Your points are well taken, Hearnthar. However, I disagree about Majestic. If you take a look at their latest financias (Q1 2009) posted on the DOI website, you'll see that they have $336M in assets, $226M in liabilites and $100M in surplus. They have about $156 in commbined loss liability.

They are writing as much insurance now as last year. Granted, their combined loss ratio is above 100% - but then so are most carriers in California. Given the long tail on WC insurance, with a return on investments of 4%, a carrier can withstand a 131% loss and still break even.

I agree, the problem is the parent company. They have worked themselves into a big mess with the self-insured management and reinsurance. These were never big revenue generators, nor was it ever very profitable (currently it's a loser).

Still, they are just management - they don't owe the estimated $135M in shortfall, the employers do. They will probably get slapped with some fines and judgements for poor management but that will be considerably less than the whole amount.

This company first hit my radar in 2006 when they went public. The prospectus said, 'We've been doing managment and reinsurance for a while and have made a little money. We're not saying we know what we're doing, but we want the public to give us $67M anyway.' And that's what happend - at $13 per share. The founders control about 1/3 of the outstanding stock - so they have a complete lock on management. Still, the institutiona investors bought into it as well. Most of them have lost 90%+ in their investments. I'm curious why they didn't ask for a management change. The owners won't get into trouble if they tell you they are taking $5 from your pocket, take the $5, and then file a statement with the SEC saying they took $5 from your pocket. That is full disclosure and is their 'Get out of jail free' card.

The best thing for this company is to split it up. Close down the management company and settle the suits. Majestic can either remain an indempendant company, or shut down and go into run-off. I think the $156 in loss reserves is probably overstated by 10%-20%. I don't think a WC company in Califorina is a good place to tie up $100 in capital.

I'm a small investor in this company ($0.49 to $1.12) - less that 10,000 shares. I know it's a muddy mess, but with the stock at $1 and the book value (cash) at over $5, there is a potential for upside.