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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 22, 2015 01:21 PM (EDT)
A.M. Best has upgraded the issuer credit rating (ICR) to "bbb+" from "bbb" and affirmed the financial strength rating (FSR) of B++ (Good) of Alabama Municipal Insurance Corporation (AMIC) (Montgomery, AL). The outlook for the FSR has been revised to positive from stable, while the outlook for the ICR has been maintained at positive.
The upgrade of the ICR reflects AMIC's improved risk-adjusted capitalization, its overall favorable operating results and the deleveraging of its investment portfolio over the current five-year period. Despite declines in net investment income, operating earnings have improved in recent years on profitable underwriting results. Improved operating results and the absence of investment related losses have led to strong return measures and surplus growth. Such growth has, in turn, led to lower leverage and much improved risk-adjusted capitalization since 2010.
AMIC's investment portfolio historically had contained significant concentrations of mortgage- and asset-backed securities (MBS/ABS), including collateralized debt obligations (CDO). With the economic crisis that began in 2008, the portfolio incurred large capital losses, as the company sold or wrote down its MBS/ABS and CDO holdings. These actions led to a drop in surplus and negative return measures. However, the company's fixed-income portfolio has been deleveraged, and currently, all fixed holdings are investment grade.
The positive outlooks reflect AMIC's strong risk-adjusted capitalization and A.M. Best's expectation that overall operating results (absent significant weather-related losses) are likely to remain favorable. The ratings could, however, be lowered if operating losses return to the extent that they negatively impact the company's capitalization.
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:
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 .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.