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Patriot Risk Management (PMG), a holding company for workers' compensation insurers Guarantee Risk Insurance Co. and Patriot Risk Services, is expected to price its IPO this week. This IPO follows a failed attempt by SPAC Inter-Atlantic Financial to acquire the company last April.

Business Overview (from prospectus)

We produce, underwrite and administer alternative market and traditional workers’ compensation insurance plans and provide claims services for insurance companies, segregated portfolio captives and reinsurers. Through our wholly owned insurance company subsidiary, Guarantee Insurance Company (Guarantee Insurance), we generally participate in a portion of the insurance underwriting risk.

Offering: 17.0 million shares at $10 - $12 per share. According to the prospectus, the net proceeds of approximately $172.0 million will be used as follows:

We intend to contribute approximately $155.0 million to Guarantee Insurance to support its premium writings. As described elsewhere in this prospectus, we have entered into a stock purchase agreement to acquire PF&C, a shell property and casualty insurance company. The acquisition of PF&C is subject to various regulatory approvals. If we obtain these regulatory approvals and consummate the acquisition on or prior to March 31, 2010, we plan instead to use approximately $16.7 million of the net proceeds of this offering to pay the purchase price for PF&C (of which approximately $15.5 million represents the capital and surplus of PF&C), to contribute approximately $119.5 million to PF&C to support its premium writings (thereby increasing PF&C’s capital and surplus to $135 million), and to contribute approximately $20.0 million to Guarantee Insurance to support its premium writings.

Lead Underwriters: FBR Capital Markets (FBCM), Macquarie Securities, Oppenheimer & Co. (NYSE:OPY)

Financial Highlights:

Net income for the nine months ended September 30, 2009 was $2.4 million compared to $600,000 for the comparable period in 2008... Gross premiums written were $96.0 million for the nine months ended September 30, 2009 compared to $94.9 million for the comparable period in 2008, an increase of $1.1 million or 1%... Net premiums written were $39.4 million for the nine months ended September 30, 2009 compared to $42.0 million for the comparable period of 2008, a decrease of $2.6 million or 6%... Net premiums earned were $28.4 million for the nine months ended September 30, 2009, compared to $32.3 million for the comparable period in 2008, a decrease of $3.9 million or 12%... Net losses and loss adjustment expenses were $15.9 million for the nine months ended September 30, 2009, compared to $20.7 million for the comparable period in 2008, a decrease of $4.9 million or 23%.

Competition:

The market for workers’ compensation insurance products and risk management services is highly competitive. Competition in our business is based on many factors, including pricing (with respect to insurance products, either through premiums charged or policyholder dividends), services provided, underwriting practices, financial ratings assigned by independent rating agencies, capitalization levels, quality of care management services, speed of claims payments, reputation, perceived financial strength, effective loss prevention, ability to reduce claims expenses and general experience. In some cases, our competitors offer lower priced products and services than we do. If our competitors offer more competitive prices, payment plans, services or commissions to independent agencies, we could lose market share or have to reduce our prices in order to maintain market share, which would adversely affect our profitability. Our competitors are insurance companies, self-insurance funds, state insurance pools and workers’ compensation insurance service providers, many of which are significantly larger and possess considerably greater financial, marketing, management and other resources than we do. Consequently, they can offer a broader range of products, provide their services nationwide and capitalize on lower expenses to offer more competitive pricing.

Additional Resources:

Source: Patriot Risk Management Aims for IPO