OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to “bb+” from “bbb-” of Repwest Insurance Company (Repwest) (Phoenix, AZ). Both ratings have been placed under review with negative implications. Repwest is a wholly owned subsidiary of AMERCO [NASDAQ: UHAL].
These actions are a result of the significant strengthening in the fourth quarter of 2011 of Repwest’s loss reserves related to its discontinued excess workers’ compensation line of business, which substantially exceeded A.M. Best’s expectations. The reserve action resulted in notable deterioration of Repwest’s operating results (which have been profitable in recent years) in 2011 and generated a significant reduction in its reported policyholder surplus at year-end 2011.
The negative implications reflect A.M. Best’s concerns regarding the scope of the reserve strengthening and Repwest’s processes for monitoring and managing its excess workers’ compensation claims, as well as the potential for deterioration in the company’s financial condition should additional actions be required to bring the loss reserves to an adequate level. The ratings will remain under review pending A.M. Best’s discussion with Repwest’s management regarding its loss reserve position and claims practices.