OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating (FSR) to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb-” from “bbb+” of Financial American Property and Casualty Insurance Company (FAMPAC) (Kerrville, TX). The outlook of the FSR has been revised to negative from stable, while the outlook of the Long-Term ICR remains negative. Concurrently, A.M. Best has withdrawn the Credit Ratings (ratings) as the company has requested to no longer participate in A.M. Best’s interactive rating process.
The downgrade of the Long-Term ICR reflects continued deterioration in FAMPAC’s underwriting results, with underwriting and operating losses reported annually since 2011. Such losses accelerated during 2015, resulting in substantial capital erosion; however, some improvement was seen in 2016. In A.M. Best’s opinion, it is unlikely that FAMPAC can achieve sustainable earnings in the near term, and that any further losses may place additional pressure on the current capitalization level. The principal drivers of these losses have been the company’s lack of scale and heavy expense structure, despite management’s efforts to reduce overhead costs in recent years.
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