In an announcement, AM Best mentioned it had downgraded New Jersey-based American Millennium Insurance Company (AMIC’s) financial strength ratings from B++ to C++ and its credit ratings from bbb- to b+.
The firm place those ratings and the B++ financial strength ratings and bbb+ credit ratings of its parent Citadel Re under review with negative implications.
AMIC is focused on the transportation business and, consistent with its website, insures a “large market share” of recent Jersey’s taxis and limousines. It’s also a distinct segment writer of trucking business within the state.
Its parent Citadel Re could be a class 3A Bermudian company that’s part of Citadel Risk. On top of to owning insurance entities includes the company also rents a captive facility and provides back office services to the (re)insurance sector and also run-off services.
The agency said the rating actions follow AMIC’s second quarter 2020 results which resulted to year-to-date underwriting and operational losses that were “well outside of management’s expectations”.
“These extraordinary losses stem from higher-than-expected loss prices and adverse loss reserve development involving two commercial auto programs – each discontinued and placed into run-off in 2018,” said AM Best.
It said that, although reinsurance can play a key role in mitigating the bulk of the losses, the scope and magnitude of the development was such that the net loss for the quarter depleted surplus by over thirty percent.
That led to lower-than-expected risk-adjusted capital, as well as that prescribed by statutory risk-based guidelines.
“As a result, AM Best has revised its assessment of AMIC’s capitalization and overall financial statement strength to very weak from weak,” the statement continued.
According to statutory filings, AMIC’s capital and surplus was reduced from $9.03mn to $5.77mn over the first half of 2020.
AM Best said that while the scale of AMIC’s surplus is little relative to of its parent, Citadel Re’s consolidated financial statement strength had been affected by the size of the hit to the transportation insurer.