OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of International Fidelity Insurance Company and its subsidiary, Allegheny Casualty Company. Both companies are domiciled in Newark, NJ, and are collectively referred to as IFIC Group.
The revised outlooks reflect A.M. Best’s opinion that IFIC Group’s management has taken significant and beneficial actions toward implementing effective internal controls as part of an overall effort to develop a comprehensive enterprise risk management (ERM) framework. The outlooks were revised to negative in 2014 following discovery by the group’s management of material weaknesses in its internal controls, which ultimately had an adverse impact on capitalization and operating performance.
The ratings reflect IFIC Group’s strong balance sheet, solid underwriting and overall operating results, as well as the group’s expertise in its contract, commercial, subdivision, bail and non-standard surety lines of business. The ratings are supported by the longevity of the group’s business model through commitment and service devoted to their niche market.
Partially offsetting rating factors include the group’s limited business scope with writings reserved to surety- and fidelity-related business, as well as competitive market conditions within the commercial and contract surety business. Further, the IFIC Group’s underwriting expense ratio and investment earnings continue to fall short of its peer composite. As a result, the group operates under tight margins. Of further concern are volatile total return measures over the most recent five-year period, driven by realized and unrealized investment losses.
There is an ongoing effort to implement a series of changes to the group’s ERM structure and return measures. Updated practices are revised governance policies, as well as efforts to improve investment yields. Revisions to the group’s ERM began in mid-2014, and the benefits and effectiveness of those programs are expected to continue.
Negative rating action could occur if risk-adjusted capitalization materially weakens. Negative rating action also could occur if operating performance were to trend unfavorably or if the group’s ERM practices are not effective, exhibited by operational failures.
This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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