A.M. Best Affirms Frontier Insurance "A-" Rating, Removes From Under Review; Negative Outlook Assigned.OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 28, 1998--A.M. Best Co. today affirmed the "A-" (Excellent) ratings of Frontier Insurance Co., Rock Hill, N.Y., and its subsidiary, Frontier Pacific Insurance Co., La Jolla La Jolla (lə hoi`yə), on the Pacific Ocean, S Calif., an uninc. district within the confines of San Diego; founded 1869. The beautiful ocean beaches, in particular La Jolla shores and Black's Beach, and sea-washed caves attract visitors and , Calif., and removed the ratings from under review. Both companies have been assigned a negative rating outlook. The ratings were placed under review with negative implications on Dec. 18, following the announcement that Frontier Insurance Group Inc. will be realizing a pre-tax charge of $150 million in the fourth quarter of 1998. The charge includes a $139 million reserve strengthening, an $8 million reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. charge and a $3 million restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. associated with the group's health-care operations. Today's action followed extensive discussions with the company regarding the reserve charge and a review of the group's 1999 business plan. The affirmation reflects A.M. Best's confirmation that Frontier's recent loss-reserve strengthening charge and anticipated earnings loss were largely contained in the problematic medical malpractice Improper, unskilled, or negligent treatment of a patient by a physician, dentist, nurse, pharmacist, or other health care professional. business that originated from the group's Bedford Hills, N.Y., office. That office has since been closed. Frontier's remaining business (roughly 70% of direct premiums), consisting of approximately 150 specialty programs, has generated strong underwriting profitability, which A.M. Best expects to continue. Most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , management plans to recapitalize re·cap·i·tal·ize tr.v. re·cap·i·tal·ized, re·cap·i·tal·iz·ing, re·cap·i·tal·iz·es To change the capital structure of (a corporation). re·cap the company by year-end and purchase reinsurance protection to limit exposure on its downsized medical malpractice book. Frontier Insurance Co.'s surplus will be substantially replenished and exceed $250 million following a capital infusion Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. from its parent holding company, Frontier Insurance Group, by year-end. The parent will contribute approximately $60 million from a short-term credit facility into Frontier. Frontier Insurance Group plans to replace the financing with more permanent capital in 1999. Frontier has committed to maintain underwriting leverage commensurate with A.M. Best's "A-" capitalization standards, and the company should be able to support its planned growth through retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. . On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, the parent holding company's financial leverage will remain manageable. Frontier has strengthened its control and oversight of its operations by bolstering its financial and actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin management team, as well as increasing its use of internal tracking reports. Management has adopted a more conservative reserving philosophy and indicated that it will maintain reserves at the actuarial best estimate, as well as performing more rigorous reserve reviews. The negative outlook reflects considerable downward pressure on the group's rating. To the extent that Frontier falls short of A.M. Best's expectations, or other material surprises emerge, the rating will be downgraded. A.M. Best will monitor the group's monthly underwriting performance and review quarterly reserve reports certified by external actuaries to ensure that Frontier maintains strong reserve margins. Frontier Insurance Group is an insurance holding company that, through its subsidiaries, is one of the leading underwriters of specialty program business in the country. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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