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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 29, 2007 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating (FSR) to B++ (Good) from A (Excellent) and the issuer credit ratings (ICR) to "bbb" from "a" of DaimlerChrysler Group and its member, DaimlerChrysler Insurance Company (DCIC) (Farmington Hills, MI). The outlook for all ratings is stable.
These rating actions reflect A.M. Best's concerns regarding DaimlerChrysler Group's parent, DaimlerChrysler Financial Services Americas LLC, dependence on the success of Chrysler LLC and the common ownership of both entities by Chrysler Holding LLC. The capitalization and operating performance of DCIC has been and continues to be supportive of the formerly assigned ICR of "a".
The ratings are based on the consolidated operating results of DaimlerChrysler Insurance Company and DaimlerChrysler Insurance Company of Canada. The ratings reflect the group's solid capitalization and its affiliation with Chrysler Holding LLC, one of the world's leading automotive corporations. The ratings further acknowledge the group's favorable, although somewhat variable, operating results that are derived from its underwriting expertise, loss prevention measures and effective low cost distribution systems.
These rating strengths are partially offset by the group's limited product offering, which is subject to volatility in underwriting results due to weather-related events. While underwriting results may continue to be impacted due to storm-related losses, management has increased its catastrophe loss limits, which it believes will protect overall surplus levels. Although surplus has fluctuated over a five-year period (largely due to stockholder dividends), management is committed to maintaining excellent capitalization levels.
The group benefits from its parent's well diversified auto dealer network that provides it with a highly efficient and effective distribution system, strong operating synergies, market opportunities and strategic value. The group's sustainable competitive market position is further enhanced by its high business retention, extensive geographic spread of risk and solid product knowledge within its specialty niche market. The ratings also recognize management's initiatives to improve underwriting results and reverse prior years of unfavorable earnings trends through exiting unprofitable books of business, implementing rate increases and higher deductibles and tightening underwriting guidelines. Over a five-year period, underwriting results have generally improved with underwriting profit recorded each year, although storm losses have impacted the level of underwriting profit.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.