Press Release - SEPTEMBER 15, 2015

A.M. Best Revises Outlook to Negative for Pacific Pioneer Insurance Company


CONTACTS:
 Kenneth Tappen
Senior Financial Analyst
(908) 439-2200, ext. 5248
kenneth.tappen@ambest.com

Joseph Burtone
Assistant Vice President
(908) 439-2200, ext. 5125
joseph.burtone@ambest.com
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - SEPTEMBER 15, 2015
A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of B+ (Good) and the issuer credit rating (ICR) of "bbb-" of Pacific Pioneer Insurance Company (Pacific Pioneer) (Cypress, CA).

The negative outlook is based on Pacific Pioneer's significant decline in policyholders' surplus and risk-adjusted capitalization, driven by substantial underwriting and operating losses.

The ratings affirmation reflects Pacific Pioneer's adequate risk-adjusted capitalization, conservative investment risk profile and local market expertise. Partially offsetting these positive factors are Pacific Pioneer's unfavorable five-year operating performance and limited business profile, as it has assumed a majority of its business from a third-party carrier.

The positive rating factors include Pacific Pioneer's local market knowledge, derived from its long-standing relationships within California's sizeable Asian communities. Management has implemented several initiatives over recent years, some of which have included the implementation of rate adjustments, the reorganization of its claims operation and the installation of a new system for better loss tracking and pricing. Pacific Pioneer also has benefited from adequate balance sheet liquidity and its conservative investment portfolio that has generated a steady stream of income.

Pacific Pioneer's negative rating factors include its limited business profile, as it has been dependent on a third-party carrier to write a considerable portion of its business on a direct basis, which it assumes from this carrier. In addition, Pacific Pioneer has reported unfavorable five-year underwriting and operating earnings relative to industry norms. These results were primarily driven by substantial underwriting and operating losses in 2014, which resulted in a significant decline in policyholders' surplus and risk-adjusted capitalization. These losses were attributable to several major commercial multi-peril fire claims, which occurred in late 2013 and in 2014. Furthermore, Pacific Pioneer has reported materially adverse loss reserve development in recent calendar and accident years. Lastly, as a predominantly California commercial and personal lines writer, Pacific Pioneer is exposed to market competition, regulatory changes and judicial decisions.

Negative rating actions could occur if there is a continuation of operating losses leading to further declines in surplus and 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 visit A.M. Best's Ratings & Criteria Center.

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AMB# Company Name
011133 Pacific Pioneer Insurance Company