Oldwick, NJ -(BusinessWire)- A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of B (Fair) and the issuer credit rating of “bb+” of Repwest Insurance Company (Repwest) (Phoenix, AZ). Repwest is a wholly owned subsidiary of AMERCO [NASDAQ:UHAL], a publicly traded holding company that is also the parent of U-Haul International, Inc. (U-Haul).
The revised outlook reflects Repwest’s strong risk-adjusted capitalization, several years of improved operating results and expectations of stabilized underwriting performance prospectively. The expectation of improved future performance reflects the favorable results of the group’s U-Haul-related business which has produced a five-year average pure loss ratio that outperforms its industry composite average.
Offsetting these positive rating factors is the adverse loss reserve development associated with Repwest’s discontinued excess workers’ compensation business, which was particularly substantial in 2011 and had a significant negative impact on the group’s calendar-year underwriting results for that year. The substantial reserve strengthening that took place in 2011 resulted in a decline in risk-adjusted capitalization and significant deterioration in results that year. Further impacting Repwest is its historically high cost structure, mainly driven by commission expense.
Future positive rating movement could result from a demonstration of stabilized underwriting results over several consecutive years. Negative rating actions could result if there is deterioration in Repwest’s underwriting performance or a significant erosion of its capital base.