Best’s News & Research Service - April 10, 2013 11:58 AM (EDT)
A.M. Best Downgrades Ratings of Western General Insurance Company
OLDWICK, N.J. //BestWire// - A.M. Best Co. has downgraded the financial strength rating to B+ (Good) from B++ (Good) and issuer credit rating to “bbb-” from “bbb” of Western General Insurance Company (Western General) (Calabasas, CA). The outlook for both ratings is negative.
The rating downgrades for Western General reflect its trend of poor underwriting performance over the past three years, which reduced its risk-adjusted capitalization. Underwriting losses were primarily attributable to significantly increased claims severity and the company’s rate adequacy in its core state of California. In addition to its limited product offerings, Western General maintains an elevated expense position due to its high commission structure.
Despite its recent decline, Western General continues to maintain risk-adjusted capitalization that supports its ratings. The company’s capitalization reflects its favorable loss reserve development in recent years. The ratings also consider management’s ongoing initiatives designed to improve underwriting profitability. Western General has a long-standing market presence as a niche writer of both dealer-originated and agent/broker produced non-standard auto coverages, primarily in California.
Negative rating actions could follow if Western General continues its underwriting losses and/or a substantial decline occurs in its risk-adjusted capitalization. Positive rating actions could occur if the company sustains improvement in its underwriting performance while maintaining solid risk-adjusted capitalization.
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.