Based in Paramus, New
Jersey, Preserver Group, Inc. is a restructured insurance company that grew out
of the insurance businesses assembled by the Motor Club of America (MCA). The
company provides property and casualty insurance through its five wholly owned
subsidiaries, which primarily serve the northeastern United States. Although
MCA became involved in the underwriting business by providing car insurance to
motor club members in New Jersey, the company in recent years has looked to cut
back its involvement in the state, or to abandon it completely, the result of
New Jersey's auto insurance regulations that have caused a number of insurers
to cease conducting business in the market.
Motor Club Origins in
1926
The Preserver Group's
roots reach back to 1926 when three brothers established a motor club. William,
David, and Samuel Green were born in Atlantic City, New Jersey, the children of
Russian immigrants. William, the second eldest, was the one who took the lead
in the motor club business, after having worked a brief time as an accountant.
He would serve as chairman of the motor club and its businesses for more than
50 years. As automobiles became more common in the 1920s, drivers looked to
pool their resources to provide mutual assistance, leading to the rise of motor
clubs that could provide maps and help with emergency repairs and towing.
Initially the Greens conducted business in a one-room office in Newark, New
Jersey. In short order, they began to sell affordable auto insurance as part of
their offerings to club members. In 1933 the company became known as the
Automobile Association of New Jersey and moved to a storefront location. The
motor club began attracting members beyond New Jersey as it created operations
in 13 other states, as far north as Maine, as far south as Florida, and as far
west as Ohio, Michigan, and Kentucky.
In the late 1950s the
company expanded beyond the automobile business to start Garden State Life
Insurance Company. It also began to offer fire and homeowners insurance, as
well as expanding on the club's travel services. The company changed its name
to Motor Club of America in 1958, and also separated out its insurance
businesses by creating Motor Club of America Insurance Company (MCAIC). It
subsequently built a five-story headquarters in Paramus, New Jersey, to house
the motor club operations and insurance businesses. It created a real estate
subsidiary, Fairmount Central Urban Renewal Corp., to own the building and
property, and then leased the facilities.
By 1970 the MCA Group
consisted of Motor Club of America, three fire and casualty insurance
companies, Garden State Life, three insurance sales agencies, two finance
companies for car loans, a real estate company, and a travel business. The
company in the late 1960s also began an effort to become involved in the
hospital services industry by initiating a plan to build the New Jersey
Rehabilitation Hospital in East Orange, New Jersey. By running all of these
businesses out of one building, the company was able to save on overhead costs.
In 1970 MCA enjoyed the most profitable year of its existence, posting net
earnings of more than $1.56 million, or $1.41 per share. Premiums from motor
club memberships were up by some 27 percent, as were fire and casualty
premiums. Garden State Life, with increased sales through the company's fire
and casualty agents, was enjoying robust growth. It was now licensed to do
business in 49 states, as well as the District of Columbia and Puerto Rico. In
1972 Garden State Life exceeded the $100 million-in-force plateau. To fuel
growth in its insurance businesses the company made an initial public offering
of the MCAIC unit in June 1972, selling 412,500 shares at $15 each.
Passage of New
Jersey's "No Fault" Insurance Laws in 1972
Although most of the
company's operations would continue to be profitable, the passage of New
Jersey's "no fault" insurance laws in 1972, which went into effect a
year later, would soon begin to have an adverse impact on MCA. During the four
years from 1976 to 1979, MCAIC endured $27 million in underwriting losses. In
addition to the no-fault provisions, the company was hurt by the increased rate
of inflation that caused high automobile repair costs. Clearly, the company was
overly dependent on New Jersey auto insurance. In 1979 almost 90 percent of
MCAIC's net premiums came from New Jersey business, and 77.3 percent of that
amount came from automobile premiums. The company sought relief from the state
and on January 1, 1980, the New Jersey Insurance Commissioner discontinued
assigning high-risk drivers who were distributed among state insurers. The
financial state of the company was so compromised by this point that it agreed
with both the States of Massachusetts and Connecticut to not write any new insurance
or renew policies upon their expiration. MCAIC also withdrew its certificates
of authority from several states in which it had yet to begin selling
insurance. The company sought additional state relief, including a rate
increase and permission to drop certain lines of automobile insurance. Although
a general 11 percent rate increase was announced, the Commissioner did not
grant any other relief to MCA. In October 1980 the company filed suit against
the Commissioner and the State of New Jersey, seeking compensation for the
injury caused by the New Jersey regulations.
Other aspects of
MCA's business that had been holding up also began to suffer in the early
1980s. Motor Club memberships had enjoyed steady growth, with operations now
spreading to include 29 states. Much of this out-of-state growth was fueled by
a program with AVCO Financial Services, Inc. With the country enduring higher
interest rates, however, the number of loans that AVCO generated dropped
significantly, and as a result the opportunity to sell motor club memberships
decreased as well. MCA's attempt to enter the healthcare business also failed
to pan out. In 1975 the company's subsidiary, Moderncare Centers of America,
Inc., opened the 152-bed New Jersey Rehabilitation Hospital in East Orange, New
Jersey. The operation had been modestly profitable in the late 1970s, but in
February 1982, MCA sold the hospital for $7 million, receiving a cash payment
of $2,650,000 after the purchaser assumed the mortgage. Moreover, in 1982 the
company sold Garden State Life to the GEICO Corporation, receiving $15 million
in total compensation.
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For more info on MCA's exciting new affiliate program visit www.checkoutmca.info
