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A.M. Best Revises Outlook to Negative for Frederick Mutual Insurance CompanyOLDWICK, N.J. --(Business Wire)-- A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Frederick Mutual Insurance Company (Frederick) (Frederick, MD). The negative outlook is a reflection of Frederick's consistently negative underwriting income and elevated combined and expense ratios. Net underwriting income has been negative four of the last five years, and the company is expected to produce an underwriting loss in 2014. The company also has a geographic concentration of risk, which leaves it susceptible to adverse weather conditions and has greatly attributed to the volatile operating results of the last five years. Management has implemented a wide range of initiatives, including rate revisions, higher deductibles and policy rewrites, which should help to stabilize results and eventually lessen volatility. The affirmation of the rating is based on Frederick's solid capitalization, favorable net investment income and long-standing local market presence. Net investment income has ben favorable, but not sufficient enough to offset underwriting losses. Despite significant weather-related events, the company has increased surplus during the last five years, mainly due to positive net investment income, as well as realized and unrealized capital gains. In addition, Frederick maintains a conservative reserve approach with redundancies on an accident and calendar year basis. Negative rating actions could occur as a result of a prolonged continuation of adverse operating results and an elevated combined ratio. An upward revision of the negative outlook is contingent upon the company's ability to improve and sustain favorable operating and underwriting results. 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. Key insurance criteria reports utilized:
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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