AM Best has downgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb” from “bbb+” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of The California Casualty Indemnity Exchange in San Mateo, Calif., and its wholly owned subsidiaries.
Its subsidiaries are: California Casualty General Insurance Company of Oregon; California Casualty & Fire Insurance Company; and California Casualty Insurance Company. All of the companies comprise the California Casualty Group (California Casualty).
The outlook of the FSR has been revised to negative from stable, while the out-look of the Long-Term ICRs remains negative.
The Credit Ratings (ratings) reflect California Casualty’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management.
The rating actions reflect a material decline in California Casualty’s capital position, resulting from less-than-optimal underwriting and operating results over several years, according to AM Best.
“The group’s adverse performance has been amplified by increased weather and catastrophe losses,” AM Best stated. “While capital is supportive on a risk-adjusted basis currently, certain balance sheet measures also are deteriorating as a product of operating performance decline. The ratings capture the benefits of the group’s extensive affiliations with various affinity trade groups that have provided it with a stable and mature policyholder base and excellent business persistency. The negative outlooks reflect AM Best’s concerns with the group’s ability to improve its underwriting performance and the ultimate impact that it may have on its risk-adjusted capitalization.”
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