OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the issuer credit rating to “bbb” from “bbb+” and affirmed the financial strength rating of B++ (Good) of American Safety Risk Retention Group, Inc. (ASRRG) (headquartered in Atlanta, GA). The outlook for both ratings has been revised to negative from stable.
The ratings reflect ASRRG’s weaker-than-anticipated operating performance, declining surplus levels, limited business profile and management’s difficulty in successfully executing a business plan to build its core book of business as a stand-alone entity. Partially offsetting these negative rating factors are favorable risk-adjusted capitalization, management’s historical track record of producing profitable business in this niche specialty market and strong retention renewal rates. ASRRG’s risk-adjusted capitalization remains supportive of the current rating level and the company’s business risks.
Management is committed to ASRRG’s mission of providing insurance solutions to its members, and policyholders remain loyal to the program, which is evidenced by high retention levels. In an effort to improve operating results, cost reduction initiatives have been implemented.
The negative outlook reflects the continuation of underwriting losses over the near term as projected by management and the challenges the company faces in growing the business to improve underwriting results.
Factors that could result in a negative rating action include management’s inability to profitably grow the book of business or if underwriting or operating results decrease significantly and fall short of the business plan. Additionally, if risk-adjusted capitalization decreases significantly and does not remain supportive of the current rating level this would negatively impact the company’s rating.
Positive rating action could occur over the long term if ASRRG succeeds in meeting or exceeding its operating plan and successfully establishes itself as a provider of insurance solutions to protect specialty niche businesses against liabilities associated with environmental hazards. In order for a positive rating change to occur, the company will have to demonstrate its ability over time to generate profits resulting in increased capital growth and fortify its balance sheet through the enhancement of its business profile.
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