National States Insurance Co., St. Louis, has prospective buyers for its life and Medicare supplement policies but can’t find insurers interested in its Florida long term care policies, says Bruce Baty, special deputy receiver for National States.

The life, long term care, and Medicare supplement insurer was placed into rehabilitation April 1 by a state judge and turned over to regulators at the Missouri Department of Insurance. John M. Huff, director of the department, was appointed receiver of National States and has taken over operations of the company along with Bruce Baty, a partner at Sonnenschein Nath and Rosenthal L.L.P., Kansas City.

The company is continuing to operate nearly 3 months into rehabilitation but has stopped writing and selling new policies, Baty says.

At the end of 2009, National States had a surplus of about $2.2 million, according to Baty. But at the end of the first quarter, the company had used up the surplus.

Baty attributed the company’s financial difficulties to its LTC policies in Florida. National States is licensed to do business in Florida as well as in 36 other states. It has been unable to get rate increases in the long term care business in Florida, and these policies are running a 400% loss ratio, according to Baty.

After initially being in a state of “triage” once rehabilitation was ordered, the company is now looking month to month to determine its financial position.

The company stopped new sales and cleared all new and pending applications for coverage by April 15.

But the company is still operating, Baty says. National States is continuing to renew policies as they come in, collect premium and pay all policyholder claims. It is also continuing to pay all agent commissions but has stopped paying advances while the insurer is in rehabilitation, Baty says.

National States has also spoken with some insurance agencies that have reported an increase in policy cancellations or replacement by policyholders, Baty says. But “agents understand we’re still in business” and that it is not in the best interest of policyholders to move to another company, Baty says.

Baty noted that protecting policyholders by paying claims, and maintaining employment at National States were two goals that Huff asked of those working in the rehabilitation process. Because National States has stopped writing new policies, 25 people in the underwriting group have been let go, Baty says.