OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” from “a” of New York Marine and General Insurance Company (New York, NY) and its wholly owned subsidiaries, Gotham Insurance Company (New York, NY) and Southwest Marine & General Insurance Company (Scottsdale, AZ) (collectively referred to as (ProSight Specialty Group). The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has downgraded the Long-Term ICR to “bbb-” from “bbb” of ProSight Global Holdings Limited (ProSight Global Holdings). In addition, A.M. Best has downgraded the Long-Term ICR to “bbb-” from “bbb” and the Long-Term Issue Credit Ratings to “bbb-” from “bbb” on the $140 million 7.5% senior unsecured notes, due November 2020 and the $25 million 6.5% senior unsecured notes, due November 2020 of ProSight Global, Inc. (ProSight Global). The outlook of these ratings is stable.
The rating downgrades are reflective of a material downturn in operating results in 2015 and 2016, elevated reserve leverage measures, limited organic surplus growth over the recent five-year period and operating results that are no longer commensurate with the previous rating level. The downturn in operating performance has been attributable primarily to adverse loss reserve development in commercial auto liability (2015 and 2016).
Conversely, ProSight Specialty Group’s ratings reflect its supportive risk-adjusted capitalization, its strong market niche position in its core specialty lines and generally favorable long-term loss ratio that compares favorably with the composite. In addition, management has committed itself to improving underwriting performance by replacing its less profitable niches with ones that it believes can be written profitably throughout market cycles. Also, after ceding a sizable volume of profitable U.S. business to the organization’s U.K. operations for more than four years, the profit associated with that business did not benefit the group’s U.S. entities. The group’s U.S. entities will retain that business along with all associated profit going forward. In addition, past U.S. business ceded to Lloyd’s was repatriated to ProSight Specialty Group through a commutation agreement whereby the group terminated all sessions to Syndicate 1110, and the group agreed to commute all reserves as of March 31, 2017. While this further increased reserve leverage, a $50 million capital contribution and the additional investment income that will be generated from the consideration has, and should mitigate that impact going forward.
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