Best’s News & Research Service - March 29, 2018 10:01 AM (EDT)
A.M. Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Specialty Risk of America
- March 29, 2018 10:01 AM (EDT)
Oldwick //BestWire// - A.M. Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Ratings of “bbb-” of Specialty Risk of America (SPRISKA) (Springfield, IL). The outlook assigned to these Credit Ratings (ratings) is negative.
The ratings were placed under review with negative implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The ratings have been removed from under review, as A.M. Best has completed its analysis of SPRISKA under the updated BCRM.
The ratings reflect SPRISKA’s balance sheet strength, which A.M. Best categorizes as strong, as well as its marginal operating performance, limited business profile and weak enterprise risk management (ERM).
SPRISKA’s balance sheet strength is supported by the strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), reflective of a recently placed quota share agreement and growth in policyholder surplus over the last two years. SPRISKA’s operating performance on a five-year average basis is marginal, with key operating metrics that lag its peer averages along with the company’s combined ratio. However, net income has been generated for two years in a row (2016-2017), largely driven by improvement in the expense ratio.
SPRISKA’s business profile is limited due to the lack of geographical diversification and limited data analytics capability. In addition, the weak ERM assessment reflects lack of formal ERM process. However, the company is working to implement a formal documented ERM process, which should be in place by year-end. Negative rating action is possible if there is deterioration in the operating results or capitalization levels fall below A.M. Best’s expectations for the current rating level. The ratings are contingent upon SPRISKA’s near-term progress and management’s success in executing on its 2018 plan.
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.