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FOR IMMEDIATE RELEASE
OLDWICK - JUNE 24, 2020 12:57 PM (EDT)
AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb” of MGA Insurance Company, Inc. (MGA) (Dallas, TX). The outlook for the FSR remains stable.
These Credit Ratings (ratings) reflect MGA’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The revision in the Long-Term ICR outlook reflects improvement in underwriting and operating performance in recent years, driven by management’s focus on underwriting discipline, rate adjustments to counter rising industry loss costs, proactive management of open claims and other risk management actions. As a result, the company’s combined and operating ratios compare favorably with the private passenger standard and non-standard automobile composites. AM Best expects that the company’s underwriting and operating performance will remain favorable over the near-term and continue to bolster balance sheet strength.
MGA’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), was very strong in 2019 and through the first quarter of 2020. This reflects an improvement from prior years largely due to a reduction in stockholder dividends paid to its parent company, GAINSCO, INC. These factors are partially offset by the company’s modestly elevated underwriting leverage and areas of adverse loss reserve development, largely related to its Florida book of business. As a result, MGA has reduced its exposure in Florida over the past five years to reduce the potential risks from high impact personal injury protection litigation. The ratings also contemplate the company’s concentration of risk in the non-standard auto lines and geographic concentration, as well as the execution risk associated with management’s geographic expansion into new states.
This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.