On March 1, A.M. Best said that the “A-minus” financial strength ratings of members of Meadowbrook Insurance Group Inc. remain under review with negative implications – a status in place since Oct. 19, 2012 – in spite of actions management has taken to shore up capital and fix pockets of unprofitable business.
The ratings remain under review as Best evaluates Southfield, Mich.-based Meadowbrook’s corrective actions, including capital enhancements through monetization of investments, quota-share reinsurance and the termination of certain underperforming books of business.
In October 2012, Best reacted to Meadowbrook’s announcement that it expected to increase loss estimates for 2011 and prior accident years by $31.4 million in the third quarter, placing the ratings for its subsidiaries – Star Insurance Co., Century Surety Co., Savers Property and Casualty Insurance Co., ProCentury Insurance Co., Williamsburg National Insurance Co. and Ameritrust insurance Corp. – under review.
In its third-quarter results Meadowbrook said the boost in prior-year losses would be $42.9 million, and that unprofitable programs representing $75.9 million in 2012 would be terminated.
In December, Meadowbrook announced it entered into a quota-share reinsurance arrangement with Swiss Re, ceding roughly $200 million of premiums on selected business. Effective Dec. 31, Meadowbrook transferred 50 percent of its unearned premium on selected business to Swiss Re and started ceding 25 percent of direct written premium on the selected books on Jan. 1. Reacting to the A.M. Best announcement, Meadowbrook issued a statement quoting Robert S. Cubbin, Meadowbrook president and CEO, who said the company continues to cooperate and work with A.M. Best to evaluate the impact of the corrective actions taken to date.
“We believe these actions position us to a return to profitability and strengthen our current capital position,” Cubbin said. He added: “We continue to achieve rate increases across our core business. The termination of unprofitable business is progressing as expected. We believe the previously announced quota-share agreement provides us the flexibility to take advantage of the firming market and rebuild our historic track record of stable underwriting results in an efficient and effective manner.”
In mid-February, Meadowbrook reported net income of $11.7 million for 2012 compared to $43 million for 2011, with the prior-year reserve charges and Superstorm Sandy losses impacting the 2012 bottom line. But statutory surplus jumped $79 million to $426.3 million at year-end, compared to $347.3 million as of Sept. 30, 2012. Gross written premiums for the year were $1.1 billion, and the full-year combined ratio was 111.4.
Topics AM Best
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