A potential savior for Pafco General Insurance Co. has pulled back from a plan to buy and revitalize the company, casting doubt over the high-risk auto insurer's future.
New York-based ICM Insurance Co. withdrew an application for a license to do business in Indiana earlier this year and gave no reason for its decision to the state Department of Insurance.
"We're certainly hopeful there could be a positive outcome, but unfortunately up to this point, there hasn't been a dramatically positive development," state Insurance Commissioner Jim Atterholt said.
An ICM representative declined to say whether it still planned to buy Pafco and Superior Insurance Co., another company owned by Indianapolis-based Superior Insurance Group. Both insurers are working to emerge from court-monitored rehabilitations spurred by high losses and low cash levels.
An outstanding lawsuit in Missouri might be bogging down Pafco's plans. Pafco can't leave rehabilitation until that case is resolved because it doesn't know the size of the settlement it might have to pay, said Liz Lovette, executive director of Indiana Insolvency Inc., a not-for-profit the state contracted with to run Pafco.
ICM has made at least a partial commitment to Indiana. About 10 employees from its management company have started working out of Superior Insurance Group's Keystone Avenue headquarters, said Doug Symons, the group's CEO.
The employees are managing and processing high-risk auto insurance ICM sells in Wisconsin, Utah and Colorado.
Superior once employed 180 people at the site. Last summer, Symons said he was optimistic empty cubicles there would soon begin to fill with workers, thanks to ICM's plan to buy Pafco and Superior Insurance Co.
This month, he said Superior Insurance Group was still working on the deal, but he couldn't talk about why it had been delayed.
"I'm optimistic that once again the companies can eventually start writing new business under a new structure," he said.
ICM official Bill Beikes declined to comment on the delay, the potential deal or even provide any information about the parent company.
Symons has said a group of investors purchased ICM a few years ago, ran off the old business, and kept the licenses to sell insurance.
Pafco and Superior Insurance Co. both sell non-standard auto insurance, policies meant for people who cannot buy insurance in the conventional market because of their driving records, credit scores or other problems. Pafco is domiciled in Indiana and Superior in Florida.
Regulators from each state placed the respective companies in rehabilitation in 2003, after Superior Insurance Group's parent, Indianapolis-based Symons International Group Inc., started posting multimillion-dollar losses. When an insurer enters rehabilitation, it stops writing new business, and regulators take over management.
Florida regulators did not return calls seeking an update on Superior's rehabilitation. But Symons said Superior "is cooperating with the Florida regulator to see something happen as quickly as possible." Most insurers liquidate after they enter rehabilitation, but Indiana Insolvency representatives say Pafco was not a lost cause when they started working with it. They've helped the insurer settle outstanding claims favorably, cut costs and sell assets to raise cash.
"Things are still working well," said Tom Kleinschmidt, an Indiana Insolvency investment manager. "I think there's a good possibility it will stay financially afloat."
Pafco needs a capital-and-surplus level-a financial cushion that protects policyholders-of about $2 million to start a process that lets it leave rehabilitation and begin writing new business.
At the end of last year, it had $1.6 million, Kleinschmidt said.
Lovette said she isn't surprised Pafco remains in rehabilitation. She said she's worked with more than 20 companies, and only one-American Interfidelity Exchange-made it out of rehabilitation. That took six years.
"It's a long process," she said.
A white knight buyer delivering a cash infusion could speed up the exit, she said. But she also noted that "no smart businessperson" would make such a move with the Missouri court case still pending.
Still, she thinks Pafco eventually will sell. She noted that it has licenses in several states and built a profitable book of business before it entered rehabilitation.
"It could be attractive to the right buyer," she said.