Outlook Called Dim for Mission Insurance
The state’s takeover last week of Mission Insurance Co. is the largest in California history, and the outlook remains bleak for the Los Angeles-based insurer, the Department of Insurance said Monday.
However, the chances for payment of worker compensation insurance claims--the company’s main business--remain good. “Nobody’s going to suffer” from unpaid worker compensation claims, said Ansel Shapiro, the department’s chief examiner.
The department took control of the insurer last week after concluding that its liabilities outstrip its assets by $169 million.
“This is the worst one we’ve ever had,” said Shapiro, who reviewed Mission’s books. “There’s no way in the world that this company can be rehabilitated.”
If that proves to be the case, the department will proceed with liquidation and pass unpaid insurance claims to an industry-financed “safety net,” the California Insurance Guarantee Assn., for payment. The Los Angeles-based association was created by the Legislature in 1969 to pay claims of insolvent property-casualty insurance companies, including worker compensation claims, according to executive director John Gates.
Possible Assessments
If Mission Insurance is indeed liquidated, Gates said, 540 property-casualty insurers doing business in the state will be assessed to pay any unpaid claims. The association has so far handled 25 insolvencies, with the largest amounting to about $40 million, he said.
Though Mission leaves $900 million in unpaid claims, according to state examiners, a large chunk of that amount probably represents reinsurance claims, which the association does not cover, Gates said. In those cases, the reinsuring firms would be stuck with the unpaid claims.
(Reinsurers accept part of other insurers’ risks in exchange for a share in the premium. Mission earlier this year announced its withdrawal from the reinsurance business.)
Ratings Downgraded
Since the subsidiary was placed under conservatorship, both Moody’s Investors Service and Standard & Poor’s Corp., which issue ratings of credit-worthiness, downgraded more than $70 million of the parent company’s debt--Moody’s to Caa from B1, and S&P; to CCC from B-.
Mission Insurance ceased writing new insurance business last summer, despite an infusion of cash from its major shareholder, American Financial Corp. of Cincinnati, which holds a 49.9% stake in the company. So far, however, state auditors have identified only half the promised $75 million. The balance, they believe, may have helped privately held American Financial start a new insurance arm under Mission Insurance Group, Mission American Insurance Co.
Financier Carl Lindner, chairman of both privately held American Financial and publicly held Mission Insurance, created Mission American in part from the assets of two Lindner-controlled truck-fleet insurers: Transport Indemnity of Los Angeles and Transport Insurance Co. of Dallas.
The company is the major subsidiary of Los Angeles-based Mission Insurance Group. The parent’s stock sagged to an all-time low of $1.25, down 62.5 cents, in trading Monday on the New York Stock Exchange.
