OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating to C++ (Marginal) from B- (Fair) and the issuer credit rating to “b” from “bb-” of IFA Insurance Company (IFA) (Clark, NJ). The outlook for both ratings is negative.
The rating downgrades reflect IFA’s net losses and surplus decline noted at year-end 2013, attributable to realized and unrealized investment losses and unprofitable underwriting performance. These factors have resulted in elevated leverage measures and a continued deterioration in the company’s risk-adjusted capitalization.
The most recent financial results follow IFA’s unfavorable trend in operating performance in recent years, which has been negatively impacted by adverse trends in bodily injury and personal injury protection loss experience in the New Jersey personal automobile market, unfavorable changes to tax laws and Superstorm Sandy. In response, the company has continued to refine its underwriting criteria, implement rate increases and broaden its geographic spread. Furthermore, IFA has increased its use of reinsurance to better address catastrophic weather events and to provide surplus relief. Nonetheless, uncertainty continues to exist regarding its ability to improve operating performance and meet financial projections.
An additional downgrading of the ratings may occur if IFA continues to post operating results that deviate from its projections, leading to further deterioration of surplus and a decline in 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 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.