AM Best Information Services

JULY 28, 2022 09:45 AM (EDT)

AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Golden Bear Insurance Company

 Nicholas Matukaitis
Financial Analyst
+1 908 439 2200, ext. 5486

Christopher Draghi
Associate Director
+1 908 439 2200, ext. 5043

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jeff Mango
Managing Director, Strategy & Communications
+1 908 439 2200, ext. 5204


OLDWICK - JULY 28, 2022 09:45 AM (EDT)
AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Golden Bear Insurance Company (Golden Bear) (Stockton, CA). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Golden Bear’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings have been removed from under review with negative implications following the successful execution of capital initiatives that were communicated in response to the surplus erosion experienced in 2021. Significant adverse loss reserve development was reported in 2021, which led to the erosion, primarily related to casualty claims that have been impacted by social inflation, higher-than-expected loss activity and challenging legal environments in certain geographies. In response, management strengthened the reserves and applied more robust underwriting guidelines to curb future development. The company also issued a $15 million surplus note and received an $8 million cash contribution from the holding company, Hall Holdings Inc., in the second quarter of 2022 to bring the company’s surplus position to over $100 million. In the interim, a $10 million line of credit was issued, which has since been settled using proceeds from the holding company. These actions returned the company’s risk-adjusted capitalization to a very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), comparable to the level reported by the company prior to being placed under review. As a result, risk-adjusted capitalization returned to a level that supports the overall balance sheet assessment, further strengthened by the company’s relatively conservative investment portfolio, solid liquidity measures and a comprehensive reinsurance program.

Golden Bear’s strong operating performance is due to consistent operating earnings supported by solid underwriting and investment income in years preceding 2021. The extreme volatility experienced in 2021 unfavorably impacted average profitability metrics, but the company had been very consistent in the prior 10-year period. Management also has been responsive to recent challenges and has largely non-renewed or aggressively adjusted underwriting guidelines for the underperforming lines of business, specifically the trampoline, habitational and Florida casualty segments. The primary culprit was the trampoline business, of which Golden Bear has shed nearly all exposure. These actions appear to be gaining traction and results have significantly improved in 2022, with a strong combined ratio of 86.8% through the first quarter.

Golden Bear’s neutral business profile assessment reflects its unique market position as a specialty insurance writer, offering surplus lines coverage across the United States and admitted coverage in California and Arizona. As a surplus lines writer, the company exits and enters markets as opportunities arise. Management has a proven track record of being able to target markets in which it can gain meaningful market share. The ERM program includes prudent reinsurance protections and an actively engaged management. Overall, it is considered appropriate for the risk profile.

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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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AMB# Company Name
001719 Golden Bear Insurance Company
058946 Hall Holdings, Inc.