A.M. Best Assigns State Farm Florida Insurance Co. an "A-" -Excellent- Rating.OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 6, 1999--A.M. Best Co. today assigned an "A-" (Excellent) rating to State Farm Florida Insurance Co., Winter Haven Winter Haven, resort city (1990 pop. 24,725), Polk co., central Fla; settled 1883. It is a marketing, processing, and shipping center for one of the state's chief citrus-fruit regions, with fruit-canning plants and packing houses. , Fla. The rating reflects the company's conservative operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. and the financial flexibility and operating support of its parent, State Farm Mutual Automobile Insurance Co., Bloomington, Ill. The company recently was formed by its parent as a subsidiary to write new property/casualty insurance in Florida and renewal business originally written in the state by two affiliates, State Farm Fire & Casualty Co. and State Farm General Insurance Co. Its business will consist largely of Florida homeowners' and commercial multi-peril lines. Major lines that will not be written are automobile, workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. , flood and fidelity and surety. The company is expected to begin writing business Feb. 1, 1999. The transfer of business to State Farm Florida from its affiliates will take place gradually at policy renewal dates over the next several years. State Farm Florida's "Excellent" rating reflects A.M. Best's belief that the company will be adequately capitalized to support its catastrophe exposure. The company's initial capitalization of $608 million will likely decline moderately during its first years of operation as start-up costs exceed generated income. However, assuming historical catastrophe experience, A.M. Best expects State Farm Florida's premium leverage will remain below 1.2 times surplus for its first several years of operation. Offsetting these strengths are the company's high catastrophe exposure, potential liquidity drain and unfavorable geographic and product concentration. 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, assuming the transfer of business between State Farm Florida and its affiliates is complete, the company's gross probable maximum loss Probable Maximum Loss (PML) The anticipated value of the largest loss that could result from the destruction and the loss of use of property, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others, in the (PML PML - Parallel ML. ["Synchronous Operations as First-Class Values", J.H. Reppy <jhr@research.att.com>, Proc SIGPLAN 88 Conf Prog Lang Design and Impl, June 1988, pp. 250-259]. ) for a 1/250 year event is high, equating to approximately 750% of surplus. While the net PML after 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. also is high at nearly 40% of surplus, this concern is mitigated by the company's conservative capitalization and the strength and support of its parent, which provides a substantial amount of reinsurance. A.M. Best Co. established in 1899, is Americas oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Bests Web site at http://www.ambest.com. |
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