AM Best has placed under review with negative implications the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) of GuideOne Insurance Company and its wholly owned subsidiaries.
According to AM Best, these ratings have been placed under review with negative implications given its concerns with a significant decline in surplus and risk-adjusted capital ratios.
“GuideOne has taken initial steps to seek out capital solutions and the transaction would likely take the form of an affiliation or mutual holding company merger combined with reinsurance and/or other capital guarantees,” AM Best explained.
The rating agency noted that a successfully executed transaction could mitigate a material decline in GuideOne’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR).
The decline was caused by a significant deterioration in surplus in 2022 driven primarily by a net loss, along with unrealised capital losses, said AM Best.
The rating agency continued, “The net underwriting loss reflects significant prior-year reserve development of GuideOne’s direct, open market E&S Specialty business that has now been exited, as well as current accident year reserve strengthening due to rising loss costs and an increase in claims frequency, particularly in the aforementioned E&S business.”
AM Best noted that GuideOne’s current BCAR score has weakened in relation to its current rating level.
The ratings will remain under review with negative implications while AM Best monitors the progress of the aforementioned transaction and has the opportunity to fully assess the impact of the transaction, once fully implemented.
AM Best stated that failure to execute on the transaction in a timely manner will likely result in a downgrade of the balance sheet assessment and the overall rating of the company.
