AM Best Downgrades Credit Ratings of Alaska Timber Insurance, Inc.

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of Alaska Timber Insurance, Inc. (ATI) (Ketchikan, AK). The outlook of the Long-Term ICR has been revised to negative from stable, while the outlook of the FSR is stable.

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

The rating downgrades reflect ATI’s prolonged deterioration of net premiums written, which has led to increased pressure on the company’s key underwriting ratios. The company has reported premium declines in each of the past five years, stemming primarily from the reductions in NCCI loss costs that the company utilizes to calculate premiums. This trend has accelerated in recent years, with ATI reporting double-digit percentage decreases in premium in each of the past three years, including additional declines through the first half of 2022. The company has experienced higher volatility in its underwriting results after policyholder dividend and also has reported lower levels of overall profits. Finally, lower premiums also may make paying policyholder dividends more challenging, limiting their effectiveness as a retention tool.

The revision of the Long-Term ICR outlook to negative from stable reflects pressure on the balance sheet assessment from the aforementioned issues surrounding the company’s premium declines, if further deterioration in operating performance were to erode the company’s surplus level. ATI’s balance sheet strength is supported by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains at the strongest level, despite significant declines in surplus size. The ratings also reflect the company’s limited business profile due to its concentrated geography and limited product offerings.

Negative rating action could occur if there is material deterioration in risk-adjusted capitalization or surplus, or if the business profile narrows due to the company’s strategic changes.

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 Performance Assessments, 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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