Physicians Insurance Co. of Wisconsin Makes Attempt to Block Takeover Bid

October 12, 2004

Physicians Insurance Company of Wisconsin (PIC Wisconsin) announced it will oppose an out-of-state company’s efforts to purchase a controlling interest in PIC Wisconsin.

PIC Wisconsin said the hostile takeover, if successful, could increase the cost of medical malpractice insurance and hurt Wisconsin’s currently stable medical malpractice insurance market.

In a filing with the Office of the Commissioner of Insurance (OCI), PIC Wisconsin indicated the proposed acquisition by American Physicians Assurance Corporation (APAC) of Michigan is contrary to the interests of Wisconsin physicians, will destabilize the state’s medical malpractice insurance market, and increase health care costs.

“The proposed hostile acquisition of PIC Wisconsin by APAC is inconsistent with our company’s 18-year history and mission of providing quality, affordable medical malpractice insurance to Wisconsin physicians,” said William Montei, president and CEO of PIC Wisconsin. “Wisconsin is one of only six states in the country with a stable market for malpractice insurance. In nearly every other state, the industry is in or near crisis, including several states in which APAC concentrates its business. PIC Wisconsin is one of the reasons that Wisconsin has such a stable market. We are also concerned that a takeover by APAC would cause Wisconsin doctors’ insurance rates to rise, which would affect the costs consumers pay for health care services.”

PIC Wisconsin – an independent, physician-owned insurer – was founded in 1986 in cooperation with the Wisconsin Medical Society to create a stable market for medical liability insurance and serve the interests of Wisconsin physicians. While other physician-owned insurers, including APAC, have demutualized, gone public, or both, PIC Wisconsin has reportedly maintained its core philosophy of being governed by and for physicians.

American Physicians Assurance Corporation has asked Wisconsin insurance regulators for permission to buy nearly 23 percent of PIC Wisconsin’s outstanding shares from five shareholders, mainly medical corporations. Although APAC states that it does not intend to solicit the purchase of additional shares of PIC Wisconsin, it also has said it may buy more shares on an “opportunistic basis,” according to the APAC filing with OCI.

“We are concerned that APAC is mainly focused on making a profit, while PIC Wisconsin’s first priority is to defend physicians and the practice of medicine,” said Montei. “We believe that APAC does not have the best interests of Wisconsin physicians in mind and that an examination of APAC and its business practices will show that it is not a fit and proper owner for PIC Wisconsin.”

According to PIC Wisconsin’s filing, a pending lawsuit against APCapital and some of its current and previous officers for alleged securities fraud also is cause for concern. PIC Wisconsin’s filing also questions APAC’s relationship with some of its major shareholders, its history of acquiring and disposing of companies, and the effect this may have on the Wisconsin market.

A.M. Best Company, which provides independent rankings of insurance companies, has given PIC Wisconsin its A- (Excellent) ranking for more than eight years. Last year, APAC experienced significant losses, and A.M. Best downgraded its ranking to B+, according to the PIC Wisconsin filing.

“We believe it is crucial that PIC Wisconsin remain an independent, physician-governed organization so that we can continue to provide affordable insurance for Wisconsin doctors,” said Montei.

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