NCRIC Group Inc., a District-based medical malpractice insurance company, announced yesterday that it plans to sell itself for $69.6 million in stock to a larger Alabama-based insurer because it can no longer withstand the volatile malpractice legal climate as a free-standing firm.
In a morning call with analysts, NCRIC's top executives explained that the $81.3 million the company had set aside to pay for 2001-to-2003 jury awards and settlements was discovered by actuaries to be $17 million less than was needed.
NCRIC announced a fourth-quarter loss of $8.3 million ($1.30 a share), compared with $5.6 million (89 cents) during 2003's final three months. Its 2004 losses totaled $7.1 million ($1.12), compared with $4.2 million (65 cents) the previous year.
"It became clear that a merger with a larger insurance company was the best choice for us," said R. Ray Pate Jr., president and chief executive of NCRIC.
NCRIC -- which covers 4,700 doctors in the District, Virginia, Maryland, Delaware and West Virginia -- approached ProAssurance Corp. in Birmingham about three weeks ago about a possible merger. ProAssurance agreed to a deal that values NCRIC at $10.10 per share. It must be approved by regulators and NCRIC shareholders. NCRIC's stock closed at $10 yesterday, down 94 cents, or 8.6 percent.
The announcement is the latest sign of distress in an industry that's been squeezed by what carriers say is a rise in lawsuits and jury awards. Since the mid-1990s, insurers that haven't been forced out of the business have either retrenched dramatically or abandoned it voluntarily, as did St. Paul Cos., once the nation's largest medical malpractice carrier.
Part of NCRIC's appeal was its presence in Virginia and Delaware, said A. Derrill Crowe, chairman and chief executive of ProAssurance, which operates in more than 14 states and grew through acquisitions. He said he plans to leave NCRIC's 107 employees, located in five mid-Atlantic offices, "as they are for a while."