On the heels of Meadowbrook Insurance Group's announcement that it was adding $31 million to its reserves, rating agency A.M. Best Co. says it has placed the insurer under review with negative implications.
Meadowbrook currently has an A.M. Best financial strength rating of "A-minus," but the agency says there is a "reasonable likelihood that the ratings (the financial strangth and issuer credit ratings) will be downgraded" based on the specialty program manager's admission of more losses for prior years 2011, 2010 and 2009, as well as "earnings prospects going forward."
In a statement, Meadowbrook CEO Robert S. Cubbin says the company is "in the process of evaluating various reinsurance alternatives and other strategies" to better meet the rating agency's capital adequacy guidelines.
The $31 million expense will be recorded in third quarter results, as will nearly $8 million in losses from storms—primarily from tornadoes in the Midwest—during the quarter, says the Southfield, Mich.-based insurer.
Meadowbrook says the majority of its business (workers' compensation, commercial multi-peril/general liability, specialty products and admitted programs) sees favorable overall underwriting results, but $11.9 million of its increase in loss estimates for accident years 2011 and prior came from commercial multi-peril/general liability—and $8.5 million in increases is derived from the workers' comp line.
Reserves in commercial auto were boosted by $11 million, the company says.
Prior-year losses also hurt Meadowbrook during the second quarter.
Meadowbrook is expected to release its third-quarter results after the market closes on Oct. 29, followed by a conference call the next morning.
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