CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK - JULY 15, 2021 12:41 PM (EDT)
AM Best has maintained the under review with negative implications status for the Financial Strength Rating (FSR) of C- (Weak) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “cc” (Weak) of American Millennium Insurance Company (AMIC) (Bridgewater, NJ), a wholly owned subsidiary of Citadel Reinsurance Company Limited (Citadel Re) (Hamilton, Bermuda). Additionally, AM Best has maintained the under review with negative implications status for the FSR of B (Fair) and the Long-Term ICR of “bb” (Fair) of Citadel Re.
AM Best downgraded the Credit Ratings (ratings) of AMIC and Citadel Re in February 2021 and maintained the under review with negative implications status following the downgrade of the ratings of AMIC in October 2020. These rating actions resulted from persistent net underwriting losses that continued into the second half of 2020 and negatively impacted the risk-adjusted capitalization of AMIC and Citadel Re given its direct ownership of AMIC. For AMIC, the impact of these unanticipated losses (net of reinsurance) resulted in a significant deterioration in surplus and notably, risk-based capital (RBC) levels, which were likely to prompt state regulatory actions. The “under review” status was pending the parent Citadel Re potentially recapitalizing AMIC’s balance sheet and its plans to raise more capital from outside investors. The negative implications for AMIC considered the pending regulatory pressures and the uncertainty related to AMIC as a going concern.
As of late June, 2021, AMIC’s regulator, the Department of Banking and Insurance (DOBI) of New Jersey, had agreed that Citadel Re will immediately recapitalize AMIC with $2.55 million in the first tranche, to correct the RBC to 200% or above, based upon the first quarter 2021 financial statements. The first tranche of the recapitalization has now been completed. DOBI expects another cash contribution of $3.65 million before the end of July (to push the RBC above 300%), following the schedules of Citadel Re’s fundraising.
AM Best is maintaining the under review with negative implications status for both AMIC and Citadel Re. Although some of the uncertainties incorporated in the previous under review status had been addressed through the completion of the first tranche of recapitalization, the planned external fundraising has not yet been completed and is likely to be delayed until August. Although Citadel Re reported a fair amount of interest from potential investors, the ultimate success of these efforts is far from certain. If the external fundraising is ultimately unsuccessful, AM Best expects continuing pressure from AMIC’s regulator (DOBI) while Citadel Re’s ratings could also be negatively impacted. AM Best plans to finalize the under review status of both Citadel Re and AMIC once the external funding is completed, which is expected to occur sometime in the third quarter of 2021.
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.