AM Best Downgrades Credit Ratings for the Members of American European Insurance Group; Places Credit Ratings Under Review With Negative Implications

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has downgraded the Financial Strength Rating to B-(Fair) from B (Fair) and the Long-Term Issuer Credit Ratings to “bb-” (Fair) from “bb+” (Fair) of Rutgers Casualty Insurance Company and American European Insurance Company, which operate an intercompany reinsurance pooling agreement, and are collectively known as AEIG or the group. Both companies are headquartered in Cherry Hill, NJ. Concurrently, these Credit Ratings (ratings) have been placed under review with negative implications.

The ratings reflect AEIG’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).

The rating downgrades reflect the revision of the balance sheet assessment and change in ERM assessment to marginal from appropriate. AEIG’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has deteriorated due to lower policyholder surplus as a result of persistent underwriting and operating losses, as well as the payment of sizeable legal settlements in 2024 related to several non-standard auto claims in Nevada. While surplus dropped, the material growth of homeowners’ premium with higher exposure to catastrophe losses increased the capital requirements putting significant pressure on the group’s risk-adjusted capitalization. AM Best considers that these negative developments resulted in part from insufficient ERM practices and oversight. The group’s management is evaluating several options to improve its capital position including equity capital and increased reinsurance utilization, specifically geared to improve the company’s capital position, net leverage, retained exposure and liquidity. However, there are concerns that if these corrective actions are insufficient or delayed, the assessments of balance sheet may be under further pressure. The ratings will remain under review with negative implications pending the outcome of these initiatives and AM Best’s assessment of changes in AEIG’s capital position.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.