A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of "a-" of FCCI Insurance Company, and its wholly owned subsidiaries, Brierfield Insurance Company (Ridgeland, MS), FCCI Commercial Insurance Company, FCCI Advantage Insurance Company (both domiciled in Sarasota, FL), Monroe Guaranty Insurance Company and National Trust Insurance Company (both domiciled in Carmel, IN), operating collectively as FCCI Insurance Group (FCCI).
The revised outlook reflects FCCI's strong risk-adjusted capitalization, consistently solid operating performance, conservative loss reserve philosophy and solid position within the Florida property/casualty marketplace. The ratings also reflect FCCI's successful diversification into additional lines and states over the past ten years. These strengths reflect FCCI's commitment to underwriting fundamentals, long-standing relationships with its agents, strong medical management capabilities, extensive loss control procedures and its advanced use of technology and sophisticated predictive analytic modeling tools.
Partially offsetting these positive rating factors are FCCI's moderately high expense ratio over the recent five-year period and somewhat concentrated business profile. While management has continued with its geographic expansion and diversification efforts, FCCI's market profile remains geographically concentrated with more than half of its premium writings derived from Florida. In addition, workers' compensation still makes up a significant portion of FCCI's total book of business, and underwriting results in this line have weakened in recent years, driven by competitive market conditions, a weak macroeconomic environment and the accumulation of state- mandated workers' compensation rate reductions occurring in Florida. Despite recent rate increases, the workers' compensation line remains challenged, although these concerns are mitigated by FCCI's conservative underwriting and reserving practices.
Factors that could lead to positive ratings movement include the continuation of FCCI's consistent and solid operating earnings while maintaining a conservative balance sheet and excellent risk- adjusted capitalization. Factors that could lead to negative rating actions include a trend of increasingly deteriorating underwriting and operating performance or an erosion of surplus to an extent that causes a significant decline in risk-adjusted capitalization.
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. Key criteria utilized include: "Rating Members of Insurance Groups"; "Risk Management and the Rating Process for Insurance Companies"; "Catastrophe Analysis in A.M. Best's Ratings"; "The Treatment of Terrorism Risk in the Rating Evaluation"; and "Understanding BCAR for Property/Casualty Insurers." Best's Credit Rating Methodology can be found at ambest.com/ratings/methodology.
A.M. Best Company is an insurance rating and information source.
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