A.M. Best: Outlook Negative for Imperial Fire and Casualty Insurance
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of Opelousas, La.-based Imperial Fire and Casualty Insurance Co. (Imperial).
The rating actions reflect Imperial’s negatively trending underwriting performance, which could not be offset by its declining investment income.
According to A.M. Best, this has led to pre-tax operating losses in four of the past five years. In addition, increased underwriting losses in 2011 and 2012, as reflected by combined ratios of approximately 108 percent and 110 percent, respectively, primarily caused by catastrophe and other weather-related events have hindered the company’s capital base.
This is reflected by an approximately 9 percent decline in surplus in 2011, followed by an 11 percent surplus loss in 2012, which has caused risk-adjusted capitalization to decline over the past year.
Additionally, Imperial’s core personal auto line of business has underperformed partly due to unfavorable results attributed to the legal environment in its relatively newly acquired Florida book, as well as recent adverse development primarily in Louisiana.
However, recent results in Florida have shown improvement. Additionally, weather-related losses primarily in the Texas and Louisiana property books of business, have led Imperial to undertake several underwriting initiatives including taking aggressive rate increases, placing a greater emphasis on risk management tools such as policy scoring and territorial pricing, and exploring additional capital resources.
To this end, Imperial recently has been acquired by Southport Lane, a New York-based private equity firm that provides Imperial with significant financial flexibility and greater access to capital.
However, despite the benefits to Imperial from a potentially significant increase to its surplus base and risk-adjusted capitalization, and the efforts to turn around its underwriting performance and operating results, the company still faces a challenging operating environment for 2013, A.M. Best said.
The negative outlook implies that a downgrading of the ratings could occur should there be a continued deterioration in the company’s risk-adjusted capitalization levels and/or a continuation of its negative operating performance trend.
Source: A.M. Best