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A.M. Best Downgrades Ratings of Delta Lloyds Insurance Company of Houston Texas
[February 25, 2014]

A.M. Best Downgrades Ratings of Delta Lloyds Insurance Company of Houston Texas

OLDWICK, N.J. --(Business Wire)--

A.M. Best has downgraded the financial strength rating (FSR) to B++ (Good) from A- (Excellent) and issuer credit rating (ICR) to "bbb+" from "a-" of Delta Lloyds Insurance Company of Houston Texas (Delta Lloyds) (Houston, TX). The outlook for the FSR has been revised to stable from negative, while the outlook for the ICR is negative.

The rating downgrades primarily reflect Delta Lloyds' volatile operating performance due to a continuing unfavorable underwriting performance. This was particularly evidenced in 2011 and 2013 by a series of frequent and severe weather-rated events that resulted in sizable underwriting losses as well as a decline in overall risk-adjusted capitalization. As a single state property writer, Delta Lloyds' surplus and operating results are exposed to frequent and severe weather-related events. However, a prudent reinsurance program is maintained to partially mitigate this risk. In addition, management has on-going initiatives to improve overall performance, which include but are not limited to stricter underwriting guidelines and reductionin unprofitable business along with significant rate increases.

These negative rating factors are partially offset by Delta Lloyds' adequate risk-adjusted capitalization, moderate underwriting leverages, generally positive realized capital gains and favorable balance sheet liquidity. In addition, despite an unfavorable underwriting performance, Delta Lloyds continues to report loss reserve redundancies on both an accident and calendar year basis.

A.M. Best has maintained the negative outlook on the ICR. Pressure may be put on the ratings if Delta Lloyds has a continuation of underwriting losses and adverse operating results, which also could lead to weaker risk-adjusted capitalization. Removal of the negative outlook on the ICR is contingent upon Delta Lloyds' ability to reverse its adverse operating performance to a longer pattern of operating profitability while maintaining supportive risk-adjusted capitalization.

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

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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