AM Best Downgrades Credit Ratings of Rockingham Insurance Company and Its Affiliates
April 17 2024 - 4:28PM
Business Wire
AM Best has downgraded the Financial Strength Rating
(FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer
Credit Ratings (Long-Term ICR) to “bbb+” (Good) from “a-”
(Excellent) of Rockingham Insurance Company and its pooled
affiliates: Rockingham Casualty Company and Rockingham Specialty,
Inc. The outlook of the FSR has been revised to stable from
negative while the Long-Term ICR is negative. All companies are
domiciled in Harrisonburg, VA, and collectively are referred to as
Rockingham Group.
These Credit Ratings (ratings) reflect Rockingham Group’s
balance sheet strength, which AM Best assesses as strong, as well
as its marginal operating performance, neutral business profile and
appropriate enterprise risk management.
The downgrade of the ratings reflects progressive erosion of the
group’s capital position, which has weakened key balance sheet
metrics. This position is driven by above-average net premium and
reserve leverage metrics that continue to pressure the current
balance sheet assessment. Despite the issuance of a $15 million
surplus note, the group’s capital has declined due to volatility in
underwriting results. Following surplus declines in 2021 and 2022,
capital erosion of slightly more than 21% in 2023 was driven by
continued elevated underwriting losses, influenced primarily by
weather-related losses and inflationary pressures. As part of the
group’s capital improvement strategy, Rockingham Group recently
completed in the first quarter of 2024 its exit from its
underperforming commercial business. Additional corrective actions
include mitigating reinsurance dependency and exposure and
concentration management, as well as strengthened reserving
practices. Collectively, these efforts may improve underwriting
leverage and ultimately strengthen the balance sheet. However, the
potential for future adverse loss reserve development remains a
rating concern.
The negative outlook on the Long-Term ICR reflects ongoing
pressure on the neutral business profile assessment given the
heightened volatility in operating results in recent years.
Operating performance in 2023 was particularly challenged by above
average weather-related losses, severe fire losses, continued
adverse loss reserve development and inflationary pressures. Also,
the expense ratio was skewed in 2023 by the group’s exit of
commercial business and higher reinsurance costs against a lower
premium base that drove this ratio upward. Management’s strategies
to improve performance include emphasis on rate adequacy and
tighter underwriting guidelines in the group’s ongoing personal and
specialty segments. While Rockingham Group is currently pursuing
additional capital management strategies to improve its overall
capital position, execution risk exists. Accordingly, the negative
outlook further reflects continued pressure on the balance sheet
strength assessment given the group’s elevated leverage metrics and
ongoing adverse reserve development trends.
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 Performance
Assessments, 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. For more
information, visit www.ambest.com.
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Maurice Thomas Senior Financial Analyst +1 908
882 2392 maurice.thomas@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
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1638 richard.attanasio@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com