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Pawtucket and its subsidiary were placed in rehabilitation by the Rhode Island Insurance Department on May 1, 2003 upon surplus falling within 24 months from $60 million to $6 million. Founded in 1848, Pawtucket wrote personal and commercial lines in 12 New England (NE) states. On May 2, 2003 AIM was appointed the “Special Deputy Rehabilitator” charged to revitalize the company. Constrained to raise equity and with an A.M. Best “E” rating, options to revive Pawtucket were not apparent. However, our evaluation found yearly reserve redundancy; a sound infrastructure; talented line management and 156 years of agency goodwill and performance data. The Providence area was favored as a low-cost city and strategically placed for NE insurance with a responsive regulatory support.
AIM saw Pawtucket as a potential base for an insurer desiring to expand into the NE or a star-up insurer seeking an established and sound. To achieve this and assure full policyholder claim payment, Pawtucket had to be demutualized. AIM created a plan with fincial projections for Court to demutualize Pawtucket as a stock company upon its recapitalization, if a buyer were found Upon Court approval; AIM launched its marketing plan to find a buyer to recapitalize Pawtucket. With operations enhanced; assets maximized; claim liabilities controlled, we identified five qualified buyers from which the Commissioner selected the best bid. Pawtucket was recapitalized with $8 million and subsequently $20 million. Creativity and diligent effort enabled AIM to lift Pawtucket from rehabilitation with fresh capital, retain key staff and reestablish this 156 year old institution as a strong going concern.
The Ohio Department retained AIM to be Deputy Rehabilitator of Total, a 45,000 member Medicaid HMO to determine its level of financial impairment and recommend a course of action. Delving into operations and sorting through myriads of issues, we presented a plan to restructure operations for present needs, fix systems, and ultimately ascertain the net amounts owed providers. The plan also identified and pursued cash generating measures including sale of the MHO members to another HMO, recovery of Medicaid reimbursements, sale of two building and securing wrongfully denied reinsurance. Fully achieving these critical success factors, AIM succeeded with Total paying in full all providers and creditors. Upon Total’s release from rehabilitation, it was and then absorbed with staff by a companion organization as was negotiated.
The California Conservation and Liquidation Office retained AIM to reengineer Mission’s operations to solve burgeoning backlogs, high staff turnover and escalating expenses. Mission with 600 employees would ultimately process over 165,000 claims. AIM’s evaluation found an antiquated and inflexible operating structure with patchwork fixes, unsupportive systems all ill-suited for its present requirements. A 35% personnel turnover rate was a reflective statistic. In resolution, AIM devised self-sufficient work-cluster teams, cross-trained, and incented to achieve excellence competing with rival teams to meet or exceed target error objectives.
With this new structure, we upgraded and tailored systems; reconfigured and documented workflows; set measures to track progress; and established an HR function to address turnover and morale, assure compliance, and manage benefits as well as layoffs. From the start, AIM incorporated management and staff in planning and implementation so that improvement would proceed post engagement. Upon implementation, staffing was reduced by 35% as latter and by work-clusters upon diminishing activity and minimizing organization change. Morale and work ethics rebounded, absenteeism, turnover and error ratios surpassed targets and the growing six-month claim backlog was cleared with current processing thereafter. Within eight-months AIM achieved what national consulting firms had attempted, whose work plans remained on shelves.
The New Jersey Department of Banking and Insurance retained AIM in 2001 as Confidential Administrative Supervisor of Eagle including three New Jersey subsidiaries. In 2007, AIM was appointed Deputy Rehabilitator. In 2000 and 2001 with the parties locked in arbitration, Eagle’s cash flow without reinsurance recoveries flowing threatened its solvency. With the insurance department interceding, AIM facilitated complex negotiations resolving a myriad of issues between AIG and Eagle, resulting in termination of arbitration. Eagle’s, a highly specialized non-standard auto insurer, owned by the Robert Plan Corporation also a party in the negotiations.
After a year and a half a settlement was reached involving multiple transactions. AIG contributed a non-recourse $150 million surplus note to Eagle with other financial support. AIG also commuted back to Eagle $148 million in claim and unearned premium reserves. Other financial elements of the “Master Agreement” included home office sale/leaseback and asset guarantees. With AIM monitoring the runoff and resolving continuous issues, Eagle paid over 97.5% or $780 million in claims. With capital exhausted by only $20 million, it was placement in liquidation on October 15, 2008.
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