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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 15, 2013 12:00 AM (EST)
A.M. Best Co. has assigned a financial strength rating of B++ (Good) and an issuer credit rating of “bbb” to Auto Club Insurance Company of Florida (ACICF) (headquartered in Tampa, FL). The outlook assigned to both ratings is stable.
The ratings and outlook of ACICF reflect its solid risk-adjusted capitalization, favorable five-year operating performance and the financial support provided by its ownership group. Partially offsetting these positive rating factors are the company’s significant catastrophe exposure and limited business profile as a writer of private passenger automobile and homeowners’ package policies in Florida.
ACICF’s solid risk-adjusted capitalization and favorable five-year operating performance are derived from its AAA affiliation, through which it writes a controlled book of business with a select class of policyholders. The company’s pre-tax operating earnings have trended upward in recent years due to improved underwriting results and gradually increasing net investment income. The improved underwriting results have been driven by management’s strategic initiatives in recent years, as well as a lack of significant weather-related catastrophe events. Furthermore, the ratings acknowledge the ownership group’s financial support, which included $79.3 million in contributed capital over the previous five-year period, as the company ramped up its new business writings. The ownership group is comprised of the Interinsurance Exchange of the Automobile Club (50.00% ownership); Auto Club Insurance Association (41.67% ownership); and The Auto Club Group (8.33% ownership); all with a combined policyholders’ surplus of approximately $6.3 billion at June 30, 2013.
ACICF’s negative rating attributes include its limited business profile as a personal lines writer in Florida and its corresponding exposure to severe weather-related losses, as well as potential changes to the judicial and regulatory environments. Gross catastrophe leverage from a 100-year hurricane, as depicted in a probable maximum loss (PML) analysis, is greater than the company’s surplus. In addition, ACICF is dependent on property catastrophe reinsurance to reduce its hurricane exposure to a moderate level. As a result, the company is exposed to credit risk, reinsurance availability and pricing issues.
Positive rating actions could occur if there is continued improvement in ACICF’s risk-adjusted capitalization on a catastrophe stress-tested basis and continued favorable earnings trends. Negative rating actions could occur if there is a material decline in the company’s risk-adjusted capitalization, potentially driven by significant catastrophe losses, reduced catastrophe reinsurance coverage and/or increased reinsurance costs.
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.