Rating agency AM Best has revised the outlooks of GeoVera Insurance Group to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a”.
These Credit Ratings reflect GeoVera’s balance sheet strength, which AM Best has assessed as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The negative outlooks follow several years of outsized catastrophe losses, which has weakened GeoVera’s operating performance relative to similarly assessed companies.
The increased catastrophe activity includes almost 30 points in recent annual combined ratios on average.
The company budgets a sound catastrophe load annually, but recent related activity has generated losses exceeding budget. In addition, high acquisition costs incrementally increased the expense ratio as part of expansion initiatives introduced in 2015.
Although the reinsurance program has been effective in protecting GeoVera from large losses, the company has been impacted by increasingly frequent catastrophe and near catastrophe-level activity, resulting in volatile operating results.
AM Best expects prospective operating performance to improve as a result of management’s strategy to reshape the company’s portfolio and increase pricing on residential wind business while expanding the use of endorsements limiting exposure to weather-driven losses.