OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating to B (Fair) from B+ (Good) and the issuer credit rating to “bb” from “bbb-” of Nations Insurance Company (Nations) (Anaheim, CA). The outlook for both ratings has been revised to negative from stable.
The ratings downgrade and negative outlook are based on a material decline in Nations’ risk-adjusted capitalization in the fourth quarter of 2015 to below a level supportive of its ratings. This deterioration was driven by significant premium growth and a decline of policyholders’ surplus.
The ratings and outlook reflect Nations’ marginal risk-adjusted capitalization, recently unfavorable operating performance, significant fluctuations in premium growth and limited business profile. These negative rating factors are partially mitigated by management's local market knowledge of the private passenger non-standard auto market in California.
Nations’ negative rating attributes include historical underwriting variability, driven in part by significant fluctuations in premium growth. This was evident in 2015, when the company reported significant premium growth, and underwriting results, operating earnings and statutory surplus deteriorated. However, management has stated that they will be implementing two rate increases in early 2016, which they expect to slow policy growth and improve underwriting profitability. In addition, as a single-state non-standard private passenger auto writer in California, the company remains susceptible to adverse changes in the judicial, legislative and economic environments, as well as increased competition.
Negative rating actions could occur from a further decline in risk-adjusted capitalization and/or additional deterioration in operating performance.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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