OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “a+” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Antilles Insurance Company (Antilles) (San Juan, PR). The outlook of these Credit Ratings (ratings) has been revised to negative from stable.
The rating actions reflect a significant decline in Antilles’ policyholders’ surplus, primarily driven by significant stockholder dividends, unrealized capital losses and deterioration in underwriting performance in recent years. The deterioration in underwriting results has been driven by an elevated underwriting expense structure coupled with a significant reduction in the company’s premium volume. The decline in premium volume was due to a reduced assumption percentage on its reinsurance agreement for the Puerto Rico compulsory auto book of business. This assumed book has significantly declined over the past four years, from a high of $34 million in 2013 to $12 million in 2016. This contract ended at 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. Presently, the vast majority of the island’s dwelling book of business is run through the banking agencies, which requires an elevated commission rate inclusive of a profit commission. While this new product will refund a percentage of the premiums for good experience directly to the policyholder, A.M. Best has concerns with the company’s ability to reach the economy of scale required to make this a profitable product in this very challenging market.
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