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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 25, 2010 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable, affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Alfa Insurance Group (Alfa or the Alfa Group) and its members.
Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and ICR of "aa-" of Alfa Life Insurance Corporation (Alfa Life) (Montgomery, AL). The outlook for these ratings is negative. (See below for a detailed list of the companies comprising the Alfa Group.)
The ratings for Alfa Group reflect its adequate risk-adjusted capitalization, dominant market presence and sustainable competitive advantages in Alabama, varied distribution system and expanded geographic diversification. These rating factors are derived from an experienced management team, which employs sound risk management practices and a conservative reserving philosophy that emphasizes exceptional customer service and claims handling.
These positive rating attributes are partially offset by Alfa's unfavorable operating results over the last five years, strong competitive market conditions and its susceptibility to severe weather related events. This is due to a concentration of risk in the Alabama property market, where both hurricane and other strong weather disturbances have resulted in underwriting losses and below average earnings. In addition, Alfa Group's invested asset base was reduced in 2008 in order to purchase the outstanding shares and privatize Alfa Corporation. As a result, future investment income is expected to be below historical averages.
Alfa has been taking a number of steps over the last few years to improve profitability, primarily reducing its property exposure in and around the Gulf of Mexico, increasing premium rate and claims deductibles, growing its profitable automobile line and expanding its geographic footprint in other states. However, the outlook on the ratings is negative due to the current trend of negative underwriting earnings and the expectation of lower investment income.
The ratings of Alfa Life acknowledge its strategic role as the life insurance operation of Alfa Group, its generally positive operating earnings in recent years and continued focus on enterprise risk management. Partially offsetting these strengths are its narrow geographic profile and high exposure to mortgage-backed securities. In addition, Alfa Life has experienced modest premium growth in recent years.
The FSR of A+ (Superior) and ICRs of "aa-" have been affirmed for Alfa Insurance Group and its following members:
- Alfa General Insurance Corporation
- Alfa Insurance Corporation
- Alfa Vision Insurance Corporation
- Alfa Mutual Insurance Company
- Alfa Mutual Fire Insurance Company
- Alfa Mutual General Insurance Company
- Alfa Specialty Insurance Corporation
- Alfa Alliance Insurance Corporation
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.