Some physician-owned medical malpractice insurers are keeping step with the consolidation craze in healthcare.
Medical Liability Mutual Insurance Co., New York, the country's largest physician-owned writer of professional malpractice insurance, announced last week it will acquire for about $5 million another New York-based carrier licensed to do business in 30 other states.
Licensed only in New York state, Medical Liability Mutual plans to acquire all the stock of Fortress Insurance Company of America, a wholly owned subsidiary of AAOMS National Insurance Co., Rosemont, Ill. AAOMS insures more than 2,500 oral and maxillofacial surgeons.
In another transaction, Florida's largest physician malpractice insurer will grow outside the Sunshine State because of its planned merger with a Michigan insurer doing business throughout the Midwest.
Coral Gables-based Physicians Protective Trust Fund announced last week it signed an agreement to merge with PICOM Insurance Co., Okemos, Mich. Formerly known as Physicians Insurance Company of Michigan, PICOM is a subsidiary of Professionals Insurance Company Management Group, a publicly traded holding company.
"There's just more and more of this going on," said Jack Pope, a spokesman for the Physician Insurers Association of America, Rockville, Md., a trade association for medical malpractice companies owned and operated by doctors and dentists.
For Medical Liability Mutual, the acquisition means fulfilling the needs of its insured, whose practices stretch beyond the New York state line.
"This permits us to write in those neighboring jurisdictions," said Edward Amsler, assistant secretary of Medical Liability Mutual. Formed in 1975, the company insures more than 14,000 physicians and dentists in New York. It also covers 23 hospitals.
According to a company financial statement, Medical Liability Mutual was hugely profitable in 1996, posting about $205.4 million in net income on total revenues of about $570.1 million.
Pending approval from the New York Insurance Department, the acquisition of Fortress is expected to be completed in November.
The acquisition of Fortress includes all its stock and insurance licenses but not its book of business, said Kenneth Ludwig, chief executive officer of AAOMS.
Providers insured by Fortress will become insured by another AAOMS subsidiary. Fortress will be renamed once it becomes a subsidiary of Medial Liability Mutual.
Last year Fortress earned about $200,000 on total revenues of about $2.3 million, Ludwig said.
The merger between Physicians Protective Trust Fund and PICOM will create an insurance company with more than 11,000 insured providers.
Officials at both companies aren't worried about antitrust troubles because the two have no overlapping markets, they said.
Physicians Protective Trust operates only in Florida, while PICOM is licensed to do business in Illinois, Indiana, Iowa, Kentucky, Michigan, Ohio and Pennsylvania. PICOM also has licenses pending in Kansas, Minnesota, Missouri and Wisconsin.
The companies are completing their merger notification documents, which will be filed with the Federal Trade Commission shortly. The merger is expected to be complete by year-end.
"It's being driven by two companies that feel the need to grow larger to remain competitive," said Vic Adamo, president and CEO of PICOM and the holding company. The merger opens up Florida's booming healthcare market to his company.
PICOM earned about $9.6 million on $64 million in premium revenues last year, said John Lang, its treasurer.
Meanwhile, Physicians Protective Trust earned about $9.3 million on $89 million in premium revenues last year, said Steven Salman, its president and CEO. The company operates as a not-for-profit trust controlled by a physician board.
Merger discussions had been going on for about six months, Salman said.
Besides letting Physicians Protective Trust do business outside Florida, the merger will expand its product line beyond physicians to include coverage for things such as freestanding treatment centers, hospitals and nursing homes.
The new insurance company that will be created by the merger doesn't have a name yet, but it will be under the umbrella of the publicly traded company.