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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 21, 2010 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and issuer credit ratings (ICR) to "a-" from "a" of Cumberland Insurance Group (Cumberland Group) and its member, The Cumberland Mutual Fire Insurance Company. The outlook for these ratings is stable. Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of "a-" of Cumberland Insurance Company, Inc. (CIC). The outlook for these ratings is negative. All companies are domiciled in Bridgeton, NJ.
The rating downgrades of Cumberland Group primarily reflect its unfavorable underwriting and operating profitability over the past five years, as well as recent significant deterioration in underwriting results. This deterioration was driven by increased storm losses, greater fire loss activity and adverse loss reserve development on its homeowners and commercial multi-peril lines of business. However, as indicated by the stable outlook, Cumberland Group continues to maintain strong risk-adjusted capitalization, primarily derived from its modest underwriting leverage and a sound liquidity position, while focusing on implementing key underwriting initiatives aimed at improving profitability in the near term.
The affirmation of CIC's ratings is based on its solid risk-adjusted capitalization and local market knowledge. In addition, the ratings reflect the financial and operational support and common management provided by its ultimate parent, Cumberland Mutual Fire Insurance Company, a multi-line carrier writing business primarily in New Jersey.
Partially offsetting these positive rating factors are CIC's unfavorable five-year operating performance, as well as recent deterioration in underwriting results. This deterioration was driven by increased losses incurred for its workers' compensation, commercial and personal automobile liability and commercial multi-peril lines of business. In addition, CIC's net premiums earned declined moderately, reflective of significant audit returns due to economic conditions, as well as state-mandated workers' compensation rate reductions. The negative outlook reflects the potential for ongoing, unfavorable operating performance and/or declines in risk-adjusted capitalization.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.