AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Amerisure Mutual Insurance Co.(Amerisure Mutual), Amerisure Insurance Co. and Amerisure Partners Insurance Co. (Amerisure Partners), all of which operate through an intercompany pooling agreement and are collectively referred to as Amerisure Companies.
All companies are domiciled in Farmington Hills, Michigan.
These ratings reflect Amerisure Companies’ balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The revision in the outlooks to negative reflects an increase in Amerisure’s underwriting losses in 2019, driven by significant adverse development occurring on prior accident year claims reserves. Operating profitability has fluctuated in recent years as underwriting losses increased, impacted by reserve strengthening on prior year claims reserves.
Based on results reported through Sept. 30, 2019, Amerisure’s underwriting losses increased significantly, driven in part by adverse reserve development of approximately $52.9 million on prior year claims reserves.
Management has undertaken a number of corrective actions, including implementation of a loss portfolio transfer and adverse development cover (LPT/ADC) intended to contain the impact of legacy construction defect claims.
While AM Best expects the LPT/ADC to mitigate the impact of adverse development occurring from pre-2012 legacy construction defect claims going forward, current results have been impacted by adverse development on auto and general liability lines of business not covered by the LPT/ADC, as well as poor performance within the company’s Florida book of business.
Amerisure’s balance sheet is supported by having the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and the high-quality investment portfolio that has historically driven pre-tax earnings, somewhat offset by adverse reserve development.
The neutral business profile reflects the spread of risk across workers’ compensation and other commercial lines, although Florida, Texas, Georgia and Michigan together comprise approximately 52% of Amerisure’s premium volume.
AM Best views Amerisure’s ERM as appropriate for the scale, scope and complexity of the organization.
Source: AM Best
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