AM Best Downgrades Issuer Credit Ratings of Florida Family Insurance Company and Its Subsidiary

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Florida Family Insurance Company and its subsidiary, Florida Family Home Insurance Company, which together make up the two pool members of Florida Family Group (Florida Family). The outlook of the FSR has been revised to negative from stable while the outlook of the Long-Term ICRs is negative. Both companies are domiciled in Bonita Springs, FL.

The Credit Ratings (ratings) reflect Florida Family’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The downgrade of the Long-Term ICRs reflects AM Best’s concerns over Florida Family’s balance sheet strength following continued surplus erosion due to underwriting losses, significantly elevated underwriting leverage metrics, inconsistent reserve development, and a declining trend in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The BCAR deterioration and view of risk-adjusted capitalization reflects higher gross probable maximum losses (PMLs) that are a product of the group’s expansion of its new homeowners product, paired with less ground-up catastrophe reinsurance coverage, which collectively result in higher net PMLs across value-at-risk intervals. Further pressuring balance sheet strength is elevated reinsurance dependency and above-average net leverage, as compared with the personal property composite.

The negative rating outlooks reflect Florida Family’s underwriting performance, which has been impacted negatively by weather-related events, a challenging Florida insurance market, which includes increases in the frequency and severity of water-related claims, and more recently, adverse loss reserve development. Management has implemented a number of actions to improve performance, including rate increases, nonrenewal of undesirable risks, the closure of new business in specific areas of Florida, and the effective management of assignment of benefits issues. The group recently launched a new homeowners insurance product, which has produced modest growth in the historical footprint and incremental writings in territories previously closed off to wind business. The business profile assessment reflects Florida Family’s limited operating territory within a hurricane-prone state. Severe weather events continue to be Florida Family’s primary risk, which is a focal point in the group’s ERM program.

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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