Providence Washington Insurance Cos., Providence, R.I., will cease underwriting new and renewal business, to the extent permitted by law. In addition, the company has entered into an agreement with OneBeacon Insurance Co., Boston, whereby OneBeacon will acquire renewal rights in Providence Washington's small business package policies. Providence Washington plans to continue servicing its existing portfolio of commercial and personal lines business. The company reported statutory net losses of $7 million in 2002 and $35 million in 2003. It reported a net loss of $7 million in the quarter ended March 31, 2004. These losses contributed to the policyholders' surplus dropping from $92 million at year-end 2002 to $59 million at year-end 2003, and to $53 million as of the quarter ending March 31, 2004.
Providence Washington is currently rated B+ by A.M. Best and anticipates a further downgrade as a result of its inability to raise new capital. As a result of the anticipated downgrade by A.M. Best and continued decline of policyholder surplus, the company's board of directors determined that ceasing new and renewal business and servicing Providence Washington's current portfolio will allow it to meet its present and future obligations. This decision was reached in the absence of new capital being raised or a buyer for the company. Following this decision, the Providence Washington board named Jeffrey Mack as new CEO.
"Taking this action is in the best interests of the company's policyholders, claimants, reinsurers, creditors and shareholders," says Mack. "Over the past year the management team of Providence Washington and its board have worked very diligently to turn around the business, and have explored various strategic options in order to avoid today's decision."
The company will work with the Rhode Island Department of Business Regulation, as well as the other state insurance commissioners, to ensure compliance with all applicable laws and regulations.
While the staff of Providence Washington will continue servicing its portfolio, the company plans to gradually reduce its workforce of 235 employees in line with a reduced amount of work. The company employs 165 people in its various Rhode Island locations and will assist with the outplacement needs of those employees affected by this decision.
Addressing Providence Washington's insureds, Mack says, "current insureds of Providence Washington can expect the company to work very closely with our agency community to find alternative markets to write their business once it comes up for renewal. In the meantime, policyholders' existing coverage with Providence Washington will remain in effect and we will meet 100 percent of all valid claims. Personalized and appropriate communication will be made directly through our agents."
Source: Providence Washington Insurance Cos.
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