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FOR IMMEDIATE RELEASE
OLDWICK - JUNE 25, 2015 01:21 PM (EDT)
A.M. Best has downgraded the financial strength rating to B (Fair) from B+ (Good) and the issuer credit rating to "bb" from "bbb-" of Galen Insurance Company (Galen) (St. Louis, MO). The outlook for the ratings was also revised to negative from stable.
The downgrade reflects a significant drop in risk-adjusted capitalization and loss of policyholders' surplus from poor operating results in 2014 and in the first quarter of 2015. This was mainly due to unexpected adverse claims development, which also produced a significant increase in ceded premium on a swing rated reinsurance treaty. The combination resulted in a decrease in risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), to a level that no longer supported the prior rating and, in A.M. Best's opinion, is not supportive of the company's aggressive growth or the potential for further adverse development. Galen's management has stated that they are tempering their growth plans for the time being, strengthening internal controls and evaluating potential capital alternatives.
The negative outlook reflects the possibility that the rating could be lowered further if BCAR continues to drop or if underwriting losses persist. However, the ratings may be stabilized or positive rating actions may occur with strengthening of the balance sheet and a prolonged period of stable, profitable operating performance. Furthermore, continued strong growth would first have to be supported by additional capital.
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.
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