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FOR IMMEDIATE RELEASE
OLDWICK - JANUARY 18, 2017 01:52 PM (EST)
A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of the members of the GuideOne Insurance Companies (GuideOne).
The outlook changes reflect GuideOne’s continued exposure to weather and natural catastrophe losses which have negatively impacted results in recent years, and again in 2016. Additional factors considered include the execution risk associated with GuideOne’s product expansion efforts, its personal lines book run-off and volatile operating earnings over the last five-year period that turned negative in 2016 and contributed to a 9% surplus drop for year-end 2016. These recurring losses led to GuideOne’s decision in 2016 to discontinue writing personal lines business by year-end 2017. Another factor contributing to GuideOne’s surplus decrease in 2016 was a large one-time charge driven by the write-off of the group’s new personal lines computer system in development and employee severance for those who could not be re-assigned. The group will be rolling its book onto another insurance company’s paper by year-end 2017. Two major reasons for this change are the beleaguered performance of GuideOne’s personal lines book over the long-term and its effect on weather losses in the church book as an exposure multiplier as churches’ parishioners largely comprise the personal lines book.
Offsetting these negative rating factors are group’s experienced management team and the growing use of sophisticated predictive analytic modeling tools to achieve sustainable competitive advantages due to its prominent position within its niche market, particularly in terms of pricing, claims adjusting and loss control. GuideOne’s positive attributes are derived from a largely disciplined underwriting approach, conservative investment strategy, long-standing relationships with its agents and strong franchise recognition among the religious community. GuideOne’s excellent reputation, along with its dedicated service capabilities, has enabled it to sustain strong market penetration and maintain high policyholder retention rates. Furthermore, the group maintains a solid geographic diversification strategy, as no single state represented more than 9% of total direct premiums written at year-end 2015. Management has taken an active role in monitoring its catastrophe exposures, mitigating this risk through underwriting that includes geographic aggregation monitoring, applying wind deductibles and rate management, as well as a prudent reinsurance program.
A.M. Best does not expect to lower the ratings of the members of GuideOne in the near to mid-term. Negative rating actions would ensue if the group incurs further material losses in capitalization; has a severe reduction in the profitability within its core books of business; becomes unable to contain its exposure to catastrophic events with the preventative measures in place; or incurs a substantial adverse reserve development relative to surplus. Positive rating action could be taken if the group’s operating results improve relative to its composite and are consistent and sustained at that level over the long term.
The outlooks have been revised to negative from stable and the FSR of A (Excellent) and the Long-Term ICRs of “a” affirmed for the following members of the GuideOne Insurance Companies:
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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