Press Release - AUGUST 01, 2019

AM Best Removes from Under Review With Developing Implications and Affirms Credit Ratings of Capital Insurance Group Members

 Robert Valenta, CPCU
Senior Financial Analyst
+1 908 439 2200, ext. 5291

Raymond Thomson, CPCU, ARe, ARM
+1 908 439 2200, ext. 5621
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of California Capital Insurance Company and its subsidiaries: Eagle West Insurance Company, Monterey Insurance Company and Nevada Capital Insurance Company (Reno, NV). These companies operate under an intercompany pooling arrangement, collectively referred to as Capital Insurance Group (Capital). All companies are domiciled in Monterey, CA, unless otherwise specified. The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Capital’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

The rating affirmations consider explicit and implicit support from Capital’s new parent, Auto-Owners Insurance Company (Auto-Owners). Risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), reflects substantial capital support received from Auto-Owners since December 2018, which followed severe net losses and surplus erosion due in part to the California wildfires in 2017 and 2018, as well as adverse reserve development on prior accident years in 2017. AM Best anticipates the group will recognize additional financial and operational benefits over time as a result of ownership by Auto-Owners, which is a highly rated, super-regional insurer with more than $11 billion in policyholder surplus.

While significant variability was shown in operating results in the past two years, as catastrophic wildfire losses impacted the group particularly in areas of concentration, management is working to mitigate this exposure over the near term through underwriting initiatives and updates to catastrophe risk modeling. Capital’s business is significantly concentrated geographically, with about 83% of direct premiums written in California, although the group does offer a diversified mix of business, with a focus on commercial multiple peril, homeowners, private passenger automobile and commercial automobile coverages.

Positive rating actions could occur over the near term if integration benefits from the Auto-Owners acquisition are realized and demonstrated in the group’s operating results. However, negative rating actions could occur if the group’s operating results do not improve over time as expected, the group incurs a material loss in capitalization or if the group’s relationship to its parent were to change in a manner that affects the operational stance of the group.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

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