Federated National, American Vehicle

A.M. Best Co. placed the financial strength rating of “B” (fair) of Federated National Ins. Co. and the rating of “B+” (very good) of American Vehicle Ins. Co., both of Plantation, Fla., under review with negative implications.

These actions reflect the combination of anticipated significant net capital losses as a result of Hurricane Charley, as well as considerable premium growth in recent years. Although Federated National does carry catastrophe reinsurance protection that will mitigate the overall impact, a significant decline in surplus is expected. While American Vehicle—the sister company of Federated National—does not write any direct property exposure in Florida, it maintained a $2 million catastrophe retention on the behalf of Federated National and will also be impacted. A.M. Best is also concerned about significant premium growth, particularly over the first half of 2004, and the correspondingly elevated catastrophic exposure in the hurricane-prone Florida market.

Historically, the parent company, 21st Century Holding Company, has provided ongoing financial support to the statutory entities. Best anticipates the need for significant additional capital support over the near term. While the parent has access to capital, execution risk exists. In the absence of capital improvement, the ratings would likely be downgraded.