OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has downgraded the financial strength rating to B+
(Good) from B++ (Good) and issuer credit rating to “bbb-” from “bbb” of Imperial
Fire and Casualty Insurance Company(Imperial)(Opelousas,
LA). The outlook has been revised to stable from negative.
The rating actions reflect Imperial’s generally negative underwriting
performance, which could not be offset by its declining investment
income. This has led to pre-tax operating losses in three of the past
five years. In addition, increased underwriting losses in 2011 as
reflected by a combined ratio of approximately 108%, primarily caused by
catastrophe and other weather-related events has hindered the company’s
capital base. This is reflected by an approximately 10% decline in
surplus in 2011, which has caused risk-adjusted capitalization to
somewhat decline over the past year.
Additionally, Imperial’s core personal auto line of business has
continued to underperform partly due to unfavorable results from its
relatively newly acquired Florida book. Weather-related losses primarily
in the Texas property book has led Imperial to undertake several
underwriting initiatives including restraining net premium exposures,
taking aggressive rate increases, placing a greater emphasis on risk
management tools such as policy scoring and territorial pricing, and
exploration of additional capital resources. However, despite these
efforts to turn around its operating performance and improve its
risk-adjusted capitalization, the company still faces a challenging
operating environment for 2012.
Although Imperial’s risk-adjusted capitalization level is consistent
with its current rating level, further downward movement in the form of
a revised outlook and/or a downgrading of the ratings could occur should
there be a continued deterioration in Imperial’s risk-adjusted
capitalization levels and/or a continuation of its recent negative
operating performance trend. While upward movement in the ratings is
unlikely in the near term, an eventual improvement in the ratings and/or
outlook will require significant improvement in the company’s
risk-adjusted capitalization, along with a turnaround in its
underwriting performance and operating results.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilized include: “Understanding BCAR for Property Casualty Insurers”;
“Risk Management and the Rating Process for Insurance Companies”;
“Catastrophe Analysis in A.M. Best Ratings”; and “Equity Credit for
Hybrid Securities.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.Neil Das Gupta, 908-439-2200, ext. 5206Senior
Morrow, 908-439-2200, ext. 5378Senior Manager, Public
Burtone, 908-439-2200, ext. 5125Assistant Vice Presidentjoseph.firstname.lastname@example.orgJim
Peavy, 908-439-2200, ext. 5644Assistant Vice President,
Source: A.M. Best Co.