OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to C (Weak) from A- (Excellent) and the Long-Term Issuer Credit Rating to “ccc+” from “a-” of American Capital Assurance Corp (ACAC) (St. Petersburg, FL). In addition, AM Best has placed these Credit Ratings (ratings) under review with negative implications.
The ratings reflect ACAC’s balance sheet strength, which AM Best assesses as very weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
These rating actions result from net underwriting losses from multiple severe weather events in the second half of 2020, particularly in Louisiana, which led to significant surplus loss and a severe negative impact to ACAC’s risk-adjusted capitalization on a standard and catastrophe-stressed basis, as measured by Best’s Capital Adequacy Ratio (BCAR). These diminished operating results are also indicative of product and geographic concentration concerns in the commercial property insurance book of business in Florida, Texas and Louisiana, calling into question the soundness and fundamentals of ACAC’s enterprise risk management program.
In response to these developments, ACAC management has communicated near-term strategic initiatives that are designed to immediately improve risk-adjusted capitalization and stabilize operating results.
The under review with negative implications status indicates continued pressure on the ratings and the heightened execution risk of strategic alternatives that ACAC’s management is currently pursuing. The ratings will remain under review pending further discussions with ACAC management regarding the progress of its strategic initiatives. Management expects these actions to be implemented, resolved and executed within the next 60 days. The negative implications status suggests that if these initiatives do not materialize, or if the timing of these initiatives are delayed, ACAC’s ratings could be lowered further.
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