AM Best


A.M. Best Removes Ratings of International Fidelity Insurance Co. and Subsidiary from Under Review; Assigns Negative Outlook


CONTACTS:


Marc Liebowitz
Senior Financial Analyst
(908) 439-2200, ext. 5071
liebowitz.marc@ambest.com

Gerard Altonji
Assistant Vice President
(908) 439-2200, ext. 5626
gerard.altonji@ambest.com


Jim Peavy
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 - NOVEMBER 06, 2014 02:18 PM (EST)
A.M. Best has removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings of "a-" of International Fidelity Insurance Company (IFIC) (Newark, NJ) and its subsidiary, Allegheny Casualty Company (Allegheny) (Norristown, PA). The outlook assigned to these ratings is negative.

The affirmation of the ratings reflects the group's strong capitalization, solid underwriting results and expertise in its niche of contract and bail bond surety. IFIC's and Allegheny's underwriting expertise is demonstrated in their favorable loss and loss adjustment expense (LAE) ratio. In turn, the group's underwriting results have remained consistently profitable over a 10-year period, producing positive operating returns.

The negative outlook reflects A.M. Best's uncertainty of the ability of the group's management to fully implement an updated enterprise risk management (ERM) program and produce returns that better reflect their peer composites. Management's ERM practices were called into question following the discovery of a significant fraud perpetrated by a former officer. This fraud led to the group's re-filing of its year-end 2013 financial statements, which reported an 18% drop in surplus. There is further concern that the return measures trail peer composite norms. The group will be challenged to improve returns given its heightened expense structure and historically low level of net investment earnings.

There is an ongoing effort to implement a series of changes to the group's ERM structure and improve return measures. Updated practices include revised governance policies and efforts to improve investment yields. Given that the revision to the group's ERM began in mid-2014, such efforts are in their initial stages and their overall effectiveness is uncertain at this time.

Negative rating pressure could occur if operating performance materially worsened or ERM practices prove ineffective.

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.

Key insurance criteria reports utilized:


  • Understanding BCAR for Property/Casualty Insurance Companies

  • Rating Members of Insurance Groups

  • Rating Surety Companies

  • Risk Management and the Ratings Process for Insurance Companies


A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.