AM Best Places Credit Ratings Under Review with Negative Implications for Rockingham Insurance Company and Its Affiliates

Business Wire

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 Ratings of “a” (Excellent) of Rockingham Insurance Company and its pooled affiliates: Rockingham Casualty Company and Rockingham Specialty, Inc. All companies are domiciled in Harrisonburg, VA and are collectively referred to as Rockingham Group or the group.

These Credit Ratings (ratings) reflect Rockingham Group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The group's ratings have been placed under review with negative implications following its June 30, 2022 quarterly filing reflective of a 14% decline in the group’s surplus. The drop in surplus was driven by net operating losses of approximately $7.8 million and a net capital loss of $4.7 million. This generated a significant decline in the group’s risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). Prior to the most recent capital decline, Rockingham Group’s underwriting leverage measures have continued to increase in recent years, primarily driven by its growth in premiums along with its associated liabilities, which have substantially outpaced the group’s surplus growth. This in turn has placed negative pressure on Rockingham’s overall balance sheet strength assessment.

The group is currently in the process of potentially stabilizing its balance sheet through a capital injection, most likely in the form of an unaffiliated surplus note. While this may ultimately result in an improvement in risk-adjusted capitalization, the ultimate impact on the ratings is uncertain given execution risk in completing the transaction in a timely fashion and finalized terms and conditions. The ratings will remain under review until the completion of the capital improvement plan and AM Best’s evaluation of the full impact of these efforts on Rockingham Group’s risk-adjusted capitalization.

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.