Specialty program manager Meadowbrook Insurance Group Inc. says it expects to add more than $31 million to its reserves to handle higher-than-expected loss activity from accident years 2009, 2010 and 2011.
The expense will be recorded in third quarter results, as will nearly $8 million in losses from storms during the quarter, says the Southfield, Mich.-based insurer.
Robert S. Cubbin, president and chief executive officer, says the company is “disappointed” in its calendar-year results, but “rate increases and underwriting actions taken since 2009 position us to return to profitable and stable underwriting results.”
The freedom of rate and form in the excess and surplus market should allow Meadowbrook to respond to its challenges, Cubbin continues in a statement.
Meadowbrook is looking at a $31.4 million third-quarter expense related to its reserves and $7.9 million in storm losses primarily from Midwest tornadoes.
The calendar-year combined ratio for the third quarter is expected to be 118.2. The accident-year combined ratio for the same period should be 104.2, says Meadowbrook. Catastrophes losses added 3.5 points to the accident-year ratio.
Meadowbrook says the majority of its business (workers' compensation, commercial multi-peril/general liability, specialty products and admitted programs) sees favorable overall underwriting results, but $11.9 million of its increase in loss estimates for accident years 2011 and prior came from commercial multi-peril/general liability—and $8.5 million in increases is derived from the workers' comp line.
The high level of catastrophes in the third quarter prevented the property line from turning a profit, and the soft market and increasing loss-costs negatively impacted underwriting in commercial auto-where Meadowbrook boosted reserves by $11 million, the company says.
The company says it “continues to aggressively achieve rates and reduce exposure on the Transportation program to lower future loss ratios.”
A pretax increase of $28.2 million in loss estimates for accident year 2011 and prior accounted for 13.3 points of Meadowbrook's 111.1 combined ratio in the second quarter, when the company booked a net income loss of $7.7 million.
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