Acceptance Insurance Companies Inc., an insurance holding company providing agricultural risk management products and services throughout the U.S., agreed to sell two wholly owned insurance companies to McM Corporation, a Raleigh, North Carolina-based insurance holding company, and owner of Occidental Fire & Casualty Company of North Carolina and Wilshire Insurance Company.
In addition, McM Corporation purchased a selected portfolio of the company’s property/casualty insurance programs managed and sold through retail and general agents.
The two companies, Acceptance Indemnity Insurance Company and Acceptance Casualty Insurance Company, underwrote only property/casualty insurance, and their sale is subject to regulatory approval. Purchase of the insurance programs, however, is final. A spokesperson for McM Corporation indicated that, in cooperation with Acceptance, it would be offering employment to a number of current Acceptance associates familiar with the purchased insurance programs.
Acceptance also announced that it has sold the Company’s Farm and Ranch and Flood insurance programs to American Reliable Insurance Company of Scottsdale, Ariz. The Company said American Reliable likewise is hiring several Acceptance associates to continue their present sales and underwriting responsibilities for these two programs.
All programs involved in each transaction were sold as of May 1, 2001. The buyers received all unearned premium for in-force policies and various other rights. In addition, each buyer reinsured the Company against losses from the in-force policies arising from or related to acts, events or occurrences on or after May 1.
As of May 1, 2001 Acceptance also said it had engaged Berkley Risk Administrators Company (BRAC) to manage the adjustment and completion of all remaining property/casualty claims. A subsidiary of W.R. Berkley, BRAC has approximately 700 employees in 39 claim management offices throughout the U.S. BRAC has employed 46 former Acceptance associates and will conduct its operations from the Company’s Council Bluffs, Iowa facilities.
Acceptance also announced today that the Company had a net after-tax loss of $3.8 million, or $0.27 per share, for the three months ended March 31, 2001. This compares with a net after-tax loss of $1.9 million, or $0.13 per share, for the three months ended March 31, 2000.
The Company recorded several adjustments in the property/casualty insurance operations that were the primary cause of the first quarter loss. These included after-tax severance costs of approximately $830,000 associated with the run-off of the property/casualty lines of business. Ceded reinsurance premium for certain property insurance lines also are below minimum levels established in an April 2000 reinsurance contract, requiring the Company to recognize a contractually established minimum premium in an after-tax amount of approximately $910,000. The third principal cause cited by the Company for its first quarter results was after-tax prior year adverse loss development of approximately $500,000 in the Company’s umbrella program, and abnormally high first quarter claims activity in certain recently sold property and casualty programs. The total of these adjustments negatively impacted the results for the three-month period ending March 31, 2001 by an after-tax amount of approximately $3.6 million or $0.25 per share.
Acceptance Insurance Companies Inc.’s wholly owned crop insurance marketing subsidiary, American Agrisurance, is a widely recognized leader in the crop insurance industry.
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