AM Best Revises Outlooks to Negative for Members of Rockingham Group

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 of “a” (Excellent) of Rockingham Insurance Company and its pooled affiliates: Rockingham Casualty Company and Rockingham Specialty, Inc. All companies are domiciled in Harrisonburg, VA and are collectively referred to as Rockingham Group or the group.

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

The negative outlooks reflect the decline in the group’s risk-adjusted capitalization and overall balance sheet strength as a result of a significant increase in the group’s underwriting leverage measures. Additionally, the negative outlooks reflect the volatility in underwriting and operating performance over the past three years that compare unfavorably with the group’s peers.

The group’s balance sheet strength is supported by its very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), conservative investment portfolio, favorable loss reserve development and comprehensive reinsurance program with strong partners.

Although the group’s operating performance is assessed currently as adequate, it is at the lowest quartile of adequate-rated companies. The group’s operating performance has declined since 2018 and its overall performance is negative when viewed on a five-year period ending 2021. The deterioration in operating results has been driven by increased underwriting losses related to a variety of causes, including weather-related events, increased auto and homeowner severity, adverse loss reserve development on some specialty programs, increased commission expenses related to the new commercial and specialty programs and increased overhead expenses related to systems implementation and upgrades. Management has taken actions to stabilize underwriting results, which include significant rate increases, re-underwriting its book of business and reducing the growth of new business in 2022.

Additionally, the group continues to expand into lines of business and states, which supports the neutral business profile assessment. Further, formalized risk management policies and procedures support the ERM assessment of appropriate.

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.

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