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Best’s News & Research Service - September 01, 2022 02:16 PM (EDT)

AM Best Revises Under Review Status to Developing for Credits Ratings of American Millennium Ins Co and Citadel Re Co Ltd

  • September 01, 2022 02:16 PM (EDT)
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Oldwick //BestWire// - AM Best has revised the implications of the under review status to developing from negative for the Financial Strength Rating (FSR) of C- (Weak) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “cc” (Very Weak) of American Millennium Insurance Company (AMIC) (Bridgewater, NJ), a wholly owned subsidiary of Citadel Reinsurance Company Limited (Citadel Re) (Hamilton, Bermuda). Additionally, AM Best has revised the implications of the under review status to developing from negative for the FSR of B (Fair) and the Long-Term ICR of “bb” (Fair) of Citadel Re.

The ratings of AMIC reflect its balance sheet strength, which AM Best assesses as very weak, as well as its weak operating performance, limited business profile and marginal enterprise risk management (ERM).

The ratings of Citadel Re reflect its balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and marginal ERM.

AM Best downgraded the Credit Ratings (ratings) of both AMIC and Citadel Re in February 2021 and maintained the under review with negative implications status following the downgrade of AMIC’s ratings in October 2020. These rating actions resulted from persistent net underwriting losses that continued into the second half of 2020 and negatively impacted the risk-adjusted capitalization of AMIC, and Citadel Re given its direct ownership of AMIC. For AMIC, the impact of these unanticipated losses (net of reinsurance) resulted in a significant deterioration in surplus, and notably, risk-based capital (RBC) levels which, at the time, were likely to prompt state regulatory actions. The under review status was pending the parent, Citadel Re, potentially recapitalizing AMIC’s balance sheet and its plans to raise more capital from outside investors.

In August 2021, Citadel Re completed its recapitalization of AMIC with a $6.2 million cash injection, raising the RBC to above 300% to the satisfaction of AMIC’s regulator, the Department of Banking and Insurance of New Jersey. Although some of the uncertainties incorporated in the previous under review status had been addressed through the completion of the recapitalization, management’s planned external capital raising has not yet been completed and is likely to be delayed until 2023. The rating status also considers the improved profitability of AMIC’s existing core commercial auto business. However, the ultimate performance of this book of business and its associated loss reserves may require more time to flesh out, which also could have an impact on Citadel Re’s earnings and capitalization due to ownership and consolidation. AM Best has revised the implications of the under review status to developing from negative for both AMIC and Citadel Re. The developing implications reflect AM Best’s need to see how these various trends play out.

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 Performance Assessments, 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.

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