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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 21, 2009 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of B (Fair) and issuer credit ratings (ICR) of "bb+" of Affirmative Insurance Group (Affirmative) and its members. Concurrently, A.M. Best has affirmed the ICR of "b" of Affirmative's parent company, Affirmative Insurance Holdings, Inc. (Affirmative Holdings) [NASDAQ: AFFM]. The outlook for all ratings is stable. All administrative offices are located in Addison, TX. (See below for a detailed list of the companies.)
The ratings primarily reflect the elevated tangible financial leverage of Affirmative Holdings. As a result, considerable pressure exists on its insurance subsidiaries to meet debt service requirements and other holding company obligations. Also, due to Affirmative's limited product and geographic business concentration, its earnings are subject to the highly competitive nature of the non-standard personal automobile insurance industry. In 2008, factors contributing to Affirmative's lower earnings included significantly lower premium volume associated with the downturn in overall economic conditions, competitive market pressures and deterioration in underwriting results related to increased losses from its Florida operations and increased amortized costs related to a major software development project.
These negative rating factors are offset by the group's adequate risk-adjusted capitalization, well-established market presence and multiple distribution platform. Affirmative's historic underwriting profitability as reflected by its five-year average combined loss ratio compares favorably to the non-standard automobile industry composite. Despite being ranked among the leading non-standard automobile writers in the United States, Affirmative remains challenged to significantly improve its capital position in the near term due to its debt service obligations, lower profit margins in recent years and competitive market pressures.
The FSR of B (Fair) and ICRs of "bb+" have been affirmed for Affirmative Insurance Group and its following members:
- Affirmative Insurance Company
- Insura Property and Casualty Insurance Company, Inc.
- Affirmative Insurance Company of Michigan
- USAgencies Casualty Insurance Company, Inc.
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.