OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Attorneys Insurance Mutual of the South, Inc. RRG (AIM) (headquartered in Birmingham, AL).
This rating action reflects the adverse operating performance during the latest five-year period. Recently, AIM experienced sizeable underwriting and operating losses due in large part to the negative impact on its swing rated reinsurance treaties. Furthermore, net investment income has declined annually due to the continuing low interest investment environment, thereby providing less support to generating adequate overall income for AIM.
Overall, the ratings of AIM reflect its excellent risk-adjusted capitalization, low underwriting leverage and conservative operating strategy. They also consider AIM's leadership position in providing lawyers professional liability insurance, primarily to sole practitioners and smaller-sized law firms in the state of Alabama.
These positive rating factors are partially offset by the company's deterioration in underwriting and operating results, which began in 2008, as well as the product and geographic concentration of risk. These factors increase its susceptibility to adverse economic, regulatory or legislative changes. Furthermore, the potential for additional negative results driven by the swing rated reinsurance treaty could impact surplus going forward.
AIM’s ratings could be downgraded as a result of continued adverse underwriting performance, such as from a decline in premium revenue, elevated loss costs due to claim severity and/or inadequate loss reserves, or from a decline in surplus.
The rating outlook for AIM could be revised upward if operating results become profitable for a sustained period while maintaining supportive 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. 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.
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