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FOR IMMEDIATE RELEASE
OLDWICK - MAY 08, 2014 03:53 PM (EDT)
A.M. Best has placed under review with negative implications the financial strength rating of A- (Excellent) and the issuer credit ratings of "a-" of International Fidelity Insurance Company (IFIC) (Newark, NJ) and its subsidiary, Allegheny Casualty Company (Allegheny) (Norristown, PA).
The under review with negative implications status reflects the recent announcement that IFIC will revise and re-file its year-end 2013 statutory statement. The company has requested that its regulator grant a 90-day filing extension for the re-filing of the annual statement as well as an extension of 90 days to file the March 31, 2014 quarterly statement. While management believes it has largely determined the 2013 statement revisions, there remains uncertainty as to the overall impact this quarterly filing may have on IFIC's current ratings. However, based on the revised projected statements, the group's capitalization will continue to comfortably support it current ratings.
The expected re-filing follows the determination in March 2014 by IFIC's management that its former chief financial officer had misappropriated funds and entered into unauthorized investments. Although the majority of these funds have been recovered, the company will record significant investment losses, which are expected to reduce surplus by approximately 30%. These events call into question the effectiveness of the group's risk management. As a result, IFIC is conducting a full operational review that will result in the implementation of new corporate governance policies and procedures to mitigate the potential of such events occurring in the future. However, the success of such actions will not be readily apparent over the near term.
The ratings will remain under review pending the re-filing of IFIC's 2013 annual statement and the filing of its first quarter 2014 statement, along with A.M. Best's discussions with management regarding the implementation of corporate governance controls.
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.
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