[April 01, 2014]

A.M. Best Revises Outlook to Stable for Frank Winston Crum Insurance Company

A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of B+ (Good) and issuer credit rating of "bbb-" of Frank Winston Crum Insurance Company (FWCI) (Clearwater, FL).

The stable outlook reflects FWCI's adequate risk-adjusted capitalization, recently enhanced by a quota share agreement; substantially improved underwriting and overall operating performance in 2012 and 2013, following significant reported losses in 2011; and expectations of continued favorable operating performance in the near term. The ratings also reflect the expectation of continued operational and financial support from the Crum family, which owns FWCI. Furthermore, the ratings recognize the company's prudent loss reserving practices, which have resulted in favorable calendar year loss reserve development in recent years.

FWCI's positive rating factors are largely offset by its changed business profile and execution risk associated with the rapid expansion of its guaranteed cost book, as well as diversification into other products. FWCI reported significant underwriting and overall operating losses in 2011, driven by losses in its guaranteed cost book, as well as losses in its professional emploer organization related business. In order to lessen the adverse impact of FWCI's significant growth of guaranteed cost business on its risk-adjusted capitalization, the company executed a material quota share reinsurance agreement on this business, effective January 1, 2014. A.M. Best will continue to monitor FWCI's progress in achieving its business plans to ensure that premium growth and the accumulation of loss reserves do not strain its capitalization and overall operating results are achieved in accordance with rating expectations.

Factors that could trigger negative rating actions include a decline in FWCI's risk-adjusted capitalization that is below A.M. Best's expectations; deterioration in underwriting results, particularly if driven by significant adverse loss reserve development; and a material deviation from the company's submitted financial projections. In addition, a lack of financial commitment from the Crum family in maintaining the company's capital adequacy also could trigger a negative rating action. Positive rating actions could be taken should FWCI's underwriting and overall operating profitability compare favorably with higher-rated workers' compensation carriers for a sustained period, and its risk-adjusted capitalization remains supportive of its ratings.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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