Kinston, N.C.-based Discovery Insurance Co.received a financial strength rating upgrade.
A.M. Best Co. upgraded Discovery to B- (Fair) from C++ (Marginal) and the issuer credit rating to “bb-” from “b+.” The outlook for the ratings is stable.
These rating actions reflect Discovery’s adequate capitalization and favorable operating performance in recent years. The improvement in risk-adjusted capitalization and operating performance has been driven by the rate increases obtained on the company’s affiliated workers’ compensation business, the reduction in written premiums and the exit from writing third party workers’ compensation business.
Offsetting these positive rating factors is the historical volatility of operating results partially attributed to adverse loss reserve development and the subsequent impact on risk-adjusted capitalization.
The outlook reflects management’s initiatives to return Discovery to profitability, improving loss reserve development trends and expectations for capitalization to remain supportive of the company’s risks. Nevertheless, Discovery’s capitalization remains sensitive to potential adverse loss reserve development as well as premium and reserve growth, which could also impact its operating performance.
Source: A.M. Best
Topics AM Best
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