment expenses, excluding Florida homeowners, to Millers Insurance, which then retrocedes 14.13% of the retained business back to Millers Casualty.

The Millers Insurance Co. mainly writes auto and general liability coverages for agriculture-related businesses, and its products are distributed primarily through managing general agents. The company began business in 1898. In January 1999, it obtained permission from the Texas insurance commissioner to convert from a mutual to a stock company and distribute capital stock to its policyholders in exchange for their membership rights. Meanwhile, Millers American Group has announced the implementation of a strategic plan to strengthen Millers.

The plan centers on simplifying the company’s operating structure and investment portfolio, as well as reducing expenses, to enable Millers to continue its century-long commitment to insureds and agents as a financially strong Texas-based insurance company.

“Millers’ strategic plan is designed to return the company to its core book of casualty and property business produced by independent agents that has consistently provided profitable returns for many years,” said Drawert.

Millers will be selling three lines of business unrelated to its strategic plan and also has terminated three other lines of business which have not been profitable. At the same time, Millers will be expanding and enhancing its internal claims handling staff in order to better service its core lines of business. Millers also reported today that it is current on all trade payable invoices incurred in the ordinary course of business.

However, Millers is currently discussing the resolution of approximately $900,000 of disputed receivables with INSpire Insurance Solutions Inc., according to Drawert. Millers recently paid $6.6 million to INSpire that was related to the Phoenix Indemnity Insurance Company contract, immediately after receiving formal transaction approval from the Arizona Department of Insurance.

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