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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 29, 2015 11:02 AM (EDT)
A.M. Best has upgraded the issuer credit rating (ICR) to “bbb+” from “bbb” of Auto Club Insurance Company of Florida (ACICF) (Tampa, FL). Concurrently, A.M. Best has affirmed ACICF’s financial strength rating of B++ (Good). The outlook for both ratings remains stable.
The upgrade to the ICR is a reflection of ACICF’s consistently favorable operating results, strong surplus appreciation and generally favorable reserve development. Profitability is driven by favorable underwriting results and positive net income that has been reported for five consecutive years and continues in 2015. ACICF’s solid risk-adjusted capitalization and favorable operating trends are derived from its AAA affiliation, through which it writes a controlled book of business with a select class of policyholders. Furthermore, the ratings acknowledge the ownership group’s financial support, which included sizable capital contributions during the time 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 members of the Auto Club Group (8.33% ownership); all with a combined policyholders’ surplus of approximately $7.4 billion.
Partially offsetting these positive factors are ACICF’s 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 a continuation of favorable earnings trends. Negative rating actions could occur if there is a material decline in ACICF’s risk-adjusted capitalization, potentially driven by significant catastrophe losses, reduced catastrophe reinsurance coverage or increased reinsurance costs.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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