A.M. Best Affirms Ratings of Fireman's Fund.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--April 17, 2003 A.M. Best Co. has affirmed the financial strength ratings of A (Excellent) on the pool members of the Fireman's Fund Insurance Companies Fireman's Fund Insurance Company is a Novato, California-based insurance company owned by Allianz SE of Germany. It was founded June 18 1863 and issued its first policy to Walter Hawxhurst covering one half interest in 1,000 kegs of Boston syrup for a premium of $12. (FFIC FFIC Fitness Franchise Information Center (Camarillo, CA) FFIC Fault-Free Integrated Circuit ) (Novato CA). The ratings are being removed from under review and the outlook remains negative. FFIC is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Allianz AG (Allianz) (Munich, Germany) which has a financial strength rating of A+ (Superior). These ratings reflect FFIC's strategic importance within Allianz's global insurance operations, which has been demonstrated through Allianz's historical tangible support and commitment to FFIC. Allianz has recently provided FFIC with Keep Well Agreements affording its surplus substantial protection against loss emergence from 2002 and prior accident years and any slippage Slippage The difference between estimated transaction costs and the amount actually paid. Notes: Slippage is usually attributed to a change in the spread. See also: Spread, Transaction Costs Slippage in FFIC's planned combined ratios for 2003. These agreements are effective through at least December 31, 2005, and can be extended thereafter at Allianz's option. In 2002, Allianz contributed almost $1.8 billion of capital to FFIC and provided inter-company 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. for the company's asbestos and environmental (A&E) exposures. Allianz charged FFIC almost $1.3 billion for this cover. Furthermore, the ratings consider the underlying improvement in more recent accident year underwriting trends and FFIC's prospective earnings capability. FFIC has taken steps to improve underwriting results and maintain its leadership position within the specialty commercial and upscale personal lines markets. It continues to maintain strong brand name recognition, well-established agency relationships and substantial service capabilities. Offsetting these favorable considerations is FFIC's protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. record of reporting poor operating results that culminated in 2002 with the emergence of approximately $1 billion in prior year losses, $750 million of which related to strengthening of A&E liabilities with the remainder driven by discontinued lines of business. The company's 2002 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). combined ratio was 141.4% and included 33.3 points relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc adverse reserve development and discontinued lines. The company's ongoing books of business generated a GAAP combined ratio for the 2002 accident year of 108.1% reflecting the improved underwriting trends cited above. Over the previous three years, FFIC's underwriting losses outpaced net investment income, generating negative pre-tax operating returns on revenue and equity. In recent years, operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. were further compounded by significant realized and unrealized capital losses emanating from FFIC's equity holdings, which have since been substantially reduced in an effort to mitigate this exposure going forward. Consequently, FFIC's risk adjusted surplus position, excluding the support provided by the aforementioned Keep Well Agreements, has deteriorated to a level below A.M. Best's expectations for an Excellent rated company. Moreover, the assignment of a negative outlook indicates that despite Allianz's support, FFIC's sustainability of the ratings is contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent its ability to take full advantage of improved market conditions and to execute its business strategy in accordance with A.M. Best's expectations. Future indications of poor performance will likely result in a downgrading of the ratings. For a complete list of Fireman's Fund Insurance Companies' financial strength ratings, please visit http://www.ambest.com/press/041702firemansfund.pdf. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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