Mission Group Loss Deepens as Claims Mount
Mission Insurance Group’s descent into red ink deepened in the year’s second quarter as losses from claims continued to mount, the Los Angeles-based insurer reported Wednesday.
But Mission, striving to place its underwriting on a solid footing, also announced that its chief shareholder agreed to pump $40 million into Mission American Insurance, the parent of Mission’s insurance subsidiaries, in the current quarter.
“The precise form of this financing has yet to be worked out,” a spokesman said.
That infusion would be the second provided by Carl H. Lindner’s Cincinnati-based American Financial Corp. In March, American Financial, which owns 49.9% of Mission’s common stock, provided $75 million in resources to support Mission’s casualty insurance and workers’ compensation operations.
Lindner is now chairman of both American Financial and Mission Insurance Group.
Mission reported a net loss of $41.9 million for the quarter ended June 30, compared to a $39.4-million loss in the same period a year earlier. For the six months, however, the loss was $34.7 million--improved from $55.5 million at the midpoint of 1984, because of a smaller loss in the first quarter. Over the same period, shareholders’ equity shrank from $8.5 million to a deficit of $26.4 million.
While a Mission spokesman said the results indicate that the company’s financial misfortune has reached bottom, that view was far from unanimous.
“I’ve been hearing that line for about a year and a half now,” said Frederick T. Sandburg, a Chicago-based analyst for Legg Mason Wood Walker Inc. of Baltimore. “I’d thought they had hit bottom last fall.
“At this point, I have more questions than I have answers,” Sandburg said. “The more severe question to me is: Where did they get this further big loss from?”
Mission has shared amply in the prolonged woes of the property/casualty insurance sector, which suffered a record $21-billion loss last year, continuing annual losses reaching back to 1979. At that time, recession-pinched companies began trimming insurance expenses, setting off increasingly frantic price cutting as insurers scrambled to replace that business and increase premium income to benefit from the high interest rates then prevailing.
For a time, investment income offset increasing insurance losses for the carriers, but then interest rates began to decline and insurance losses rose sharply because of higher-risk business taken on in the quest for premium income at almost any price.
Insurers now are seeking to restore cost-based pricing through sharp rate increases and cutbacks in coverage, creating insurance shortages in a growing number of areas.
Mission’s subsidiaries wrote net premiums of $181 million for the six months, compared to $229 million a year earlier. Nonetheless, Mission has had to add $39 million to its loss reserves since January.
That reflected losses from business taken on during the price-slashing years, a spokesman said.
