A.M. Best Co. has downgraded the financial strength rating to ‘B+’ (Good) from ‘B++’ (Good) and issuer credit ratings to “bbb-” from “bbb” of Wisconsin Reinsurance Corporation and its wholly-owned subsidiary, 1st Auto & Casualty Insurance Company, together known as Wisconsin Reinsurance Group (WRG). Best has also revised the outlook for all of the ratings to negative from stable.
The rating actions reflect WRG’s “poor underwriting results over the recent five-year period, primarily driven by an accumulation of weather-related losses, large property losses, increased frequency private passenger automobile claims and an unresponsive reinsurance program,” Best explained. “While WRG’s risk-adjusted capitalization supports its current ratings, weak underwriting results and challenging macroeconomic conditions have adversely impacted the group’s operating performance in recent years.”
Best also noted that “although management is formulating several strategic initiatives to improve the group’s underwriting performance, successful execution of WRG’s business plans has yet to materialize into profitable results.” As a result, Best said it “remains concerned with the group’s volatile underwriting performance and potential further erosion of capital through 2012 as WRG continues to face ongoing exposure to property- and weather-related losses amid challenging macroeconomic conditions.
“WRG would need to improve its capitalization and its operating performance before the negative outlook likely would be removed. There will be additional pressure on the rating if the negative operating results experienced in 2011 continue in 2012, resulting in a loss of surplus and further deterioration in capitalization.”
Source: A.M. Best
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