Best’s News & Research Service - October 10, 2013 03:48 PM (EDT)
A.M. Best Revises Outlook to Negative for Casualty Underwriters Insurance Company
OLDWICK, N.J. //BestWire// - A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb” of Casualty Underwriters Insurance Company (CUIC) (Murray, UT).
The revised outlook reflects the recent underwriting losses on the company’s primary livestock risk protection (LRP)-lamb line of business that raised the need for the pending modification of the program’s pricing model and led to a decline in premium writings and weakened business profile. CUIC management will be working with the appropriate government agencies over the next several years to modify the LRP-lamb pricing model. The revised outlook also reflects the uncertainty surrounding the viability of the existing level of federal protections.
The ratings of CUIC recognize its minimal underwriting leverage due to its niche market exposure, low investment risk and conservative management team. These positive rating factors are partly offset by CUIC's unfavorable operating performance over the past five years, which was mitigated by the strong federal protections.
Negative rating actions may follow significantly weakened federal protections of CUIC’s LRP-lamb program, a sudden, unexpected and material decline in the company’s planned levels of risk-adjusted capitalization, or diminished liquidity measures.
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.