AM Best: Credit Rating Outlook Negative for Atain Insurance Cos.

AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term ICRs of “a+” of Atain Specialty Insurance Co. and Atain Insurance Co., collectively referred to as Atain Insurance Cos. (AIC).

The outlook of the FSR remains stable. Both companies are headquartered in Farmington Hills, Michigan, and are members of the H.W. Kaufman Group.

The ratings reflect AIC’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The revised Long-Term ICR outlook is the result of AIC’s subpar operating results in 2016 and 2017, which ended the group’s enviable streak of net underwriting profit and placed the group’s overall profitability more in line with its peers.

Despite the recent underwriting setbacks, AIC’s risk-adjusted capitalization remains at the strongest level in each of the return periods.

Lastly, in terms of resources and services, AIC derives benefits from its affiliation with Burns & Wilcox Ltd., one of the largest independently owned insurance wholesalers in the United States and also part of the Kaufman Group.

AIC has the ability to participate on mature programs produced by its affiliated wholesaler, which over the years has proven to be profitable and a driver of its historical operating profitability.

AIC also benefited from synergies and substantial expense efficiencies afforded by the Kaufman Group.

These favorable ratings factors are offset partially by the aforementioned less-than-favorable operating performance experienced by AIC in recent years, a higher expense ratio that is more akin to its peers and the modest, albeit adverse, reserve development reported in accident years 2012 and 2013.

AIC is formed by the consolidation of Atain Specialty Insurance Co. and its wholly owned subsidiary, Atain Insurance Co. Both companies participate in an intercompany reinsurance pooling agreement.