A.M. Best Affirms Ratings of Continental Heritage Insurance Company and Revises Outlook to Negative [Health & Beauty Close – Up]

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Continental Heritage Insurance Company (CHIC) (Boca Raton, FL).

The ratings reflect CHIC's strong level of capitalization, demonstrated history of favorable operating performance and management's expertise within the bail bond segment. The ratings also take into consideration the additional collateral and indemnity provided by the bonded individual as well as the agent in the event of forfeiture.

Somewhat offsetting these positive rating factors is CHIC's limited product diversification, above average expense ratio and dependence on quota share reinsurance with Evergreen National Indemnity Company (ENIC), CHIC's former parent. CHIC and ENIC continue to share a common board of directors as well as management and infrastructure.

The negative outlook reflects A.M. Best's concerns regarding CHIC's planned growth strategy and the uncertainty surrounding the potential strain on capital. While management has pledged increased capital support during 2012, A.M. Best remains somewhat concerned over the potential for volatility and growth to further strain capital resources in the medium term.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides an explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies" and "Understanding BCAR for Property/Casualty Insurers."

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