AM Best downgrades Citadel Re’s ratings
AM Best has downgraded the financial strength rating (FSR) to B++ (Good) from A- (Excellent) and the long-term issuer credit rating (Long-Term ICR) to “bbb+” from “a-” of Citadel Reinsurance Company.
The outlook of these ratings has been revised to stable from negative.
In addition, AM Best has revised the outlooks to stable from negative and affirmed the FSR of B+ (Good) and the Long-Term ICR to “bbb-” of American Millennium Insurance Company (AMIC), Citadel Re’s subsidiary. AM Best also has affirmed the FSR of B++ (Good) and Long-Term ICR of “bbb+” of Great Falls Insurance Company, of which Citadel Re is the majority shareholder. The outlook of these ratings is stable. Concurrently, AM Best has withdrawn the ratings of Great Falls as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings of Citadel Re reflect its balance sheet strength, which AM Best categorises as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings of AMIC reflect its balance sheet strength, which AM Best categorises as weak, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings of Great Falls reflect its balance sheet strength, which AM Best categorises as strong, as well as its marginal operating performance, limited business profile and appropriate ERM.
The rating agency said that the downgrade of Citadel Re reflects a declining trend in risk-adjusted capitalisation coupled with continuing marginal operating performance as adverse loss and loss adjusted expense reserve development has prevented a material accumulation of surplus over the most-recent five-year period.
However, AM Best noted that company projections indicate reserve stabilisation for the six-month period ended June 30, 2018, and into near-term periods. This potentially could become a positive rating factor should the reserve stabilisation be accompanied by growth in risk-adjusted capitalisation. AM Best added that the company reported a net profit in 2017.
