A.M. Best has revised the outlook to stable from negative and
affirmed the financial strength rating of B+ (Good) and issuer credit
rating of "bbb-" of Frank Winston Crum Insurance Company (FWCI)
The stable outlook reflects FWCI's adequate risk-adjusted
capitalization, recently enhanced by a quota share agreement;
substantially improved underwriting and overall operating performance in
2012 and 2013, following significant reported losses in 2011; and
expectations of continued favorable operating performance in the near
term. The ratings also reflect the expectation of continued operational
and financial support from the Crum family, which owns FWCI.
Furthermore, the ratings recognize the company's prudent loss reserving
practices, which have resulted in favorable calendar year loss reserve
development in recent years.
FWCI's positive rating factors are largely offset by its changed
business profile and execution risk associated with the rapid expansion
of its guaranteed cost book, as well as diversification into other
products. FWCI reported significant underwriting and overall operating
losses in 2011, driven by losses in its guaranteed cost book, as well as
losses in its professional emploer organization related business. 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 January 1, 2014. A.M. Best will continue to monitor
FWCI's progress in achieving its business plans to ensure that premium
growth and the accumulation of loss reserves do not strain its
capitalization and overall operating results are achieved in accordance
with rating expectations.
Factors that could trigger negative rating actions include a decline in
FWCI's risk-adjusted capitalization that is below A.M. Best's
expectations; deterioration in underwriting results, particularly if
driven by significant adverse loss reserve development; and a material
deviation from the company's submitted financial projections. In
addition, a lack of financial commitment from the Crum family in
maintaining the company's capital adequacy also could trigger a negative
rating action. 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.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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