Rating agency AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb-” (Fair) from “bb” (Fair) of P&C holding company, Conifer Holdings.
The agency has also downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term ICR to “bbb-” (Good) from “bbb” (Good) of Conifer’s subsidiaries Conifer Insurance Company (CIC) and White Pine Insurance Company (White Pine).
The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the group’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management (ERM).
These rating actions follow Conifer’s reported full year earnings announced by management in early March and takes into consideration the group’s underwriting and operating losses which, along with prior years, have fallen below expectations.
Projections over the past few years have been marred by higher-than-expected loss costs and material adverse loss reserve development.
This rating action reflects a revision in AM Best’s assessment of Conifer’s ERM capabilities to “marginal” from “appropriate”, particularly as it relates to underwriting and reserving and the issues on executing strategy, meeting corporate objectives, organically growing capital and maximising returns.
AM Best recognises the various remedial actions taken by management over the years in terms of rebalancing its book of business, exiting certain territories, pruning underperforming business and refining pricing; however, these actions have not translated into meaningful improvement to date.
This, combined with the inability to grow organic surplus, places a strain on Conifer’s risk-adjusted capital. Although the balance sheet strength assessment remains adequate, the group’s level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), could be pressured if adverse loss reserve development continues.
