AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Ratings to “bb” (Fair) from “bbb-” (Good) of Civil Service Employees Insurance Company and CSE Safeguard Insurance Company, which together comprise CSE Insurance Group (CSE Group) in Walnut Creek, Calif.
The outlook of the Credit Ratings (ratings) is negative. Concurrently, AM Best has withdrawn the ratings as CSE Group has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect CSE Group’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, very limited business profile and marginal enterprise risk management (ERM).
The rating downgrades reflect changes to CSE Group’s business profile and balance sheet strength assessment following the notification that it has been effectively placed into run-off. Following CSE Group’s decision to exit the market and no longer write new business as of October 9, as well as non-renew existing business over the next 12 months, the group’s business profile is assessed as very limited based on material changes in business strategy, product offerings and earnings capacity, according to AM Best.
Although the group currently maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), policyholders’ surplus has continued to decline, down 25% through the first six months of 2023, due to significant underwriting losses. In addition, the balance sheet strength assessment also reflects inconsistent loss reserve development, negative operating cash flow and declining admitted assets to fund operational needs, according to AM Best.
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