A.M. Best Special Report: Credit Rating Upgrades Outpace Downgrades for U.S. Property/Casualty Carriers in 2016

OLDWICK, N.J.--()--Credit rating activity in 2016 turned positive as upgrades outpaced downgrades for the U.S. property/casualty (P/C) industry, despite facing headwinds that include pressure on underwriting results and the low investment yield environment, according to a new A.M. Best special report.

The Best’s Special Report, titled, “Upgrades Outpace Downgrades for Property/Casualty Carriers in 2016,” states that the number of Long-Term Issuer Credit Rating (Long-Term ICR) upgrades, as a percentage of all rating actions on P/C carriers, increased to 7.3% in 2016, compared with 5.2% in the previous year. Conversely, the number of Long-Term ICR downgrades fell to 4.6% compared with 6.7% in 2015 of total actions on rating units.

In 2016, A.M. Best took action on the Long-Term ICRs of 786 rating units, a small decrease from the prior year. Consistent with the prior four years of rating actions, the overwhelming majority (81.9%) were affirmations.

Overall, the percentage increases on rating upgrades was driven by individual company trends of positive operating performance over several years, steady growth in risk-adjusted capitalization that supported higher rating levels and acquisition/affiliation with more highly rated companies and groups.

The following are some other highlights from the report.

  • The number of ratings placed “under review” in 2016 was 32, compared with 33 in 2015, and reflects material changes in operating performance, mergers and acquisitions and reorganizations through pooling and reinsurance arrangements;
  • The commercial lines segment recorded 28 upgrades compared with 20 downgrades, while in the personal lines segment, upgrades totaled 26 compared with 15 downgrades; and
  • Just over three-quarters of the U.S. P/C industry’s ratings carried a stable outlook in 2016, a modest decline from 2015. Contributing to this decline was the continued higher amount of negative outlooks relative to positive outlooks.

To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=258420.

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

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Lewis DeLosa, +1 908-439-2200, ext. 5529
Financial Analyst
lewis.delosa@ambest.com
or
Kevin Dorsey, +1 908-439-2200, ext. 5401
Senior Financial Analyst
kevin.dorsey@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Lewis DeLosa, +1 908-439-2200, ext. 5529
Financial Analyst
lewis.delosa@ambest.com
or
Kevin Dorsey, +1 908-439-2200, ext. 5401
Senior Financial Analyst
kevin.dorsey@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com