Oldwick, NJ -(BusinessWire)- A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of B+ (Good) and the issuer credit rating “bbb-” of Frank Winston Crum Insurance Company (FWCI) (Clearwater, FL).
The revision of the outlook largely reflects significant underwriting losses in the company’s rapidly growing workers’ compensation business in 2014, primarily resulting from adverse prior-year loss reserve development that resulted in overall operating performance falling short of company projections for the year.
FWCI’s ratings reflect its adequate level of risk-adjusted capitalization, the expectation of continued operational support from the Crum family, which owns FWCI, and profitable overall operating performance over the past three years. These positives rating factors are largely offset by the company’s volatile underwriting results over time; the execution risk associated with the rapid expansion of its workers’ compensation guaranteed cost book, as well as diversification into other products; and below average investment returns. A.M. Best will continue to monitor FWCI’s expansion plans in its guaranteed cost and general liability businesses to ensure that premium growth and the accumulation of loss reserves do not strain its risk-adjusted capitalization.
In order to lessen the adverse impact of FWCI’s significant growth of guaranteed cost business on its risk-adjusted capitalization, the company executed a material quota share reinsurance agreement on this business, effective Jan. 1, 2014. This quota share reinsurance agreement was renewed, effective Jan. 1, 2015, with modest modifications.
Factors that could trigger negative rating actions include a decline in risk-adjusted capitalization that is below A.M. Best’s expectations; deterioration in underwriting results, particularly if it is driven by adverse loss reserve development; and a material deviation from the company’s submitted financial projections. Positive rating actions could be taken should FWCI’s underwriting and overall operating profitability compare favorably with higher-rated workers’ compensation carriers for a sustained period and its risk-adjusted capitalization remains supportive of its ratings.
Source: BusinessWire