Fitch Ratings announced that it has placed Harleysville Group Inc.’s (HGIC) ‘BBB+’ senior debt rating on Rating Watch Negative.
“This action follows a $55 million pretax charge in the third quarter by HGIC to strengthen prior year loss reserves for worker’s compensation ($17 million), commercial automobile liability ($19 million), commercial multi-peril ($14 million), and personal automobile liability ($5 million) lines of business,” said Fitch. “In the first quarter of 2003 prior period worker’s compensation reserves were increased by an additional $20 million. HGIC also reported losses of $9.4 million related to Hurricane Isabel in September 2003.”
The rating agency indicated that the “magnitude of these reserve increases relative to HGIC’s capital base creates concerns about the adequacy of pricing in commercial lines and uncertainty regarding HGIC’s future earnings potential.” It also noted that the “company’s combined ratio was 119.4% for the first nine months of 2003, compared with 101.9% for the 2002 period.”
Fitch said it “expects to resolve HGIC’s Rating Watch status shortly following a review of the company’s rating fundamentals and discussions with management.”
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