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FOR IMMEDIATE RELEASE
OLDWICK - MAY 22, 2015 11:25 AM (EDT)
A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings of "a-" of Maxum Indemnity Company and its wholly owned subsidiary, Maxum Casualty Insurance Company, which participate in an intercompany reinsurance pooling agreement, collectively referred to as Maxum Specialty Insurance Group (Maxum) (headquartered in Alpharetta, GA).
The ratings reflect Maxum's solid risk-adjusted capitalization, historically favorable operating results and adequate liquidity. These strengths are partially offset by the recent volatility in reported results, highlighted by a sizable underwriting loss reported in 2012, below average returns on revenue and surplus and elevated underwriting leverage measures relative to surplus lines composite averages. The underwriting loss in 2012 was primarily from Superstorm Sandy and adverse loss reserve development on the auto liability line. In addition, the group settled an extracontractual claim in 2014, which caused the combined ratio to deteriorate to over 100. The group continues to face considerable financial and operational challenges as it continues to build its overall book of business, particularly in its newest divisions. The ratings consider the group's return to operating profitability in 2013. The group increased policyholders' surplus to $109.7 million at year-end 2014 from $87.3 million at the end of 2010.
A.M. Best believes that historical levels of operating profitability are attainable for the group over the near term provided adherence to conservative underwriting principles and operating strategies continue. A.M. Best also expects capital will be prudently maintained at a level commensurate with the ratings.
Although the outlook has been revised to negative, positive rating actions could occur if Maxum can improve its operating performance over the long term while maintaining supportive risk-adjusted capital. Factors that may lead to a negative rating action include deterioration in reserves, adverse underwriting performance and/or a decline in risk-adjusted capitalization.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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