Best’s News & Research Service - September 16, 2021 09:08 AM (EDT)
AM Best Downgrades Credit Ratings of Civil Service Employees Ins. Co. and CSE Safeguard Ins. Co.; Places Ratings Under Review
- September 16, 2021 09:08 AM (EDT)
Oldwick //BestWire// - AM Best has downgraded the Financial Strength Rating to B+ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb-” (Good) from “a-” (Excellent) of Civil Service Employees Insurance Company and CSE Safeguard Insurance, which make up CSE Insurance Group (CSE Group) domiciled in Walnut Creek, CA. These Credit Ratings (ratings) have been placed under review with developing implications.
The ratings reflect CSE Group’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
The rating downgrades reflect the elimination in ratings enhancement following the announcement that the ultimate parent of CSE Group, Société de Groupe d’Assurance Mutuelle Covéa (Covea), entered into a definitive agreement to sell CSE Group to Porch Group, Inc. (Porch), a Seattle-based publicly traded, vertical software and InsurTech company. The sale is expected to close in the second quarter of 2022 and is subject to customary regulatory approvals.
Prior to the announcement, the ratings of CSE Group have been enhanced historically by Covea, as CSE Group was considered to be of strategic importance to the organization. The credit enhancement to CSE Group also considered the benefits of being part of a much larger organization, and the explicit financial support provided by Covea over the years (via reinsurance and capital contributions) and the notion of implied financial support should the need arise.
With the intent to sell CSE Group to Porch, the credit enhancement received from Covea has been removed, as CSE Group is no longer considered a strategic member to the Covea organization. This also considers the reinsurance agreements that are no longer in place between Covea and CSE Group, which were terminated prior to the announced sale, and the removal of all explicit support in various forms.
The developing implications status reflects AM Best’s need to further assess the strategic plans of the new parent following further discussions with the company. The ratings will remain under review until all approvals are finalized, the transaction closes and AM Best evaluates the overall impact.
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 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.