Analysts at AM Best say credit rating activity was mixed over the first half of 2020 with upgrades mostly outnumbering downgrades.
Nevertheless, the rating agency found that the percentage of upgrades for US P&C carriers’ Issuer Credit Ratings through mid-year 2020 were down modestly, to 5.1% of rating actions, compared with 6.2% in first-half 2019.
Approximately 25% of the 17 upgrades over the six-month period were due to affiliations or mergers.
Meanwhile, downgrades decreased to 3.3% of total actions, down from 7.1% in the first half of 2019.
Affirmations were the most common rating action, at 81.3%, reflecting what AM Best sees to be overall stability in the US P&C industry.
Despite this, analysts acknowledged that the industry continues to face significant challenges, including elevated non-weather related water losses, catastrophic weather activity, uncertainty over COVID-19, and system implementations.
Rating upgrades were driven primarily by increases in risk-adjusted capitalization, strong results relative to operating performance and the appropriateness of companies’ enterprise risk management (ERM).
AM Best noted that the number of ratings placed under review in first-half 2020 nearly doubled to 16 from nine in the first half of 2019, with 50% having negative implications, compared to 33% previously.
Over the first half of 2020, 81.9% of the P&C industry’s rating outlooks were stable, down modestly from 83.2% for the same period in 2019.
AM Best maintains a stable market segment outlook on the personal lines segment of the P&C industry and the global reinsurance industry, and a negative outlook on the commercial lines segment, reflecting the macroeconomic fallout from COVID-19.
