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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 27, 2009 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Frankenmuth Financial Group (Frankenmuth) and its members. The ratings apply to Frankenmuth Mutual Insurance Company and its 80% reinsured subsidiary, Ansur America Insurance Company, as well as its 100% reinsured subsidiary, Patriot Insurance Company (Yarmouth, ME).
In addition, A.M. Best has withdrawn the FSRs of A+ (Superior) and ICRs of "aa-" of two inactive affiliates, ASure Worldwide Insurance Company (ASure) and Fortuity Insurance Company (Fortuity), and assigned an NR-3 (Rating Procedure Inapplicable) to the FSRs and an "nr" to the ICRs. All companies are domiciled in Frankenmuth, MI, unless otherwise specified.
The negative outlook reflects Frankenmuth's weakened operating results since 2007 as well as its investment losses in 2008, which led to an increase in leverage and declining return measures. While management has begun to broaden the group's geographic spread of risk away from Michigan, where 60% of its premiums are written, Frankenmuth remains somewhat exposed to that state's weakened economic conditions and weather-related loss activity. The outlook further considers the challenges Frankenmuth faces to improve results given the current competitive market environment and the book's susceptibility to weather losses. As such, additional downward rating pressure may be applied should return measures not significantly improve in the medium term.
Offsetting these negative concerns is Frankenmuth's very strong level of capitalization, historically favorable operating results, solid regional market presence and management's efforts to improve results going forward. Expense ratios improved in 2008 and are likely to remain more favorable in the near term.
The rating actions on ASure and Fortuity reflect their long dormant status, having not written business in over a 10-year period, and their no longer meeting A.M. Best's requirements for group rating consideration.
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.