A.M. Best ‘Downgrades’ Vesta Insurance Group

Birmingham, Ala.-based Vesta Insurance Group Inc. has announced that A.M. Best has downgraded the company’s property casualty subsidiaries’ ratings to C++ (Marginal) from B (Fair).

Best’s Ratings reflect the A.M. Best Company’s opinion based on an evaluation of the company’s balance sheet strength, operating performance and business profile. Vesta is a holding company for a group of insurance companies that primarily offer property insurance in targeted states.

“We are disappointed with Best’s evaluation of the company, which we believe focuses on our current balance sheet,” David W. Lacefield, Vesta’s new president and CEO said. “While we recognize these balance sheet concerns, we have also seen improving operating results throughout 2005 stemming from rate increases and underwriting actions taken over the last several years, and our underlying business is now performing well.

“We have always paid our claims promptly and serviced our accounts and our franchise is valuable,” he said. “We are actively working with third parties to structure a transaction that will protect this long-term value for our shareholders and other constituents.”

Vesta’s statutory capital and surplus has declined over recent years due to higher than anticipated losses from the 2004 and 2005 hurricane seasons, combined with other declines in statutory surplus attributable to changes in accounting estimates. While Vesta successfully executed previous capital enhancement plans, which included the sale of its life insurance and automobile insurance operations, hurricane losses largely offset the surplus realized through those transactions.

Topics AM Best