AM Best Revises Outlooks to Negative for Ategrity Specialty Holdings LLC and Its Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Ategrity Specialty Insurance Company (ASIC) and its affiliate, Sequentis Reinsurance Company Limited (Sequentis Re). Concurrently, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb-” (Good) of their holding company, Ategrity Specialty Holdings LLC (Ategrity). Ategrity and ASIC are domiciled in Wilmington, DE, USA, while Sequentis Re is domiciled in Hamilton, Bermuda.

The Credit Ratings (ratings) reflect Ategrity’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revision of the outlooks to negative reflects AM Best’s concern over recent underwriting volatility, which has resulted in pressure on the company’s operating performance and ERM fundamentals. While the company has made recent changes in senior management and is in the midst of executing a strategy with less inherent volatility, these changes still need to prove beneficial to the group’s underwriting performance in the intermediate term.

Ategrity exhibits a very strong level of balance sheet strength considering the execution risk inherent in the group’s operations. The group’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is considered strongest. Ategrity, which is in its third year of operation, has grown more than originally projected. Although capital levels have kept pace with the increased premium, the group has been subject to outsized catastrophe losses linked to their property exposure.

Prospective operating profitability is dependent on management’s ability to execute a revised business plan with a greater focus on lines of business with reduced catastrophe exposure and less inherent volatility. The group’s investment performance has been accretive to results.

Ategrity, through its U.S. operating subsidiary, ASIC, began writing excess and surplus lines of business in the fourth quarter of 2018. The group’s business profile is considered limited given its start-up status and shifting business plans, although management has strong existing industry relationships. The company is making enhancements to its ERM program, which are expected to lead to greater stability in its underwriting results.

Negative rating action could occur if Ategrity fails to improve its underwriting track record over the next cycle and falls short of projected performance. Continued significant underwriting volatility could also result in negative rating pressure on the assessment of the group’s ability to manage its risk exposures.

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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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.

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