April 04, 2013 01:30 PM Eastern Daylight Time
A.M. Best Revises Outlook to Negative for Kentucky Growers Insurance
Company
OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to negative from stable and
affirmed the financial strength rating of B++ (Good) and issuer credit
rating of ”bbb” of Kentucky Growers Insurance Company (Kentucky
Growers) (Lexington, KY).
“Risk Management and the
Rating Process for Insurance Companies”
The revised outlook is based on Kentucky Growers’ unprofitable
underwriting performance in recent years. Through 2012, the company’s
five-year averages for pre-tax return on revenue and total return on
surplus were negative. Kentucky Growers has recorded net underwriting
losses in excess of $3 million in four of the last five years, including
in 2012, primarily due to frequent and severe weather-related events. As
a result, the company’s five-year average pure loss ratio significantly
exceeded the average of the personal property composite, and surplus
declined by 30% over the last five years.
Partially offsetting Kentucky Growers’ negative rating factors are its
local market presence and long-standing agency relationships. Also,
despite the recent underwriting losses, the company’s risk-adjusted
capitalization remains supportive of its ratings. Kentucky Growers has
implemented numerous rate modifications that it expects will result in
improved operating performance going forward. In addition, Kentucky
Growers has purchased increased reinsurance protection under its
aggregate excess of loss treaty.
The company will have to demonstrate sustained improvement in its
operating performance while maintaining an appropriate level of
risk-adjusted capitalization for the negative outlook to be revised.
There is potential for Kentucky Growers’ ratings to be downgraded if its
unfavorable operating performance continues or if capitalization is
weakened.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
“Catastrophe Analysis in A.M. Best Ratings”; “Risk Management and the
Rating Process for Insurance Companies”; and “Understanding BCAR for
Property/Casualty Insurers.” Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
RESERVED.
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