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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 23, 2013 12:00 AM (EDT)
A.M. Best Co. has downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating (FSR) of B++ (Good) of Armed Forces Insurance Exchange (AFIE) (Leavenworth, KS). Concurrently, the outlook for the FSR has been revised to negative from stable, while the outlook for the ICR remains negative.
The downgrading of AFIE’s ICR reflects the company’s trend of unfavorable underwriting performance that drove the decline in surplus and management not meeting its 2012 performance expectations. The ratings of AFIE recognize its adequate level of capitalization and long-standing history as a provider of personal lines insurance products to the preferred risk segment of the military market.
Partly offsetting these positive rating factors are the company’s unfavorable trend of underwriting performance, concentration of coastal exposures and elevated underwriting expense ratio.
The negative outlooks reflect the ongoing challenges facing management in order to improve profitability and strengthen the company’s capitalization in the near-term. Management recognizes catastrophe exposure as its major risk; however, it is executing its coastal mitigation strategies as well as other initiatives to address its elevated operating expenses, pricing segmentation and competitive market position.
Negative rating actions could occur if there were an unexpected and material decline in AFIE’s risk-adjusted capitalization, continued deterioration in its operating performance or a diminishing of its liquidity measures over the next several years.
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.