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| | Paula Financial Rides Out Another Storm By John Millrany - March 14, 2001Pasadena-based Paula Financial, steering through the shoals of California’s sometimes-turbulent insurance financial waters, has taken on another ratings blow, having been downgraded to a B- from a B, by the rating agency A.M. Best. Best cited concerns about the publicly-traded Paula’s increased leveraging in closing out the year 2000.
The thorny issue over reserve development has been particularly nettlesome to the WC carrier, whose loss reserve surplus has been pared by more than 50% in the past two years. It’s the third year in a row where the company has sustained an adverse loss reserve occurrence.
Regarding Paula’s year-end earnings, set to be announced March 15, CEO Jeff Snider said they are expected to be in the red.
Ratings analysts noted that Paula effected an $18.2 million reserve strengthening in the last quarter of 2000. Meanwhile, the company put together a new quota-share reinsurance agreement with Everest Re Group Ltd. According to analysts, the reserve contingency was necessary to pay for unprecedented indemnity and medical cost events on a per-claim basis in California. |