By 1998, IMSG was pulling in over $50 million in revenues, more than half of it from Bankers Insurance Group companies. That's about the time investment bankers came knocking on Bankers Insurance Group's door urging a public spinoff of Insurance Management Solutions.
In early 1999, Insurance Management Solutions went public, issuing 12 million shares of common stock at $11 each. Bankers Insurance Group, which is owned by founder Robert M. Menke and his family, remained the largest shareholder with some 62% of all shares.
It's been a bumpy ride for IMSG's investors since, as the company has struggled to establish itself as a stand-alone insurance outsourcing firm. The acquisition of a flood zone mapping business didn't pan out as expected. A promising contract with Reliance Insurance Co. fell apart when Reliance collapsed last year. Expected revenue growth didn't materialize. In fact, revenues reversed in 2000, leading to a loss of $509,000.
IMSG's stock fell as low as 32 cents last summer, leading Nasdaq to delist the shares, which now trade on the bulletin board. A slew of shareholder suits followed.
Meanwhile, things haven't been going much better at Bankers Insurance Group, IMSG's principal shareholder and customer. Insurance losses have chipped away at the group's biggest property and casualty subsidiary, Bankers Insurance Co. In less than a year, its policyholder surplus had fallen from $50 million to $20 million by Sept. 30, 2001.
"They've been having a downward trending from operations," says Michelle Newell, director of insurance services at the Florida Department of Insurance. "We're monitoring them on a quarterly basis."
To raise cash, Bankers sold its headquarters in St. Petersburg last year for $17 million. The company also hired new CEO Jason Israel, who replaced Robert G. Menke, the founder's son.
Bankers also avoided losing its license to operate in Florida by agreeing in late January to pay the state $1 million in fines and costs to settle a complaint that the company had improperly tried to influence regulatory policy. In 1995, a Bankers private investigator illegally wiretapped the telephone of an insurance regulator named Kevin McCarty. Bankers had already paid McCarty $2.55 million to settle the civil suit he filed.
Exploring their options
IMSG officials, meanwhile, have other decisions to make. In December, the company sold its Geotrac flood zone mapping business back to its original owners for $19 million. IMSG paid
$23.5 million for it. IMSG CEO David Howard says the company has three options: It can use the proceeds to finance future growth; repurchase its stock; or distribute the cash to shareholders as a one-time dividend and possibly sell the operating businesses. "The board of directors will be meeting to review all the possibilities," Howard says.
Investors are eagerly awaiting the outcome. After bottoming out at 32 cents last year, IMSG's shares have soared to as high as $3.75, before settling in at around $3, the company's intangible book value.
IMSG returned to profitability for the first nine months last year, thanks in part to cost-cutting measures and a huge pickup in claims processing in the wake of Tropical Storm Allison.
But with the sale of Geotrac, IMSG now gets some 80% of its revenues from Bankers and other affiliated companies. At the same time, IMSG's largest shareholder -- Bankers -- could use the proceeds from the sale of Geotrac as well as IMSG itself to help shore up its wobbly balance sheet.