A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of B- (Fair) and the issuer credit rating of “bb-” of Greenville Casualty Insurance Company (Greenville) (Greer, SC).
A.M. Best said the revised outlook is a result of Greenville’s improved overall risk-adjusted capitalization, lower underwriting leverage measures and recently improved operating performance. These improvements are primarily due to corrective actions implemented by management, which included rate increases, increased upfront underwriting initiatives and a significant reduction in premium volume.
The ratings reflect Greenville’s historically volatile operating results, increased premium levels and significant variation in overall risk-adjusted capitalization as measured by its Best’s Capital Adequacy Ratio (BCAR). During the latest five-year period, Greenville has reported sizeable underwriting losses that have resulted in pre-tax operating losses and negative net income. As a result, the five-year average pre-tax and total returns on revenue and equity are negative and compare unfavorably to the private passenger non-standard auto composite. In addition, both the five-year combined ratio and operating ratio also lag the composite.
Partially offsetting these negative rating factors are Greenville’s recently improved underwriting results, lower underwriting leverage measures and increased overall risk-adjusted capitalization. These improvements are mainly due to management’s corrective actions, which have included rate increases, improved upfront underwriting tools allowing for better risk selection and a significant reduction in premium volume.
In future rating cycles, positive rating action is contingent upon the company’s ability to maintain adequate risk-adjusted capitalization and produce favorable operating results. Conversely, negative rating action could occur with a decline in overall risk-adjusted capitalization, a return to unfavorable operating performance or a material increase in underwriting leverage measures.