AUGUST 30, 2013 12:00 AM (EDT)
A.M. Best Revises Outlook to Stable for Bankers Insurance Company and Its Subsidiaries
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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 30, 2013 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of B+ (Good) and issuer credit ratings (ICR) of bbb- of Bankers Insurance Company (Bankers) (St. Petersburg, FL) and its property/casualty subsidiaries, Bankers Specialty Insurance Company (Metairie, LA) and First Community Insurance Company (St. Petersburg, FL). Concurrently, A.M. Best has affirmed the FSR of B (Fair) and the ICR of bb of Bankers Life Insurance Company (Bankers Life) (St. Petersburg, FL). The outlook for these ratings is stable.
The revised outlook for the ratings of Bankers and its subsidiaries reflects the incremental improvements Bankers has made in its property/casualty operations regarding risk-adjusted capital, internal operations and enterprise risk management. A.M. Best anticipates that these changes will benefit Bankers core operating results even more going forward. The improvements include extensive exposure and pricing initiatives as management continues to implement comprehensive underwriting, pricing, risk management and operational strategies designed to achieve and sustain a strong level of profitability.
Management continues to face market challenges, an elevated expense position and exposure to frequent and severe weather-related events. Partially offsetting factors include the fluctuation of underwriting performance over the past five years, driven partially by increased costs. Despite exposure reductions, the group continues to rely heavily on catastrophe reinsurance programs to mitigate potential losses due to hurricanes and other severe and frequent weather events.
Key rating factors that could result in positive rating actions on the property/casualty companies include sustained improvement in underwriting performance while increasing the level of risk-adjusted capitalization. Primary factors that could result in rating downgrades include a material deterioration in underwriting performance or erosion in capital base and risk-adjusted capitalization.
The ratings of Bankers Life reflect the challenges to execute its strategic business plans, maintain adequate levels of risk-adjusted capitalization as it manages its anticipated growth in interest-sensitive liabilities and improve its overall net operating performance. The ratings also reflect the company's elevated exposure to structured securities relative to total-adjusted capital.
Partially offsetting these factors are Bankers Lifes increasing level of absolute capital, adequate risk-adjusted capitalization, positive net operating performance and the generally improved quality of its fixed-income investment portfolio.
Positive rating actions on Bankers Life could result from sustained improvement in its risk-adjusted capitalization, net operating performance trends that meet or exceed A.M. Best's expectations or positive rating actions taken by A.M. Best on Bankers. Negative rating actions could result from a meaningful and sustained decline in the companys risk-adjusted capitalization or net operating trends that fall below A.M. Best's expectations.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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