A.M. Best Revises Issuer Credit Rating Outlook to Negative for Florists’ Mutual Insurance Company and Its Subsidiary [Manufacturing Close – Up]

A.M. Best Co. has revised the outlook to negative from stable and affirmed the issuer credit ratings (ICR) of "bbb+" of Florists' Mutual Insurance Company and its reinsured subsidiary, Florists' Insurance Company (collectively known as Florists').

Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) of both companies. The outlook for the FSR is stable. Both companies are domiciled in Edwardsville, IL.

The revised outlook for the ICRs is a reflection of Florists' continuing sub-par operating results since 2009 and reflects the likelihood that this rating may be downgraded if this trend continues into 2013. The rating actions also recognize the recent deterioration in Florists' risk-adjusted capitalization as well as the continuing challenges facing Florists' as it pertains to weaker than anticipated experience in the California workers' compensation segment and reserve strengthening in that line. This follows years of Florists' unfavorable property experience in 2009, 2010 and 2011, as well as inadequate pricing in select workers' compensation accounts.

Despite the revised outlook for the ICRs, the ratings acknowledge Florists' adequate (albeit weakened) capitalization and its leading market position as a provider of insurance solutions to the horticulture industry. Similarly important is Florists' 2013 projections, which take into consideration the future benefits to be derived from the various actions taken by management in 2012 that are expected to restore profitability and replenish its risk- adjusted capitalization. These actions include, but are not limited to, rate strengthening, underwriting tightening, expense reduction and loss control activity. Management also has non-renewed a sizable portion of the poorest performing accounts. A.M. Best will continue to monitor Florists' overall performance, in particular its development in prior year reserves as well as loss trends in its workers' compensation accounts.

The ratings and/or outlook for Florists' are unlikely to improve over the near term but are more likely to be downgraded and/or revised, respectively, due to sustained sub-par underwriting and operating results, material adverse reserve development and/or further declines in its risk-adjusted capitalization.

More information:

ambest.com

((Comments on this story may be sent to [email protected]))