A.M. Best Removes From Under Review With Negative Implications and Downgrades Credit Ratings of One Alliance Insurance Corporation
OLDWICK, N.J.--(BUSINESS WIRE)--Jun 12, 2018--A.M. Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb+” from “bbb-“ of One Alliance Insurance Corporation (One Alliance) (San Juan, Puerto Rico). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings were placed under review with negative implications on Feb. 1, 2018, due to the uncertainty surrounding a previously planned capital contribution. In addition, the level of transparency regarding the reasoning for the delay added to A.M. Best’s concerns, as well as willingness of the shareholder to support future anticipated growth.
The rating actions are due to the significant decline in the company’s policyholder surplus since the start of operations, driven by poor underwriting and operating performance. Additionally, the rating actions reflect the limited financial flexibility and the uncertainty regarding the execution of its business plan and support of its primary shareholder.
The ratings reflect One Alliance’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
One Alliance’s balance sheet strength is reflective of its conservative investment portfolio, solid liquidity measures and comprehensive reinsurance program. These positive factors are offset by the company’s limited financial flexibility and scale of operations.
One Alliance’s operating performance is categorized as marginal. As a relatively new startup (late 2015), its operating earnings and return measures are distorted and provide limited insight. The company reported an underwriting and operating loss in each of the first two full years of operations. However, in each year, the company’s results have improved due to its increased premium volume, as it tries to reach economies of scale. The management team scaled back its 2018 premium growth plan based on the lack of financial support. In 2017, the company’s underwriting performance was impacted by the two major hurricanes (Maria and Irma), which contributed nearly 25 points to its combined ratio.
One Alliance’s business profile is limited due to its geographical concentration in Puerto Rico, which exposes results to weather-related events, overall macro-economic conditions on the island and to regulatory and competitive market challenges. The company’s market position is supported by a tenured management team with a long-standing track record. A.M. Best acknowledges the appropriate ERM program for the One Alliance organization, as they have developed a formalized process with risk identification, management and mitigation. The company has done well with the operational disruption following the two major hurricanes affecting the island, both immediately after the storms and in the months that followed.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s web page. For additional information regarding the use and limitations of Credit Rating opinions, please view . For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view .
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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CONTACT: A.M. Best
Brian O’Larte, +1 908-439-2200, ext. 5138
Richard Attanasio, +1 908-439-2200, ext. 5432
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
KEYWORD: UNITED STATES EUROPE NORTH AMERICA NEW JERSEY
INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE
SOURCE: A.M. Best
Copyright Business Wire 2018.
PUB: 06/12/2018 11:10 AM/DISC: 06/12/2018 11:10 AM