Press Release - APRIL 17, 2013
A.M. Best Downgrades Issuer Credit Rating of Consumers Insurance USA, Inc.
Charles M. Huber
Managing Senior Financial Analyst
(908) 439-2200, ext. 5122
Assistant Vice President
(908) 439-2200, ext. 5423
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 17, 2013
A.M. Best Co. has downgraded the issuer credit rating to bbb from bbb+ and affirmed the financial strength rating of B++ (Good) of Consumers Insurance USA, Inc. (Consumers) (Murfreesboro, TN). The outlook for both ratings has been revised to negative from stable.
The rating actions are primarily due to a significant weakening in Consumers risk-adjusted capitalization and unfavorable operating performance in recent years, which is compounded by continued adverse loss reserve development. As a result, policyholders surplus was down over 13% each of the last two years; however, underwriting leverage ratios are elevated and profitability ratios have fallen below industry averages and A.M. Bests expectations.
These negative rating factors are offset in part by Consumers history of favorable earnings, actions management is taking to improve profitability and favorable net income over the last nine months. The recent results were driven by rate increases, cancellation of underperforming agents, fewer storm losses and a more stable reserve development. The negative outlook is due to the companys weakened capital position and history of significantly increasing reserves on prior accident year claims as well as the ongoing challenges for management to improve operating results in the near term.
Additional negative rating actions could occur if Consumers underwriting losses or unfavorable loss reserve development continues or if there is a further decline in its risk-adjusted capitalization. However, the ratings would be stabilized by a favorable earnings trend that leads to capital appreciation.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the worlds oldest and most authoritative insurance rating and information source.