Best’s News & Research Service - September 06, 2017 01:35 PM (EDT)
A.M. Best Revises Outlooks to Stable for Restoration Risk Retention Group, Incorporated
- September 06, 2017 01:35 PM (EDT)
Oldwick //BestWire// - A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Restoration Risk Retention Group, Incorporated (RRRG) (Burlington, VT).
The revision of the outlooks reflects significant improvement in RRRG’s risk-adjusted capitalization since 2014, coupled with a material decrease in the accident-year loss and loss adjustment expense ratios over the past two years.
Risk-based capitalization has improved materially over the past two years as RRRG has increased its surplus significantly through strong underwriting profits from favorable reserve development and $3 million in additional letters of credit from its sponsor, Servpro Industries, Inc. The company also has dramatically reduced its equity leverage since mid-2016 as shifts its investment portfolio away from equity exposures has reduced volatility in its investment results. Underwriting and profitability ratios for 2015 and 2016 improved significantly due to favorable reserve development. Combined and operating ratios had fallen behind industry averages in 2013 and 2014, following a history of readily outperforming the composite and the industry.
The ratings of RRRG reflect supportive risk-adjusted capitalization, focused business strategy and historically strong operating performance. Partially offsetting the positive rating factors are a fairly limited business profile, oriented exclusively toward one class of insured group, and limited net investment income, although it has generated steady, albeit modest, investment income and very good liquidity.
Positive rating actions could occur if operating results reflect management’s successful execution of its growth strategies or if risk-based capitalization significantly improves through surplus growth from operating profits, with no material deterioration in loss experience. Negative rating actions could occur if risk-adjusted capitalization materially weakens or if underwriting losses re-emerge, which would reflect material volatility in operating performance.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive .
This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.