According to a release on
The ratings and outlook reflect OHCIC's weakened risk-adjusted capitalization following its acquisition of the stock of
Following the acquisition, OHIG's net underwriting leverage and reinsurance dependence measures increased from the assumed premiums and liabilities and compare unfavorably to its respective composite measures. Additionally, this geographic and product line expansion brings with it additional property exposure to hail and wind perils, potential unfavorable judicial and regulatory changes and competitive market dynamics, which contributed to the group's increased risk profile. Furthermore, although the group has a reinsurance program to mitigate catastrophe losses, it has increased its retained level of risk from catastrophes.
Partially offsetting these negative rating factors is OHIG's five- year operating profitability, albeit declining, which includes the five-year operating results of GNW and HIG.
Operating profitability was derived primarily from the group's conservative bond portfolio, which generated consistent investment income over the latest period and offset underwriting losses. Additionally, OHIG has had favorable loss reserve development primarily from its lead member, OHCIC.
There may be future positive rating and/or outlook changes if OHIG generates sustained operating income that grows policyholders' surplus and increases risk-adjusted capitalization as reflected by Best's Capital Adequacy Ratio (BCAR) capital model.
However, there may be future negative rating actions if the group's operating performance deteriorates and erodes policyholders' surplus or there is a further decline in its risk-adjusted capitalization as reflected by BCAR.
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