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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 17, 2013 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to “bb+” from “bbb-“ for American European Insurance Company and its wholly owned subsidiaries, Rutgers Casualty Insurance Company and Rutgers Enhanced Insurance Company. All three companies are headquartered in Cherry Hill, NJ, and collectively referred to as American European Insurance Group (AEIG). The outlook for these ratings has been revised to stable from negative.
The rating downgrades reflect AEIG’s historically poor operating performance and execution risk in replacing business previously assumed from Merchants Mutual Insurance Company (MMIC), an unaffiliated insurer. Other negative factors include the company’s lack of scale driving its high and therefore uncompetitive expense ratio, as well as volatile total investment returns and competitive market conditions under which the group operates. Further, the group remains exposed to northeast storms that have impacted results over the past two years.
Offsetting these negative factors is AEIG’s solid capitalization and the recent actions taken by management to improve overall operating results. The outlook reflects A.M. Best's view that the company’s strong level of capitalization will allow the necessary time for management’s initiatives to gain traction in the medium term.
AEIG’s ratings could be negatively impacted if results do not materially improve in the near term.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.