Best Affirms Fremont’s ‘A-‘ Ratings

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of Fremont Insurance Company, as well as the ICR of “bbb-” of its parent holding company, Fremont Michigan InsuraCorp, Inc. (OTC BB: FMMH). The outlook for all ratings is stable. Both companies are domiciled in Fremont, Mich.

Best explained that the ratings and outlook reflect Fremont’s “solid risk-adjusted capitalization, favorable operating earnings and its well-established presence as a writer of personal lines insurance in Michigan. The company’s capital position reflects its moderate underwriting leverage, conservative investment risk profile and favorable loss reserve development.

“Fremont’s operating earnings have been driven by strong underwriting results and solid investment income over the previous five-year period. The favorable operating earnings were due in part to management initiatives such as terminating unprofitable agencies, increased insurance-to-value, rate adjustments, enforcing stricter underwriting guidelines, insurance scoring and diversifying its spread of risk within Michigan.

As offsetting factors Best cited “the risks inherent in Fremont’s geographic concentration within Michigan, which may subject it to weather-related loss exposure, potentially adverse legal and regulatory conditions, as well as economic and competitive market pressures.

“Most recently, Fremont’s pre-tax operating earnings have declined due to a deterioration in underwriting results that was driven by a higher loss and loss adjustment expense ratio across all lines of business, coupled with lower net investment income. The deterioration in loss experience was attributable to an increase in weather-related claims, higher losses in personal automobile and increased fire losses.”

Source: A.M. Best