S&P Lowers Fremont Rating

On May 8, Standard & Poor’s (S&P) lowered its various ratings on Fremont General Corp. and related entities and placed them on CreditWatch with negative implications. The ratings actions came soon after Fremont’s release of first-quarter earnings, which did not bode well for future earnings.

Reserve adequacy is an ongoing area of concern which S&P believes could weaken the capital adequacy of the operating companies, the financial flexibility of the parent company, and the overall financial strength of the organization. A recent study conducted by the Workers’ Compensation Insurance Rating Bureau of California indicated that the California workers’ compensation market might be deficient in carried reserves by as much as $4.7 billion on a gross basis.