OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating to D (Poor) from B- (Fair) and the Long-Term Issuer Credit Rating to “c” from “bb-” of American Resources Insurance Company, Incorporated (ARIC) (Oklahoma City, OK). The outlook of these Credit Ratings (ratings) remains negative.
These rating actions are a result of continued weakening of the balance sheet due to a significant reduction in policyholders’ surplus from higher than expected underwriting losses in the latter half of 2017. A.M. Best categorizes ARIC’s balance sheet strength as very weak, its operating performance as marginal, its business profile as limited and enterprise risk management as marginal. The negative outlook reflects the downward earnings trend and A.M. Best’s anticipation that the balance sheet may continue to weaken before corrective actions take effect. There also is uncertainty about management’s ability to enhance capitalization while achieving profitable business growth over the longer term. Since emerging out of voluntary run-off in 2012, ARIC, whose focus is to provide an array of insurance products to small, commercial accounts in non-urban locales, has grown aggressively, especially in a large metropolitan area. In recent years, this business has been unprofitable.
In response, management has ceased writing business in this area and taken other measures to improve earnings. However, risk-adjusted capitalization is very weak and recent adverse reserve development has raised further concerns about overall reserve adequacy.
Further negative rating action could result if risk-adjusted capitalization continues to weaken or from continued unprofitable operating performance.
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