Best’s News & Research Service - April 14, 2008 02:43 PM (EDT)
A.M. Best Downgrades Rating of Alliance Mutual Insurance Company
OLDWICK, N.J. //BestWire// - A.M. Best Co. has downgraded the financial strength rating (FSR) to B+ (Good) from B++ (Good) and assigned an issuer credit rating (ICR) of “bbb-” to Alliance Mutual Insurance Company (Alliance) (Greensboro, NC). The outlook for the FSR is stable, and the outlook assigned to the ICR is stable.
These rating actions follow Alliance’s continued operating performance downturn, driven in 2007 by elevated underwriting expenses partly due to demutualization costs, as well as adverse reserve development. In addition to these factors was the lack of new progress or public announcement regarding the May 16, 2007 acquisition announcement, which when taken into consideration with the continued operating performance issues became a consideration for the FSR change.
These ratings also reflect Alliance’s low underwriting leverage, long-standing local market presence and aggressive improvements to its underwriting fundamentals. These strengths are tempered by its elevated expense structure and recent reserve strengthening, which have weakened underwriting performance compounded by a business concentration in North Carolina, which makes the company susceptible to regulatory, economic and judicial changes, as well as potential earnings and surplus setbacks from local storms and hurricanes. However, Alliance’s capital base, as well as management’s aggressive response to recent challenges, supports the company’s current outlook.
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