A.M. Best Downgrades Reliance, Reliance Disagrees with Rating Action

Following an evaluation of the group’s worse-than-expected first quarter underwriting results and unfavorable operating trends, A.M. Best Co. downgraded the financial strength rating of Reliance Insurance Group from “A-” to “B++.”

The group’s rating remains under review pending the finalization of the purchase agreement between Leucadia National Corp. and Reliance Group Holdings Inc. The downgrade applies to the group’s 13 domestic members, led by Reliance Insurance Co.

Reliance Group Holdings Inc. issued the following statement in response to A.M. Best’s downgrade: “Although Reliance’s ratings remain in Best’s ‘Secure Rating’ category and Reliance National (U.K.) Ltd. continues to have an “A-” rating, we strongly disagree with this action. It is inconsistent with the substantial progress Reliance has achieved strengthening its financial position. The completion of the sale of its Surety operation on May 31 has increased Reliance’s statutory capital by approximately $300 million. Reliance also has made solid progress executing a restructuring that is expected to achieve $80 million in annualized expense savings. In addition, on May 26, Reliance announced that it had entered into a definitive merger agreement with Leucadia National Corporation, consummation of which is subject to the satisfactory completion of Leucadia’s due diligence review and various required regulatory approvals.”

Overall, A.M. Best believes Reliance’s corrective actions are prudent and should improve long-term policyholder security. If the Leucadia transaction closes successfully, Reliance’s rating will stabilize in the “Very Good” range. However, if the transaction is not completed in a timely manner and satisfactory arrangements for debt refinancing are not made, A.M. Best said it would expect to further downgrade Reliance’s rating.

Topics AM Best