AM Best Places Credit Ratings of Stillwater Insurance Group’s Members Under Review With Negative Implications

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has placed under review with negative implications the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Stillwater Insurance Company (SIC) (Santa Barbara, CA) and its wholly owned subsidiary, Stillwater Property and Casualty Insurance Company (SPAC) (Jericho, NY). These companies are collectively known as Stillwater Insurance Group (Stillwater). Concurrently, AM Best has placed under review with negative implications the Long-Term ICR of “bbb-­” (Good) of WT Holdings, Inc. (Memphis, TN). Stillwater is ultimately owned by WT Holdings, Inc.

The under review with negative implications status is based on the significant decline in Stillwater’s surplus position at year-end 2022, primarily driven by substantial unrealized capital and net underwriting losses. These unrealized capital losses were largely driven by the equity markets volatility impacting Stillwater due to its high equity exposure. The company’s net underwriting results stemmed from multiple fire losses, weather-related events, as well as rapid and atypical increases in inflation that have plagued the industry as a whole. Stillwater’s homeowners’ line of business accounts for about 65% of its premium volume and has been impacted by increasing costs of material and labor along with supply chain constraints. The company’s auto line of business results also have been impacted by price increases for new and used vehicles. In addition, higher rental rates combined with longer average repair times due to parts shortages, particularly microchips, have contributed to higher loss ratios.

In an effort to address the surplus decline that directly impacts Stillwater’s risk-adjusted capitalization, management is currently working on a series of action plans to replenish capital, increase overall risk-adjusted capitalization and improve balance sheet metrics. The plans consider several options including but not limited to quota share reinsurance for the property book of business, potential capital infusion from its parent, increased top layer catastrophe coverage and a further reduction of common stock holdings in the investment portfolio to remove market risks. In addition, Stillwater is exploring other capital initiatives. WT Holdings, Inc. has indicated a willingness and ability to make a capital contribution; the timing and amount are being discussed.

The ratings will remain under review until AM Best can fully analyze the impact of management's plan. If these actions do not sufficiently improve balance sheet metrics and overall risk-adjusted capitalization, the ratings will most likely be downgraded.

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.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Adib Nassery
Senior Financial Analyst

+1 908 439 2200, ext. 5205

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Joseph Burtone
Director

+1 908 439 2200, ext. 5125

[email protected]

Al Slavin
Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

[email protected]

Source: AM Best