Patriot National Inc., provides technology, outsourcing and underwriting services to the workers’ compensation insurance industry with several offices in California.
According to a report in the Insurance Journal, it has announced a plan of reorganization as part of a restructuring support agreement (RSA) with its lenders, Cerberus Business Finance, LLC and its affiliates, and TCW Asset Management Co. LLC., which have agreed to acquire the financially troubled firm.
Under the transaction, announced Nov. 28, Patriot National will be acquired by certain funds and accounts managed by the investment management firms, and its direct and indirect U.S.-based subsidiaries will file voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code.
Cerberus and TCW will convert a portion of their claims under the financing agreement in consideration for 100 percent of the new equity to be issued in Patriot National and the subsidiaries under the plan. All existing equity interests in Patriot National and its subsidiaries will be extinguished, and Patriot National will no longer have any affiliation with its founder and former CEO Steven Mariano, who resigned earlier this year.
The company, headquartered in Fort Lauderdale, Fla., expects the reorganization, which is subject to regulatory approval, will be completed early in the second quarter of 2018.
Patriot National said in a statement that it will “continue to operate its business in the ordinary course and the Chapter 11 filing is not expected to have a meaningful impact on its day-to-day operations.”
Patriot National provides general agency services, technology outsourcing, software, specialty underwriting and policyholder services, claims administration services and self-funded health plans to insurance carriers, employers and other clients. While it does not bear underwriting risk, it works with insurance carriers to design workers’ compensation and other multi-line programs that are marketed through more than 4,000 independent retail agencies.
In its announcement, Patriot National said it intends to continue to provide service to all of its carrier customers in accordance with the terms of current agreements. Furthermore, it anticipates all commissions due to brokers who commit to continue their business relationships with Patriot National will be paid “in the ordinary course of business or in full under the [reorganization] Plan,” the statement says.
The move is not unexpected after a tumultuous year for the company that came to a head in mid-November with the announcement that its largest workers’ compensation customer, Guaranteed Insurance Co. (GIC), would be placed in receivership by Florida regulators. The companies were mutually owned by Mariano, who resigned from Patriot National last summer. GIC held an estimated 10 percent of Patriot National’s stock and accounted for 60 to 70 percent of its business.
GIC provided alternative market workers’ compensation insurance in 31 states, with 8,600 active polices in force as of Nov. 13, including 1,250 in Florida. Its liquidation was approved by Florida regulators on Monday. Under the liquidation order, all GIC policies are canceled effective Dec. 27, unless otherwise terminated prior to that date.
Another subsidiary, Patriot Underwriters Inc., is a national program administrator that underwrites and services workers’ compensation insurance for insurance companies. Shortly after Florida regulators took over GIC, Patriot National filed a forbearance agreement with the Securities and Exchange Commission that said it would be laying off 250 employees, representing approximately one-third of its workforce.
Another affiliate of Patriot National, Ashmere Insurance Co., announced last week it would be acquired by New York-based Bedrock Insurance Group Holdings. Ashmere is a workers’ compensation insurance carrier licensed in 15 states.