Meadowbrook Insurance Group Inc. and Swiss Re have mutually agreed to terminate a quota-share reinsurance agreement that was put in place late last year, Meadowbrook said Wednesday.
The insurer said it has bolstered its financials and the reinsurance is no longer necessary.
In December 2012, Meadowbrook entered into a quota-share reinsurance arrangement with Swiss Re, ceding about $200 million of premiums on selected business. Effective Dec. 31, Meadowbrook transferred 50 percent of its unearned premium on the selected business to Swiss Re, and it also started ceding 25 percent of direct written premium on the selected books on Jan. 1, 2013.
During the first six months of 2013, this agreement provided surplus relief, but also increased the the insurer’s combined ratio by 3.2 percentage points and reduced net after-tax operating income by $4.1 million, or $0.08 per share, Meadowbrook reported, noting that the termination applies to business effective as of Oct. 1, 2013.
In a statement, Meadowbrook’s President and Chief Executive Officer Robert S. Cubbin said the company is making progress strengthening its balance sheet. He said in the statement that with statutory surplus of $498.4 million at June 30, 2013 and the reductions in premium-to-surplus ratios, Meadowbrook “no longer need[s] the quota share agreement with Swiss Re.”
Cubbin said that Meadowbrook continues to partner with Swiss Re as the lead reinsurer on its core workers’ compensation excess-of-loss treaty.
“The mutual termination of this agreement, along with growth in profits from our net commissions and fees, achieved rate increases [that exceed] loss ratio trends across our core business, and the implementation of our policy issuance agreement with the State National Companies, places Meadowbrook in a strong financial position and creates the framework for a return to profitability,” Cubbin said.
In August, after A.M. Best downgraded the financial strength ratings of the insurance operations of Meadowbrook from “A-” to “B++,” the insurer announced on that it had entered into an agreement with State National Insurance Co. to provide “A” rated policies for a portion of its business.
Source: Meadowbrook Insurance Group