[November 28, 2012]

A.M. Best Withdraws Ratings of Gramercy Insurance Company

A.M. Best Co. has downgraded the financial strength rating to D (Poor) from C++ (Marginal) and issuer credit rating to "c" from "b" of Gramercy Insurance Company (GIC) (Dallas, TX). The outlook for both ratings is negative. Concurrently, A.M. Best has withdrawn the ratings as GIC has requested to no longer participate in A.M. Best's interactive rating process.

The rating actions reflect the worsening of GIC's already weak capitalization through the third quarter of 2012, driven by ongoing underwriting and operating losses. As a result, policyholders' surplus has declined by 73%, which has driven underwriting leverage to very high levels. The heavy underwriting losses were partially due to an additional $3.7 million of adverse loss reserve development during 212, primarily on the 2011 and pre-2010 accident years. The ratings also reflect GIC's elevated dependence on reinsurance to support its operations.

The outlook reflects A.M. Best's view that GIC may cease operations in the near term due to lack of capital support.

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. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies" and "Understanding BCAR for Property/Casualty Insurers". Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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