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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 16, 2015 02:18 PM (EDT)
A.M. Best has downgraded the financial strength rating to C (Weak) from C++ (Marginal) and the issuer credit rating to "ccc" from "b" of Peachtree Casualty Insurance Company (Peachtree) (Longwood, FL). Both ratings have been removed from under review with negative implications and assigned a negative outlook.
The rating downgrades are the result of the reduction in Peachtree's risk-adjusted capitalization following recent volatility in its underwriting performance. Significant underwriting losses in 2014 have contributed to a sharp decline in Peachtree's policyholder surplus, which resulted in elevated underwriting leverage measures and risk-adjusted capitalization that is no longer supportive of its previous rating level.
This recent deterioration was driven by rapid new premium growth in Texas, adverse loss experience in Florida, Texas and Georgia, as well as increased claims overhead and underwriting expenses.
In response to the 2014 underwriting results and weakened capital position, management has taken corrective actions, which include reductions in certain unprofitable auto programs, significant rate increases, tightening of underwriting guidelines, producer terminations and better control of claims overhead and underwriting expenses. Furthermore, Peachtree recently received a capital infusion from its parent company, in the form of a surplus note.
The negative outlook further reflects the potential for continued operating losses and the uncertainty that management's initiatives will return the company to operating profitability over the intermediate term.
There is potential for further negative rating action if Peachtree fails to improve its operating performance, along with its policyholders' surplus and risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio. Stabilization of the outlook is contingent upon consistent and improved operating performance.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.