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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - DECEMBER 17, 2013 12:00 AM (EST)
A.M. Best Co. has revised the issuer credit rating (ICR) outlook to stable from negative and affirmed the financial strength rating (FSR) of A (Excellent) and the ICRs of “a+” of the Alfa Insurance Group members (Alfa or the group). The outlook for the FSR is stable.
In addition, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a+” of Alfa Life Insurance Corporation (Alfa Life). The outlook for both ratings is stable. All companies are headquartered in Montgomery, AL. (See below for a detailed list of companies and ratings.)
The ratings and outlook of the group reflect its supportive risk-adjusted capitalization, improved earnings over the last two years, excellent business profile in Alabama and the risk management and profitability initiatives underway to reduce exposure to loss from catastrophic weather conditions and improved earnings on its core homeowners, farmowners and private passenger automobile lines of business. The ratings also benefit from management’s strong enterprise risk management focus, multi-channel distribution network, sponsorship of the Alabama Farmers Federation and the ability to cross-sell property/casualty and life insurance products.
These positive rating factors are partially offset by Alfa’s below average earnings, exposure to hurricane and other severe windstorm activity in the southern and southeastern United States, and the prolonged period of low interest rates that are creating investment income growth challenges and putting pressure on underwriting performance.
The group’s ratings may be downgraded if operating performance significantly falters or there is a material decline in capitalization. The ratings would be further stabilized by a continuation of a favorable earnings trend that leads to sustained capital appreciation.
The ratings of Alfa Life recognize its strong risk-adjusted capital, historically favorable operating performance and its strategic importance to the group. Alfa Life has a close marketing relationship with the group’s property/casualty distribution network, both captive and independent agents, and the majority of its new sales are tied to the property/casualty distribution network. While Alfa Life has a strong market position in Alabama, its life operations outside of Alabama remain modest and its operating profile has contracted somewhat due to lower portfolio reinvestment yields, IT-related capital investments and some reversion to mean mortality, which has been favorable for years.
A.M. Best believes Alfa Life is well positioned at its current rating level. Potential for future negative rating actions could be possible should Alfa Life’s first-year life premiums continue to decline or it experiences a material decline in operating results or risk-adjusted capitalization levels, or loss of strategic value to Alfa’s property/casualty operations.
The FSR of A (Excellent) and ICRs of “a+” have been affirmed for the following members of the Alfa Insurance Group:
-Alfa Mutual Insurance Company
-Alfa Mutual Fire Insurance Company
-Alfa Mutual General Insurance Company
-Alfa Alliance Insurance Corporation
-Alfa General Insurance Corporation
-Alfa Insurance Corporation
-Alfa Specialty Insurance Corporation
-Alfa Vision Insurance Corporation
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.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.