Oldwick, NJ -(BusinessWire)- A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of FFVA Mutual Insurance Co. (FFVA) (Maitland, FL).
The stable outlook reflects FFVA’s continued excellent risk-adjusted capitalization and substantially improved underwriting and overall operating performance in 2012 and 2013, following significant reported losses in 2011, projections of further improvement in operating performance in the near term, as well as improved risk-adjusted capitalization in 2012 and 2013, largely as a result of realized and unrealized capital gains.
The ratings reflect FFVA’s excellent risk-adjusted capitalization, historically strong underwriting and overall operating performance and expertise in the Florida workers’ compensation market. These positive rating factors are largely derived from the company’s adherence to sound underwriting principles, prudent investment strategies and an experienced management team.
FFVA’s positive rating factors are partially offset by its recent significant growth in southeastern states contiguous with Florida, where substantial underwriting losses have been reported; its concentration risk as a monoline workers’ compensation writer; the current soft market environment within the workers’ compensation marketplace; and the generally weak economy. FFVA’s underwriting losses, in conjunction with unrealized capital losses on its equity portfolio, resulted in a 21% reduction in policyholders’ surplus and a weakening in risk-adjusted capital in 2011. However, more recent surplus increases—largely reflecting capital gains—and modest growth have resulted in risk-adjusted capital that is well-supportive of FFVA’s current ratings.
FFVA’s ratings could be negatively impacted should soft market conditions, a lack of underwriting discipline or unfavorable loss reserve development result in underwriting and overall profitability measures that underperform its peers, or should there be a material decline in the company’s risk-adjusted capitalization.