A.M. Best Downgrades Ratings of Gateway Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to “bb” from “bbb-” of Gateway Insurance Company(Gateway) (St. Louis, MO). The outlook for both ratings is negative.

The rating actions reflect the substantial deterioration in Gateway’s underwriting and overall operating performance over the past three years, most notably in its long-haul trucking and construction programs, and Florida book of commercial auto lines, as well as the company’s significant operating losses in 2010 and 2011. Effective May 1, 2012, Gateway will discontinue and begin running off the long-haul trucking program that has contributed significantly to its large operating losses. In addition, there is substantial uncertainty surrounding the company’s operating outlook given the execution risk associated with its operating plans, particularly relating to the planned run-off of its trucking operations; the potential for adverse prior year loss reserve development; and the current competitive environment in property/casualty markets.

These negative rating factors are largely offset by Gateway’s adequate risk-adjusted capitalization, favorable historical operating results on its core book of commercial auto lines—excluding the Florida business—and the financial flexibility provided by its ultimate parent, Diane M. Hendricks Enterprises, Inc. (DMHE Inc.), which has demonstrated explicit financial and operational support since purchasing the company in 2005.

Further negative rating actions could occur if Gateway’s underwriting and overall profitability measures do not meet A.M. Best’s expectations, or should DMHE Inc. fail to provide necessary financial support to maintain adequate risk-adjusted capitalization.

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: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “The Treatment of Terrorism Risk in the Rating Evaluation”; and “Rating Members of Insurance Groups.” 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 RESERVED.

A.M. Best Co.
W. Dolson Smith, CFA, 908-439-2200, ext. 5379
Senior Financial Analyst
[email protected]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Michael J. Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice President
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Co.