A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a” of the insurance operating subsidiaries of American Safety Insurance Holdings, Ltd. (ASI) (Hamilton, Bermuda) [NYSE:ASI], which include: American Safety Casualty Insurance Company, American Safety Indemnity Company (both domiciled in Oklahoma City, OK), American Safety Reinsurance, Limited (ASRE) (Hamilton, Bermuda) and its affiliate, American Safety Risk Retention Group, Inc. (Burlington, VT). Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the ICR of “bbb” of ASI.
The ratings are based on the consolidated financial condition and operating performance of ASRE and its three U.S. domestic subsidiaries and affiliate (entities), with each one receiving significant quota share reinsurance support from ASRE.
The revised outlook reflects the unfavorable underwriting results reported in 2011 by the ASI subsidiaries and A.M. Best’s expectation of similar results for 2012, which have been impacted by weather related losses and unfavorable development in prior year loss reserves, primarily for business that has been placed in run off. The revised outlook also considers the inherent risks involved in ASI’s anticipated build-out of new and existing lines of business (particularly its excess and surplus lines and reinsurance divisions) through the expansion into new geographic territories, growth and expansion of its surety business associated with the recent acquisition of the Bluestone Agency in 2012 and the melding of new underwriting teams into ASI’s culture. Furthermore, this revised outlook takes into consideration the organization’s adverse prior year loss reserve development reported in 2011, and additional reserve strengthening in 2012, ASI’s recent de-emphasis on certain poorly performing reinsurance and program businesses, competitive headwinds, elements of execution risk associated with ASI’s diversification strategy and the challenges facing management to improve underwriting results over the near term.