Oldwick, NJ -(BusinessWire)- A.M. Best has downgraded the Financial Strength Rating to B- (Fair) from B (Fair) and the Long-Term Issuer Credit Rating to “bb-” from “bb” of American Resources Insurance Company, Incorporated (ARIC) (headquartered in Mobile, AL). The outlook of these Credit Ratings (ratings) remains negative.
The negative rating actions reflect the further weakening of ARIC’s balance sheet, its ongoing unfavorable operating performance and historical inability to execute effective risk management practices. Surplus levels continue to decline while underwriting risk increases, resulting in high underwriting leverage and above average use of reinsurance to bring its net retained exposures to a manageable level. Earnings have also been strained by investments in technology and staff to support growth initiatives.
Since 2012, ARIC has provided commercial multi-peril, workers’ compensation, commercial auto and general liability coverage, primarily in small rural areas in Georgia, Alabama, Mississippi, Tennessee, Kentucky and other Southern states. Recent underwriting losses were attributed to larger non-rural commercial accounts produced in the metro Atlanta, Georgia area. ARIC also maintains exposure to claims related to black lung disease from a legacy workers’ compensation book of business provided in the past to the coal mining industry. In recent years, the run-off of these legacy claims has been favorable.
The negative outlook reflects pressure on the rating and A.M. Best’s opinion that the balance sheet will continue to weaken in 2017 due to further loss of surplus from operations.