The MIIX Group, Inc., a leading provider of medical professional liability insurance and headquartered in Lawrenceville, New Jersey, recently announced a loss for their fourth quarter, ending December 31, 2001. The loss is primarily due from strengthening the Company’s loss and loss adjustment expense reserves and from recording a valuation allowance against the Company’s net deferred tax asset.
Net loss reserves were increased by $64.5 million at December 31, 2001, to reflect a trend of unprecedented loss severity that developed in the last half of the year, particularly in the Pennsylvania institutions book. Other states, most notably, Pennsylvania, Texas and Ohio reported adverse development associated primarily with physician business. The reserve increase, representing management’s best estimate of the appropriate adjustment, followed a period of intensive study by the Company’s internal staff, the Company’s outside actuary and a noted medical malpractice actuarial expert.
The Company’s net deferred tax asset grew to $95.4 million in the fourth quarter as a result of the adjustment to net loss reserves, primarily due to the recognition of $26.7million of net operating loss carry forwards. A valuation allowance of $95 million was recorded in accordance with existing GAAP accounting requirements. The valuation allowance recorded against the deferred tax asset is required under the strict guidelines of GAAP accounting literature. Management believes that the new operating plan provides opportunity for profitable results. Rapidly improving market pricing conditions support this belief. The valuation allowance has the potential effect (if profits are realized) of increasing after-tax returns to the Company in future years.
For the fourth quarter ending December 31, 2001, with the combined effect of the reserve adjustment and the deferred tax valuation allowance, the Company recorded a net operating loss of $162.8 million as compared to the net operating income of $4.2 million.
Patricia Costante, the Company’s President and CEO, stated, the new operating plan will focus Company operations on New Jersey and the Mid-Atlantic region where there is a history of profitability and a strong core insured physician base. In addition, the Company plans to exit institutional business to focus solely on physician insureds.