CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 15, 2009 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to "bb" from "bbb-" of Peace Hills General Insurance Company (Peace Hills) (Alberta, Canada). The outlook for both ratings is negative.
These rating actions reflect the further decline in Peace Hills' risk-adjusted capitalization due primarily to investment and underwriting losses. Capitalization was adversely impacted by an additional 10.7% loss of shareholders' equity, further elevating the company's above average underwriting leverage ratio. Balance sheet strength was weakened by declining asset values from the downturn in the investment markets and from an increase in the frequency and severity of property losses from fire.
The outlook on the ratings is negative due to Peace Hills' minimal capitalization relative to the ratings and several significant challenges to rebuilding capital. These include the uncertainty concerning the final status of the minor injury cap in the Alberta auto market and rate adequacy in that market; declining earnings; soft commercial lines pricing; strong competitive pricing pressure; and the potential for unanticipated loss due to an increasing trend of more frequent and severe weather events across Canada.
Partially offsetting these negative ratings factors are the actions of Peace Hills'experienced management team to reduce investment leverage and earnings volatility, increase premium rates across all major lines of business and slow growth.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.