Queensway faces receivership

The last of specialty risk insurer Queensway Financial Holdings Ltd.’s (TSE: QFH) directors have resigned in light of the company’s bid to have an interim receiver appointed over its assets by the Ontario Superior Court of Justice. That request was granted May 18, a day after directors Harold Meloche, Kevin Charlebois and David Ogilvie announced their resignations.

Just two weeks prior, CEO and president James Petcoff, and vice president and COO Matthew Petcoff also announced their resignations as directors. This came in response to the sale of Queensway subsidiary North Pointe Financial Services to California-based Argonaut Group Inc. The Petcoffs had joined Queensway in 1998 when the holding company purchased North Pointe, and they now say they expect to remain as directors and officers at North Pointe. At the same time, director Brian Reeve also announced his resignation.

The court order to appoint an interim receiver was sought to complete the previously announced sale of Queensway’s various North American insurance subsidiaries, the company says. Queensway says the order affects only the holding company and Queensway Holdings Inc., an intermediary holding company, and not the insurance units which fall under the supervision of state and provincial regulators. “The insurance subsidiaries continue to operate in the normal course with their boards of directors and management teams in place,” a company media statement says.

In response to the granting of the court order, rating agency A.M. Best has changed its review status of Queensway’s insurance subsidiaries to “developing”. This is in expectation of the sales being completed by the end of the third quarter of 2001 but will be adjusted downward should the sales not be finalized.

Following the completion of the sales, Queensway expects the Ontario court to order all remaining assets to be sold to pay outstanding debts. The company had tried to reschedule its debt payments in late December but missed payment of $3.7 million owed at the time. Early in 2001 the company faced senior debt of $45.8 million, and in January the Florida and Georgia courts ordered Queensway to liquidate its insurance units at the request of state insurance regulators. “Accounting irregularities” from subsidiaries Paradigm and Sun States Group (SSG) had also troubled the company over recent years. Trading of Queensway shares was halted on the Toronto Stock Exchange pending the Ontario court order. The share price closed at 45 on May 17, having dropped 77% since the beginning of the year.