Pinnacol Assurance, the state-chartered insurance firm, has had a rough couple years. In addition to coverage squabbles that unfortunately have become the norm for insurance companies everywhere, Pinnacol faced down a major PR blunder in 2010 after KMGH uncovered a $318,717 golf junket the firm's executives took to Pebble Beach.
The company made waves again in May 2011 when Pinnacol's top 12 executives were granted a $4.3 million severance package. In August, the company decided to stop handling claims from state workers, identifying the state contract as only a small part of their core business. President Ken Ross previously offered the state $330 million to go private.
Now, Governor Hickenlooper's proposed Pinnacol Assurance restructure has been squashed. “We agree with Pinnacol that additional time is needed to fully explore the proposal,” Hickenlooper said in an emailed statement today. “Clearly, there is more work to do. We look forward to continuing the conversations about restructuring in the coming weeks and months. Our priority remains doing what’s best for injured workers, policyholders and the people of Colorado.”
The ultimate goal, according to an earlier press release from the governor's office, would have established a more competitive "level playing field." The Denver Post explains that, under the privatization proposal, Colorado would have owned 40 percent of Pinnacol -- worth around $340 million. The $13.6 million in dividends this would have generate annually could fund economic development efforts and scholarships.
Finer details include:
- Par amount of preferred security is increased from $340 million to $350 million;
- Pinnacol provides an additional $22 million for an Injured Workers Fund;
- Pinnacol pays a $13.6 million dividend to the Futures Fund annually in advance rather than quarterly in arrears (this effectively allows the Futures Fund to begin operating a year early);
- Pinnacol provides a meaningful "floor" to the value of the security;
- Pinnacol pays its pro-rata share of the State Guaranty Association liability (5.8 million) in cash upfront;
- Pinnacol's executive equity compensation is limited to terms approved by the Governor and Division of Insurance; and
- Pinnacol remains a non-exclusive provider of workers' compensation insurance of last resort and pays premium tax on such "last resort" business.
For those eager to learn more, a complete 80-page proposal on Pinnacol's restructuring has all the details.