A.M. Best Co. has downgraded the financial strength rating to A(Excellent) from A+ (Superior) and issuer credit ratings to "a+"from "aa-" of Central Insurance Companies (Central) and its members,Central Mutual Insurance Company, All America Insurance Company(both domiciled in Van Wert, OH) and CMI Lloyds (Irving, TX).
The outlook for all ratings has been revised to stable fromnegative.
The rating actions are a result of the deterioration in Central'soperating performance in recent years, driven by underwriting lossesprimarily attributable to consecutive years of weather claims thatwere well above historical averages. The impacts of Hurricane Ike(2008) in Texas and Ohio, and two significant hailstorms in Oklahomathat generated nearly $30 million in net losses, are reflected inCentral's weather losses. As a result, underwriting and pre-taxoperating and losses have been reported for three consecutive years.In addition, net income has been unfavorable during the same time.
Partially offsetting these negative rating factors is Central'srisk-adjusted capitalization, which remains strong despite therecent reduction in surplus, and its geographic spread of risk.Also, Central maintains competitive advantages within its corepersonal and commercial segments, which have promoted excellentbusiness persistency. These advantages include high quality customerservice, strong agency relationships and enhanced internettechnology. Although Central has coastal exposure, managementmaintains a comprehensive reinsurance program in order to mitigatethe impact of catastrophic events on surplus.
The principal methodology used in determining these ratings isBest's Credit Rating Methodology -- Global Life and Non-LifeInsurance Edition, which provides a comprehensive explanation ofA.M. Best's rating process and highlights the different ratingcriteria employed. Additional key criteria utilized include: "RiskManagement and the Rating Process for Insurance Companies";"Understanding BCAR for Property/Casualty Insurers"; "CatastropheRisk Management Inc. Within the Rating Analysis"; "CatastropheAnalysis in A.M. Best Ratings"; "Rating Members of InsuranceGroups"; and "Natural Catastrophe Stress Test Methodology."Methodologies can be found at ambest.com/ratings/methodology.
A.M. Best Company is an insurance rating and information source.
More Information:
ambest.com
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