OLDWICK, NJ–(BUSINESS WIRE)–AM Best downgraded Aegis Security Insurance’s financial strength rating from A- (Excellent) to B++ (good) and the issuer’s long-term credit rating to “bbb+” (good) from “a-” (Excellent) Company (Aegis) (Harrisburg, PA). At the same time, AM Best maintained status under review with negative implications on these credit ratings (ratings).
The ratings reflect the strength of Aegis’ balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal management of business risks.
The downgrades to the rating reflect a revision of the company profile assessment from neutral to limited given the company’s continued fluctuations in distribution agreements, product offerings, business plans whatever. little incoherence and the geographical concentration of risks.
The maintenance of the status under review with negative implications is mainly due to the reduction of the risk-adjusted capitalization of the company at the end of the year 2021. The reduction was motivated by a considerable increase in the underwriting leverage due to the assumption of a real estate business portfolio, coupled with a decline in surplus of almost 7% due to weather-related claims and the corresponding net underwriting loss. The continued status under review with negative implications also recognizes efforts to improve risk-adjusted capitalization with the sale of its wholly-owned subsidiary, American Sentinel Insurance Company. A definitive agreement has been signed with an expected closing date of late June or July 2022. The sale is expected to result in a net gain and subsequent improvement in risk-adjusted capitalization. In addition, management indicated a likely reduction in premium underwriting given various re-underwriting initiatives and the continued decline of one of its current distribution channels. In the absence of capital improvement, ratings will likely be further downgraded. The ratings will remain under review pending the closing of the sale of the subsidiary and AM Best’s review of the full impact of these transactions.
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