A.M. Best Revises Outlook to Negative for Frank Winston Crum Insurance Company

OLDWICK, N.J.--()--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.

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.

Key insurance criteria reports utilized:

  • Risk Management and the Rating Process for Insurance Companies
  • The Treatment of Terrorism Risk in the Rating Evaluation
  • Understanding BCAR for Property/Casualty Insurers

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best Company
W. Dolson Smith, CFA, 908-439-2200, ext. 5379
Senior Financial Analyst
w.dolson.smith@ambest.com
or
Michael J. Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice President
michael.lagomarsino@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best Company
W. Dolson Smith, CFA, 908-439-2200, ext. 5379
Senior Financial Analyst
w.dolson.smith@ambest.com
or
Michael J. Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice President
michael.lagomarsino@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com