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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MAY 1, 2000
FRONTIER INSURANCE GROUP, INC.
(Exact name of registrant as specified in charter)
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<S> <C> <C>
DELAWARE 1-10584 14-1681606
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
195 LAKE LOUISE MARIE ROAD, ROCK HILL, NEW YORK 12775-8000
(Address of principal executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (914) 796-2100
NOT APPLICABLE
(Former name or former address, if changed since last report)
Page 1 of 4 Pages
Exhibit Index Located on Page 3
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
(a) Former Accountants
On May 1, 2000, Ernst & Young LLP ("E&Y"), the independent accountants
of Frontier Insurance Group, Inc. (the "Company"), notified the Company
of E&Y's decision to decline to stand for reelection as the Company's
auditors for 2000.
E&Y had audited the Company's consolidated financial statements for the
years ended December 31, 1998 and 1999. E&Y's reports on those
consolidated financial statements did not contain an adverse opinion or
a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles, except for an
explanatory paragraph for the year ended December 31, 1999 relating to
the Company's ability to continue as a going concern.
Except as set forth below, during the past two years, and in the
subsequent interim period, there were no disagreements with E&Y on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope and procedures which, if not resolved to
the satisfaction of E&Y, would have caused E&Y to make reference to the
disagreement in their report:
Based on a review of the loss and loss adjustment expense ("LAE")
reserves for the quarter ended September 30, 1999, E&Y concluded
that the Company's recorded reserves were not sufficient. In
conformity with E&Y's analysis, the Company increased its loss and
LAE reserves by approximately $136 million at September 30, 1999.
The Company and E&Y disagreed as to the appropriate 1999 reserves
relating to claims under certain performance and payment surety
bonds. After E&Y notified the Company that the recorded reserves were
insufficient, in conformity with E&Y's analysis, the Company
increased its reserve for these surety bonds by approximately $27
million.
During the past two years and in the subsequent interim period, there
were no reportable events (as defined in Item 304(a)(1)(v) of
Regulation S-K), except that E&Y advised management and the Audit
Committee of the Company's Board of Directors (the "Audit Committee")
that E&Y had identified a material weakness in the Company's internal
control environment as follows:
During its review of the loss and LAE reserves for the quarter ended
September 30, 1999, E&Y noted that the Company's actuarial analysis
did not include appropriate documentation and/or analysis supporting
certain calculations and/or assumptions, including certain loss
ratios and case reserve redundancies, sufficient to support the
Company's conclusion as to the appropriate level of reserves needed.
The Audit Committee discussed these disagreements and the material
weakness with E&Y. The Company has authorized E&Y to respond fully to
inquiries of the successor independent accountants concerning such
disagreements and material weakness.
The Company has requested E&Y to furnish the Company with a letter
addressed to the Securities and Exchange Commission stating whether E&Y
agrees with the above statements. A copy of that letter, dated May 8,
2000 is filed as an exhibit to this Form 8-K.
(2)
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(b) New Independent Accountants
The Company's Board of Directors is in the process of selecting
successor independent accountants.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 16.1 Letter from Ernst & Young LLP to the Securities and Exchange
Commission dated May 8, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
FRONTIER INSURANCE GROUP, INC.
(Registrant)
By: /s/ Harry W. Rhulen
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Harry W. Rhulen
President and Chief Executive Officer
Dated: May 8, 2000
(3)
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May 8, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read paragraph (a) Item 4 of Form 8-K dated May 1, 2000, of Frontier
Insurance Group, Inc. and are in agreement with the statements contained
therein.
Regarding the registrant's statement concerning the lack of internal control to
prepare financial statements, included in the fourth paragraph on page 2
therein, we had considered such matter in determining the nature, timing and
extent of procedures performed in our audit of the registrant's 1999 financial
statements.
Very truly yours,
Ernst & Young LLP
