A.M. Best Revises Outlook to Negative for Frank Winston Crum Insurance, Inc.
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The rating actions reflect FWCI’s poor underwriting and operating results in 2011, the revised business profile and execution risk associated with the continued expansion of its guaranteed cost book, as well as management’s plans to diversify into other lines of business. The company is expected to report a significant underwriting and operating loss in 2011, driven by losses in its guaranteed cost book of business and in its professional employer organization (PEO) related business. Furthermore, as a result of its geographic concentration risk, with approximately 70% of its business in
The company has also focused on growing its premium outside the PEO related business by continuing to expand its guaranteed cost book of business. Considering the inherent risks of growing this business amidst challenging market conditions, as evidenced by the significant deterioration in underwriting and operating results in 2011,
The ratings also reflect FWCI’s adequate level of risk-adjusted capitalization and the expected financial support provided in the form of capital contributions from its owner, the Crum family. The Crum family initially infused
Factors that could trigger negative rating actions include a decline in risk-adjusted capitalization that is below
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: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; and “The Treatment of Terrorism Risk in the Rating Evaluation.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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