CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 02, 2010 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit ratings of "a" of Accident Fund Group (Accident Fund) and its members, which include Accident Fund Insurance Company of America (AFICA) and its subsidiaries, Accident Fund General Insurance Company, Accident Fund National Insurance Company, United Wisconsin Insurance Company (New Berlin, WI) and CompWest Insurance Company (CompWest) (San Francisco, CA). All companies are domiciled in Lansing, MI, unless otherwise specified.
The revised outlook reflects the recent deterioration in Accident Fund's operating performance, adverse reserve development occurring in recent calendar years, and its sizeable growth in premiums and reserves related to diversification initiatives outside of Michigan. This deterioration has outpaced growth in surplus, and along with a persistent poor underwriting cycle and macro-economic conditions, will continue to strain operating profitability over the near term. Additionally, the performance of the recently acquired CompWest business has fallen short of expectations and has contributed to the deterioration in overall underwriting results.
The affirmation of the ratings for Accident Fund recognizes its solid capital position, market expertise within the Michigan workers' compensation marketplace, historically strong earnings performance and the operating synergies and access to capital provided by its parent, Blue Cross and Blue Shield of Michigan.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Rating Members of Insurance Groups"; "Equity Credit for Hybrid Securities"; "A.M. Best's Ratings & the Treatment of Debt"; "Natural Catastrophe Stress Test Methodology"; and "The Treatment of Terrorism Risk in the Rating Evaluation." Methodologies can be found at www.ambest.com/ratings/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.