OLDWICK, N.J.--(BUSINESS WIRE)--Please replace the release dated August 15, 2018 with the following corrected version due to revisions to the second sentence of the fourth paragraph.
The corrected release reads:
A.M. BEST DOWNGRADES CREDIT RATINGS OF ANTILLES INSURANCE COMPANY
A.M. Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a-” from “a” of Antilles Insurance Company (Antilles) (San Juan, PR). The outlooks of these Credit Ratings (ratings) remain negative.
The ratings reflect Antilles’ balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating actions reflect a significant decline in Antilles’ policyholders’ surplus, primarily driven by substantial stockholder dividends, unrealized capital losses in 2014 and 2015 and deterioration in underwriting performance in the most recent years. The deterioration in underwriting results was largely due to the company’s high underwriting expense structure, along with a significant decline in its premium volume. The reduction in premium volume was driven by a reduced assumption percentage on its reinsurance agreement for the Puerto Rico compulsory auto book of business. This assumed book has declined over the past five years from a high of $34 million to $0 in 2017 as the contract ended in year-end 2016.
To counter the loss of the compulsory auto book of business, Antilles has developed a new dwelling product that will be distributed mainly through independent agencies as opposed to the current bank-owned agencies. Currently the vast majority of dwelling business in Puerto Rico is run through banking agencies, which generally reflects an elevated commission rate inclusive of profit commission. This new product will refund a percentage of the company’s dwelling premiums directly to its policyholders based on favorable loss experience. However, A.M. Best has some concerns with Antilles’ ability to reach the economies of scale required to make this a profitable product in this challenging marketplace.
There may be additional negative rating action if there is further decline in operating results, or a material weakening in Antilles’ risk-adjusted capitalization. Additional contraction in policyholders’ surplus or if the new dwelling book of business fails to improve underwriting performance also would create negative rating pressure. Positive rating action, most likely in the form of an outlook revision to stable, could occur if underwriting and operating performance stabilizes in the near term.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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