Best’s News & Research Service - March 27, 2014 11:38 AM (EDT)
A.M. Best Downgrades Issuer Credit Ratings of Anchor General Insurance Company and Its Subsidiary
Oldwick //BestWire// - A.M. Best has downgraded the issuer credit rating (ICR) to "bbb" from "bbb+" and affirmed the financial strength rating (FSR) of B++ (Good) for Anchor General Insurance Company (Anchor General) (San Diego, CA). The outlook for both ratings has been revised to negative from stable. A.M. Best has also downgraded the ICR to "bbb-" from "bbb" and the FSR to B+ (Good) from B++ (Good) for Anchor General's wholly-owned subsidiary, Pacific Star Insurance Company (Pacific Star) (Madison, WI). The outlook for both ratings remains stable.
The rating actions reflect Anchor General's recent decline in risk-adjusted capitalization due to significant premium and policy growth that led to elevated underwriting leverage measures when compared to other similarly-rated entities and the nonstandard auto composite.
Somewhat offsetting these negative factors are Anchor General's generally favorable operating results, as measured by the combined ratio. Furthermore, management continues to take proactive and corrective measures to improve underwriting performance through rate changes, agency management and risk mitigation initiatives.
Further negative rating actions may be taken if there is a continued decline in Anchor General's risk-adjusted capitalization as a result of operating losses and/or unplanned premium and exposure growth.
The rating downgrades for Pacific Star reflect its trend of poor underwriting and operating performance over the latest five-year period, which reduced policyholders' surplus. Underwriting losses were primarily attributable to increased auto liability losses from its Oregon book of business, which is currently in run off.
Despite the decline in policyholders' surplus over the latest five-year period, Pacific Star continues to maintain adequate risk-adjusted capitalization based on its favorable underwriting leverage measures that support its ratings.
Further negative rating actions may be taken if there is a material decline in Pacific Star's risk-adjusted capitalization as a result of deteriorating operating results.
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.
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