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FOR IMMEDIATE RELEASE
OLDWICK - JUNE 27, 2016 09:48 AM (EDT)
A.M. Best has downgraded the financial strength rating to C++ (Marginal) from B- (Fair) and the issuer credit rating to “b” from “bb-” of Public Service Insurance Company (Chicago, IL) and its affiliates, Paramount Insurance Company (New York, NY) and Western Select Insurance Company (Chicago, IL) (collectively referred to as Magna Carta Companies). Additionally, the ratings have been removed from under review with negative implications and assigned negative outlooks. Concurrently, A.M. Best has withdrawn the ratings in response to the company’s request to no longer participate in A.M. Best’s interactive rating process.
The downgrade reflects the deterioration in operating performance in the last half of 2015, resulting partially from a $40 million development in reserves in the fourth quarter, having followed a $13.8 million charge at the end of the third quarter. This equated to a nearly $60 million surplus loss for 2015, including underwriting losses. Approximately $23.6 million of the fourth-quarter reserve development was related to the workers’ compensation line of business. Management has had an adverse development cover (ADC) in place since 2014 on 100% of the 2013 and prior accident years to provide protection against further unexpected reserve developments. However, the group has yet to reach its retention of $385 million (having just $12 million of retention remaining) to begin to use the cover of $60 million for all lines of business. The development in 2015 counted $36 million toward the ADC retention level.
With the purchase of a Loss Portfolio Transfer (LPT) from Technology Insurance Company, which protects the company for all commercial business in accident years 2014 and 2015, Magna Carta now has some type of protection for all of its business except the current accident year. Surplus currently is $50 million after the first-quarter LPT purchase. While protected, the group’s surplus now is less than its surplus note responsibility, although after taking all of the various adjustments into consideration, adjusted surplus still outpaces the note.
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 see A.M. Best’s Recent Rating Activity web page.
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