A.M. Best Downgrades Issuer Credit Rating of American Resources Insurance Company Incorporated
<p>By a <org>News Reporter-Staff News</org> Editor at <org>Insurance Business Weekly</org> -- <org value="ACORN:0879856307" idsrc="xmltag.org">A.M. Best</org> has downgraded the issuer credit rating to "bb" from "bb+" and affirmed the financial strength rating of B (Fair) of <org>American Resources Insurance Company Incorporated</org> (ARIC) (<location value="LU/us.al.mobile" idsrc="xmltag.org">Mobile, AL</location>). The outlook for both ratings has been revised to negative from stable.</p><p>The negative rating actions reflect <org value="ACORN:2943625040" idsrc="xmltag.org">ARIC's</org> lower risk-adjusted capitalization and weakened underwriting performance during 2013 and 2014. <org value="ACORN:2943625040" idsrc="xmltag.org">ARIC's</org> rapid premium growth since re-starting operations in mid-2012, combined with an uptick in underwriting losses, has resulted in increased underwriting leverage. While <org value="ACORN:0879856307" idsrc="xmltag.org">A.M. Best</org> expects the company's premium growth rate to slow as management builds scale in the beginning years of operation, rising underwriting leverage will likely result in further declines in risk-adjusted capitalization over the near term. Partially offsetting these negative rating factors is <org value="ACORN:2943625040" idsrc="xmltag.org">ARIC's</org> familiarity with its core book of business and its insureds, as well as its strong agency relationships.</p><p>The negative outlook reflects <org value="ACORN:0879856307" idsrc="xmltag.org">A.M. Best's</org> expectation of continued underwriting losses through 2015 as set forth by management, and challenges the company faces to improve results given competitive market conditions. As a result, weak earnings may result in a continued decline in risk-adjusted capitalization in the near term.</p><p>Negative rating action could result if there is adverse development with the company's run-off liabilities, a significant deviation in actual operating results from projected results over the near term or a significant erosion of the capital base. Continued favorable run-off of the company's legacy liabilities, improvement in risk-adjusted capitalization or profitable operations supported by an appropriate level of risk-adjusted capital could lead to favorable movement in the company's ratings.</p><p>The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of <org value="ACORN:0879856307" idsrc="xmltag.org">A.M. Best's</org> rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at <a href="http://www.ambest.com/ratings/methodology">www.ambest.com/ratings/methodology</a>.</p><p>Keywords for this news article include: <org value="ACORN:0879856307" idsrc="xmltag.org">A.M. Best Company</org>.</p><p>Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2015, NewsRx LLC</p>
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