Best’s News & Research Service - August 09, 2016 05:07 PM (EDT)
A.M. Best Revises Outlooks to Negative for Lancer Insurance Company and Lancer Indemnity Company
- August 09, 2016 05:07 PM (EDT)
Oldwick //BestWire// - A.M. Best has revised the outlooks to negative from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-” of Lancer Insurance Company (Lancer Insurance) (Chicago, IL). Concurrently, A.M. Best has revised the outlooks to negative from stable and affirmed the FSR of B++ (Good) and the ICR of “bbb” of Lancer Indemnity Company (Lancer Indemnity) (Long Beach, NY).
The revised outlooks for Lancer Insurance reflects the declining trend in its underwriting performance over the past several years, particularly in 2015, in large measure attributable to adverse prior year loss reserve development in its commercial auto line. This has resulted in overall operating performance falling short of projections and contributed to a decline in risk-adjusted capitalization. The revised outlooks for Lancer Indemnity reflects the underwriting losses in its commercial multi-peril and general liability lines, particularly in 2015, also largely attributable to adverse prior year loss reserve development, and the significant decline in its risk-adjusted capitalization.
Lancer Insurance’s ratings reflect its solid market presence in the specialty transportation market; its adequate, albeit lower, risk-adjusted capitalization; and overall favorable return measures over the most recent five- and 10-year periods. The ratings also reflect management’s ongoing initiatives to improve underwriting results by maintaining tight underwriting guidelines and rate actions as necessary. Dividend payments to its parent, Lancer Financial Group, Inc., have been suspended since 2013 in order to limit increases in leverage measures.
Lancer Indemnity’s ratings acknowledge its adequate risk-adjusted capitalization, focused niche market strategy and much improved expense ratio. The ratings also acknowledge the benefits derived from LFG’s ownership, which includes both operational and capital support. These positive rating factors are offset by the company’s overall weak operating results in recent years, as well as increased leverage under its growth initiatives.
Lancer Insurance’s ratings could be negatively impacted should competitive conditions or a lack of underwriting discipline result in underwriting and overall profitability measures falling short of A.M. Best’s expectations or should there be a material decline in the company’s risk-adjusted capitalization. Lancer Indemnity’s ratings could be negatively impacted by persistent unfavorable operating results or a material drop in risk-adjusted capitalization.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
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