TMCnet News
A.M. Best Downgrades Ratings of Specialty Risk of AmericaOLDWICK, 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 Specialty Risk of America (SPRISKA) (Springfield, IL). The outlook for the FSR has been revised to stable from negative, while the outlook for the ICR is negative. The rating downgrades reflect the deterioration in SPRISKA's operating results since 2010, and more importantly, the execution risk and challenges brought on by new business growth following the change in ownership and management. The rating actions also consider SPRISKA's expense ratio disadvantage driven by the high commissions paid to its immediate parent and managing general agent, Special Insurance Services, Inc. Other factors include SPRISKA's rapid premium growth in 2013, significant reduction in risk-adjusted capitalization since being acquired in 2009, management's planned product and geographic expansion, coupled with near-term growth initiatives, which are likely to place additional strain oncapitalization. Hence, the negative outlook on the ICR. Despite these actions, SPRISKA's ratings acknowledge the additional capital contribution made by its immediate parent in 2013, elimination of debt at the ultimate parent and the action plans implemented by management to return the company to profitability. In light of these broad changes, the preservation of the current ratings is contingent upon SPRISKA's near-term progress and management's success in reversing the recent adverse trends in profitability and capitalization. Negative rating actions are likely if there is a continuation of operating losses and/or capitalization levels fall below A.M. Best's expectations for the current rating level. The ratings are contingent upon SPRISKA's near-term progress and management's success in reversing the recent adverse trends in these areas. 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. For more information, visit www.ambest.com. Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. |
