A.M. Best Upgrades North Carolina’s Atlantic Casualty Ratings

A.M. Best removed from under review with positive implications and upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and the issuer credit rating (ICR) to “a” from “a-” of Atlantic Casualty Insurance Co. in Goldsboro, N.C. The outlook assigned to each is stable.

The ratings upgrade reflects Atlantic Casualty’s excellent risk-adjusted capitalization, improved operating performance, strong cycle management practices and solid profitability of its core book of business, as well as the support from its new parent, Auto-Owners Insurance Co.

The positive rating factors are derived from management’s efforts to improve performance by focusing on the company’s core general liability book of business, exiting unprofitable books of business and troublesome states and improving efficiencies through investments in technology. The ratings also recognize the support derived from its new parent company, Auto-Owners. This support includes reinsurance protection, an established enterprise risk management structure, underwriting support and lead generation within Auto-Owner’s 6,000-strong agency plant. While integration risk is present in any transaction, Auto-Owners’ support, along with Atlantic Casualty’s non-admitted insurance expertise, will help mitigate this risk.

As an E&S writer, Atlantic Casualty’s premium volume fluctuates through underwriting cycles. While underwriting and operating results have improved in recent years, the results have also varied. The company remains exposed to catastrophic weather-related losses despite property exposure that is moderate for its underwriting footprint.

Factors that could lead to downward rating pressure include: a change in Atlantic Casualty’s relationship to its parent or its support that affects the company’s operational stance; weakened operating earnings due to a severe reduction in the profitability of its core book of business; a material loss in capitalization; and substantial catastrophe losses that are outsized relative to the company’s peers and industry averages.