XL Denies Interest In MRM Acquisition

Moody's Investors Services in New York lowered the insurer financial strength ratings of members of the Legion Insurance Company pool?the principal insurance underwriting subsidiaries of Mutual Risk Management?to "Ba2″ (questionable) from "Baa2″ (adequate).

Prior to Mutual Risk Management's earnings announcement, Standard & Poor's kicked its Legion ratings down to "triple-B" from "single-A."

Just after the earnings announcement, A.M. Best lowered Legion's to "B" (fair) from "A-minus" (excellent). (At the same time, Best downgraded the IPC Group subsidiaries to "B-plus" from "A-minus.")

While the executives have said they have done all they can to improve the capital position of the company to stave off such downgrades?including selling a fund administration business, Hemisphere Management, for a gain of $100 million–executives must now embark of a new set of strategies.

"We'll explore all alternatives that might help us mitigate the impact" of the downgrades, Robert Mulderig, chairman and chief executive officer, said during a conference call on Tuesday,.

He noted that the downgrades will have an adverse impact on the company's corporate risk management and specialty insurance businesses.

Asked whether shareholders wouldn't be better served by becoming part of more stable group, Mr. Mulderig replied: "I don't think we would necessarily disagree with that or rule that out, and that's certainly one of the possibilities that we will explore."

Asked specifically whether the company might be in discussions with XL Capital about "a Plan B," Mr. Mulderig said: "I think that XL will have to, in some ways, speak for themselves on this."

In April of last year, XL announced that it had joined with several co-investors in the purchase of $112.5 million of debentures issued by MRM.

Noting that XL is a financial investor and that it has three members on MRM's board of directors, Mr. Mulderig said, "they have been extremely supportive through this, but I don't think I can comment any further than that."

At the Bermuda Insurance Symposium, a representative of XL told National Underwriter that the company has no plans to acquire the company, noting that XL has only been involved with the non-U.S. portion of the company.

Explaining the "disappointing" results during the conference call, Mr. Mulderig said the results continue to reflect losses in program business segment, for which MRM took a $61.5 million reserve charge in the fourth quarter. The program business segment, he said, "experienced rapid growth in a severely underpriced property-casualty market in the last 1990s."

He also said that while the downgrades would have an adverse impact, the impact "won't be as serious as it would have been a year ago. Today's property-casualty market is a whole lot less of a buyers market and less rating sensitive than it was a year ago," he said.