The American Hospital Association is seeking buyers for its highly profitable insurance subsidiary with the hope of selling it by the end of the year, MODERN HEALTHCARE has learned.
The subsidiary, Health Providers Insurance Co., is a liability reinsurance company that sells excess layers of coverage to hospitals above their basic level of liability insurance. HPIC reinsures 2,000 hospitals either directly or through other companies.
Last fall, the AHA launched an evaluation of HPIC to decide whether to stay in the insurance business or divest the unit (Oct. 4, 1993, p. 14).
The sales effort, confirmed by AHA executives last week, is consistent with the ongoing divestiture of fee-for-service activities by the association as it converts itself into a dues-supported organization.
The AHA sold its teleconference series, its directory of healthcare professionals and its hospital long-distance telephone service. It tried but failed to sell its two hospital comparative data bases, which have been discontinued.
Dennis Olsen, HPIC's president, told MODERN HEALTHCARE that the AHA has hired the New York-based investment banking firm Donaldson, Lufkin & Jenrette to market the company.
"We hope to have it resolved by the end of the year," he said. "Until then, HPIC is conducting business as usual."
Richard Wade, the AHA's senior vice president for communications, said an offering memorandum has been sent to eight parties in a "limited solicitation."
HPIC sustained a $2.2 million underwriting loss last year, compared with a $2 million underwriting loss in 1992, according to figures obtained from the Illinois Department of Insurance.
But nearly $10 million in investment income each year pushed HPIC well into the black. Last year, HPIC earned $4.4 million on total revenues of $25.1 million, compared with a $4.1 million profit on total revenues of about $23.8 million in 1992.
The company has assets of $135 million and liabilities of $105 million, Mr. Olsen said.