Meadowbrook Insurance Group Inc., which had its rating cut in early August by A.M. Best, said it will reduce the funds available on a credit facility as part of an agreement to comply with loan covenants.
In a regulatory filing with the Securities and Exchange Commission (SEC), the insurer reported that the commitment was lowered to $30 million from $100 million and is to be reduced to $21 million on March 31, 2016.
Meadowbrook will also pay higher interest rates under the facility with banks led by JPMorgan Chase & Co.
In August, Best said the insurer’s weaker-than-expected second quarter results prompted its downgrades of the FSR and of issuer credit ratings (to “bbb+” from “a-” for Meadowbrook’s subsidiaries and to “bb+” from “bbb-” for Meadowbrook Insurance Group, Inc.). Meadowbrook reported a net operating loss of $4.4 million for the quarter, attributable in part of $21.4 million of prior year adverse loss reserve development and $8.2 million of pre-tax losses (on prior years) the result of adverse reinsurance arbitration.
The downgrade by A.M. Best led to a second-quarter impairment of $115.4 million, and the company’s stock has lost 20 percent since June 30.
Karen M. Spaun, the company’s chief financial officer, said in a statement the company believes it is on the road to profitability.
“We are pleased with the amendment to our credit facility,” Spaun said. “With $498.0 million of statutory surplus, growth in profits from our net commission and fees, achieved rate increases in excess of loss ratio trends across our core business, and the implementation of our policy issuance agreement, which provides the Company with the use of an “A” rated policy issuance company for a portion of its business, we believe the Company is in a strong financial position to return to profitability.”