By Lilla Zuill

Troubled financial and insurance services firm Mutual Risk Management may be working to restructure its operations in a bid to stem its financial deterioration.

MRM CEO, Robert Mulderig, yesterday told The Royal Gazette that it continues to evaluate strategic alternatives - including possible restructuring - with its financial advisor, recently retained company Greenhill & Co., LLC.

But Mr. Mulderig cautioned: "I don't think anything is definite. The company's preference would be to complete restructuring but nothing is firm."

Mutual Risk (MRM) is currently under review by the Bermuda Monetary Authority insurance division, with the BMA revealing they have put the company under watch on an "ongoing basis".

An officer with the insurance division said the BMA felt it "prudent" to take action after MRM's financial situation showed increasing deterioration.

The company has seen its value on the stock market - it was listed on the New York Stock Exchange (NYSE) until its delisting earlier in the month - plummet to below a dollar with reported losses for 2001 of $99.2 million. And the company's Pennsylvania insurers were also put in to run off by state regulators and a string of rating agency downgrades has plagued the company, as its financial condition - despite a reported $2.6 billion in reinsurance recoverables on its books - has crumbled.

In filings with the US Securities and Exchange Commission (SEC), MRM has hinted at the possibility of selling off its assets and even the possibility of liquidation.

The filing states: "We are currently in default under the agreements governing our debt facilities... Therefore, if these defaults are not waived or if our debt is not restructured, there is substantial doubt as to the company's ability to continue as a going concern."

The company also reported in an SEC filing that as part of its analysis of "strategies going forward", it might consider "strategic asset sales".

Sources close to the matter indicated that could include the sale of MRM-owned captive manager International Advisory Services (IAS), but management this week said that was unlikely.

IAS president David Ezekiel dispelled rumours that IAS was about to go on the sales block and told The Royal Gazette: "That is absolutely not the case. The (MRM) group is looking at the restructuring of its profitable units."

Mr. Ezekiel conceded that MRM SEC filings have indicated the possible sales of assets. And he added: "One can never say never in terms of a sale," but Mr. Ezekiel said the company does plan to restructure: "A number of the profitable service units in the MRM group - of which IAS is one - are looking at restructuring so that we can move forward together."

IAS was bought by MRM in 1998. Although owned by MRM, IAS has been largely autonomous and run by Mr. Ezekiel.

Mr. Ezekiel said that despite MRM woes, IAS is doing well: "IAS is growing and profitable. We had our best ever year in 2001 and we are expecting again to have our best ever year in 2002."

Mr. Ezekiel added that the company has also maintained 100 percent client retention in spite of MRM's financial deterioration.

Mr. Ezekiel said MRM's situation has sparked calls from concerned clients, but he said the enquiries have been "after our own (IAS) well-being."

Meanwhile, XL Capital indicated in a recent SEC filing that its investment in MRM is not under threat.

A year ago XL led a $112.5 million investment in the firm, along with First Union Capital Partners, High Ridge Capital and Century Capital Partners with a newly created class of debentures.

In its SEC10-k filing XL Capital said it continuously reviews the performance of its investments.

The filing stated further: "Included in the company's other investments at December 31, 2001 is a convertible debenture issued by Mutual Risk Management carried at $63.2 million. Although the market value of MRM has declined significantly, the company has assessed the value of the debenture, and due to underlying security features, believes there is no impairment."

Three XL executives sat on the MRM board until last month but resigned following concerns over possible conflicts of interest. Michael Esposito, chairman XL Capital, Fiona Luck, executive vice-president, group operations, and Bruce Connell, executive vice-president, group underwriting officer stepped down.

A spokesman from XL said: "The XL representatives on the MRM board stepped down after it became clear that MRM's changed circumstances would require liquidation (of assets) to satisfy creditors."

The spokesman added that as the board would be called to vote on actions taken by the firm to satisfy creditors - and with XL being a creditor - the XL executives could have faced a conflict of interest.