OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating to B- (Fair) from B (Fair) and the issuer credit rating to “bb-” from “bb+” of Public Service Insurance Company (Chicago, IL) and its affiliates, Paramount Insurance Company (New York, NY) and Western Select Insurance Company (Chicago, IL) (collectively referred to as Magna Carta Companies). Additionally, A.M. Best has placed the ratings under review with negative implications.
The downgrade and the under review with negative implications status reflects the significant deterioration in operating performance in the last half of 2015, resulting partially from a $40 million development in reserves in the fourth quarter, having followed a $13.8 million charge at the end of the third quarter. This equated to almost $60 million in surplus losses for 2015, after adding in underwriting losses for the year.
Approximately $23.6 million of the fourth quarter reserve development was related to the workers’ compensation line of business. Management has an adverse development cover (ADC) on 100% of the 2013 and prior accident years, in place since 2014, to provide protection against further unexpected reserve developments. However, the group has yet to reach its retention of $385 million, (having just over $12 million of retention remaining), and begin to use the cover of $60 million for all lines of business. 2015’s development counting toward the ADC’s retention level was $36 million.
The ratings will remain under review with negative implications pending A.M. Best’s evaluation of management’s capital preservation plans.
This press release relates to rating(s) 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.
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