Standard & Poor’s has placed its single-‘A’ counterparty credit and financial strength ratings on Star Insurance Co. and its wholly owned subsidiary, Savers Property & Casualty Insurance Co. – collectively known as Meadowbrook Insurance Group – on CreditWatch with negative implications.
This rating action follows Meadowbrook’s announcement on Feb. 15, 2001, that its year-end 2000 net operating loss was $17.8 million, which is greater than S&P had expected.
The earnings shortfall is mainly a reflection of an after-tax charge of $19 million for reserve strengthening Meadowbrook took in the fourth quarter of 2000, primarily related to discontinued programs. This reserve action resulted from a comprehensive reserve review conducted by management in consultation with two independent actuarial firms.
Capitalization, which has been very strong for the group, has suffered as a result and might not support current ratings. One of the capital resources for the group is an unsecured revolving bank line of credit of $50 million, which the company expects to reduce by $15 million by April 30, 2001. S&P met with management today to discuss the group’s most recent financial results, overall reserve adequacy position, and ongoing underwriting profitability.
Within the next week or so, Standard & Poor’s will review the ratings and evaluate very closely various company actions — such as rate increases and capital raising initiatives — that could positively affect the profitability of current programs, overall reserve position, and capital adequacy in the near term.
Was this article valuable?
Here are more articles you may enjoy.
Progressive Q2 Net Income Skyrockets Over 320% 
Trigger Warning: Cyber Policy Wordings to Impact Coverage for Tech Outage 
FM Global Rebrands As FM 
Study Urges Rethinking of Disaster Management in Era of Compounding Events 
