Standard & Poor’s today lowered its ratings on Fremont General Corp. (Fremont), Fremont General Financing I, and the members of the Fremont Comp Intercompany Pool (FCIP). These ratings remain on CreditWatch, where they were placed on May 08, 2000, with negative implications following Fremont’s first-quarter earnings release.
These rating actions reflect Standard & Poor’s belief and continued concern that Fremont is likely to sustain significant adverse loss development on prior accident year books of business. As a result, the earnings and capital adequacy of FCIP are likely to deteriorate considerably. Furthermore, Fremont’s financial flexibility, which is already strained, will be affected. Standard & Poor’s review of loss reserve adequacy in the California workers’ compensation market, following studies put out by the Workers’ Compensation Insurance Rating Bureau, leads Standard & Poor’s to believe Fremont’s reserves are deficient.
Standard & Poor’s believes the potential level of deficiency would put FCIP’s capitalization at a level that is not supportive of an investment-grade rating. Standard & Poor’s plans to resolve the CreditWatch status of the ratings shortly after completion of an independent actuarial reserve review.
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