AM Best Withdraws Credit Ratings of First American Property & Casualty Insurance Company and First American Specialty Insurance Company

OLDWICK, N.J.--()--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb” (Good) of First American Property & Casualty Insurance Company and First American Specialty Insurance Company, collectively referred to as First American PC Companies (FAPCC). The outlook of these Credit Ratings (ratings) is negative. These companies are domiciled in Santa Ana, CA. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect FAPCC’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

FAPCC primarily provides homeowners and renters insurance throughout the United States, with a geographic concentration in the Western region. The group’s operating results have been on a downward trend due to increased claim frequency and severity, which adds strain to its balance sheet strength. The group reported underwriting losses in 2017 and 2018, driven largely by the unprecedented California wildfire activity, which also caused pressure on its balance sheet strength. The fires losses diminished during 2019, but the group’s operating results remained unfavorable through year-end 2020. The group’s operating performance continues to be marginal; its surplus decreased an additional 5% since year-end 2019, which has added pressure to its balance sheet strength. Additionally, the parent company has entered into book transfer agreements with two third party insurers to transfer its property/casualty policies and expects the transfers to be completed by the end of the third quarter of 2022.

The negative outlooks reflect the potential for future loss emergence, loss reserve development and further deterioration in risk-adjusted capitalization. There is also concern relating to the book transfer agreements, their effects on senior leadership, employee turnover and risk management.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Kourtnie Beckwith
Financial Analyst
+1 908 439 2200, ext. 5124
kourtnie.beckwith@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Fred Eslami
Associate Director
+1 908 439 2200, ext. 5406
fred.eslami@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Kourtnie Beckwith
Financial Analyst
+1 908 439 2200, ext. 5124
kourtnie.beckwith@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Fred Eslami
Associate Director
+1 908 439 2200, ext. 5406
fred.eslami@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com