Pa. Puts Legion, Villanova In Runoff

A spokesman for the department said department staff was on site today supervising management.

Stephen Johnson, deputy commissioner for company regulation, said the department had been monitoring Legion and Villanova for the past two years when the companies ran into financial difficulties.

He said problems arose at that point when the companies' attempt to raise cash with a stock issue ended after a negative auditor's report led underwriters to withdraw and a rating downgrade from "secured" to "vulnerable" from A.M. Best Company in Oldwick, N.J.

When that occurred, Mr. Johnson said, "the liquidity issue became more dramatic" and reinsurers, realizing new business was unlikely, slowed their rate of claims reimbursement.

Ms. Koken said the rehabilitation order was obtained with the consent of the companies, "in an attempt to halt further financial deterioration of the insurance companies and to see that policyholders are protected."

The orders of rehabilitation, she explained, give the department control of the companies, put numerous policyholder safeguards in place, "and preserve the remaining assets of the companies."

Legion Insurance Company and Villanova Insurance Company are part of the Legion Insurance Group, which has $1.3 billion in admitted assets and is owned by Mutual Risk Management Ltd. MRM is a publicly-held holding company organized in Bermuda and listed on the New York Stock Exchange. The group also includes an Illinois surplus lines insurer.

The Legion Group transacts insurance business in all 50 states. The group, in addition to its main line of workers' comp, writes other commercial insurance products, including medical malpractice, general liability, group accident and health, and property coverages. A large portion of the group's business involves structuring self-insured programs for mid-sized corporations and associations.

"The first order of business is to undertake a thorough, independent financial analysis of Legion Insurance Group," Commissioner Ms. Koken said. "This will determine if financial rehabilitation is feasible."

Mr. Johnson said runoff is preferable to liquidation, which puts a company in a total bankruptcy situation where creditors might not recover dollar-for-dollar on claims and the state guaranty fund must provide support.