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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 18, 2013 12:00 AM (EDT)
A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of PrimeOne Insurance Company (PrimeOne) (Farmington Hills, MI). The outlook assigned to both ratings is negative.
The rating actions take into account PrimeOne’s adequate balance sheet capitalization driven by moderate underwriting leverage and a conservative investment profile, in addition to its strong liquidity. Following the departure of the prior president and chief operating officer in mid-year 2012, new president, Daniel Gibson, has focused on strengthening the executive team and staff of the company through the hiring of several experienced insurance professionals, who have helped to develop a revised business plan. PrimeOne’s lead investor has expressed his support for the new management team and commitment to the operation of the company over the long term. PrimeOne will continue to focus on small-to-medium sized commercial risks in the Michigan hospitality market (restaurants, bars and taverns and other similar exposures) while also planning to build a platform that underwrites medical professional liability business.
Offsetting PrimeOne’s positive rating factors are the considerable challenges and execution risk associated with a recent start-up company, which have negatively impacted its operating results, thus far. PrimeOne also faces the potential for volatility in its operating performance over the near term, which could hurt its ability to maintain adequate balance sheet strength to support its ratings. This is coupled with the challenge of establishing a clear market presence as a new entrant.
The negative outlook reflects A.M. Best’s concerns about whether PrimeOne can successfully meet or exceed its underwriting and operating performance goals over the next 24 to 36 months based on its performance to date. Taking the company’s future projections into account, it is a distinct possibility that PrimeOne could develop a definite need to fortify its capital in order to continue adequately supporting its growing exposure base, if that growth erodes the modest amount of excess capital the company enjoyed at the end of 2012. While PrimeOne has developed positive momentum in terms of modest underwriting and operating profits generated during the last two quarters, it remains to be seen if that momentum proves sustainable.
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.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.