Following Seattle-based SAFECO’s announced loss reserve strengthening and subsequent discussions with management, A.M. Best Co. has affirmed the financial strength rating of A (Excellent) for the property/casualty companies while maintaining a negative outlook.
Additionally, the existing ratings and negative outlook remain in effect for SAFECO’s debt instruments. The group financial strength rating of A (Excellent) on SAFECO’s life/health companies remains unaffected.
The reserve strengthening that was based on an independent actuarial study of the property/casualty reserve adequacy resulted in a $240 million addition to reserves and was funded from the sale of SAFECO Credit. SAFECO increased loss reserves for construction defect, workers’ compensation and asbestos/environmental claims. During discussions with A.M. Best, SAFECO management clarified that this strengthening primarily applies to prior accident years and positions loss reserves well within the actuarial acceptable range.
The core operating profitability of the property/casualty businesses has been significantly impacted by weather-related losses and the unfavorable performance of its large commercial program business. The strategies and action plans implemented by management raise A.M. Best’s expectations that property/casualty operations will begin to generate more favorable levels of profitability.
However, A.M. Best remains concerned that property/casualty operations will be challenged to generate operating profitability commensurate with current rating levels as a result of continuing competitive market conditions and significant weather-related losses; therefore, the negative rating outlook is maintained.
Was this article valuable?
Here are more articles you may enjoy.