AM Best Downgrades Credit Ratings of Grange Insurance Group Members

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings to “bbb+” (Good) from “a-” (Excellent) of Grange Insurance Association and its fully reinsured subsidiary, Granwest Property & Casualty, collectively referred to as Grange Insurance Group (Grange). The outlook of these Credit Ratings (ratings) has been revised to stable from negative. Both companies are domiciled in Seattle, WA.

The ratings reflect Grange’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 (ERM).

The downgrades reflect a business profile that has challenged underwriting performance and restricted surplus growth over a prolonged period of time. While the group writes in six states and several lines of business, concentrations exist as two states (Washington and California) represent nearly 80% of the portfolio with homeowners and personal auto being the dominant coverages provided. The group has reduced its exposure to wildfire losses substantially in recent years; however, the current book of business continues to limit surplus growth from core operations. Management continues to implement corrective actions in an effort to smooth prospective underwriting performance, which include rate increases, underwriting restrictions and emphasis on more profitable segments.

Grange’s overall balance sheet strength of very strong continues to be supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as key metrics that do not materially deviate from composite averages. In prior years, the group reported an unfavorable trend of deficient reserve development; however, corrective actions were implemented to strengthen the reserve position, which led to consistent favorable development. The marginal operating performance reflects underwriting volatility, which has resulted in underwriting and operating performance metrics that trail the private passenger standard auto and homeowners composite. Performance has been impacted by severe events, such as wildfires and winter storms, which have ultimately restricted surplus growth over the past five years. AM Best views Grange’s ERM to be appropriate, with stress testing and capital modeling performed for the top risks of the organization.

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