A.M. Best Downgrades Florida’s FFVA Mutual to A-

A.M. best has downgraded the financial ratings of FFVA Mutual Insurance Co. due to underwriting losses on its workers’ compensation line of business, especially in states where it expanded outside of Florida.

A.M. Best downgraded FFVA Mutual from A (excellent) to A- (excellent) and its issuer credit rating from “a” to “a-.” The outlook for both ratings has been revised to negative from stable.

The financial rating organization stated that it acted based on the Maitland, Fla.-based FFVA Mutual’s substantial underwriting losses during the first three quarters of last year. Those results were largely due to a sharp increase in losses, inadequate workers’ compensation premium rates, a soft market, the weak economy, and the need to strengthen prior accident-year loss reserves, according to the rating organization.

FFVA’s underwriting losses, combined with capital losses on its equity portfolio, resulted in a 27 percent reduction in policyholders’ surplus and a decline the insurer’s risk-adjusted capital.

Also factoring into the drop in FFVA Mutual’s ratings is the change in its business profile as it expanding into more states where it had less underwriting experience and higher losses.

In 2005, only 10 percent of FFVA Mutual’s writings were outside of Florida. That number has grown to 44 percent as of last year. In addition to Florida, the insurer is doing businesses in Georgia, Mississippi, Kentucky, Tennessee, and North and South Carolina.

A.M. Best warned that FFVA Mutual’s ratings could face a further downgrade unless it improves its underwriting performance.

The outlook could improve if the company’s underwriting and overall operating performance compares favorably with comparable insurers in the market, A.M. Best said.

Topics Florida Underwriting AM Best