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FOR IMMEDIATE RELEASE
OLDWICK - NOVEMBER 11, 2014 03:55 PM (EST)
A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of "a-" of Topa Insurance Company (Topa) (Los Angeles, CA).
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of "a-" of Topa's wholly owned subsidiary, Dorchester Insurance Company, Ltd. (U.S. Virgin Islands). The outlook for these ratings is stable.
The negative outlook is a reflection of Topa's consistently negative underwriting income and declining overall profitability. Net underwriting income has been negative over the past five years, and the company is expected to produce and additional underwriting loss for 2014. Company management is implementing a wide range of strategic initiatives and remedial actions to reverse the negative trends. Nonetheless, there is uncertainty regarding the overall impact these actions will have upon the company's balance sheet and income statement. In addition, there is heightened execution risk with these strategic options and their impact on the company's business profile.
The affirmation of the rating is based on Topa's strong capitalization, favorable net investment income results and local market presence.
Negative rating actions could occur if operating results worsen or there is an elevation in the combined ratio.
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:
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.