Ohio Casualty Group Lowered

A.M. Best Co. lowered the financial strength rating of the Ohio Casualty Group, Fairfield, Ohio, from “A” (Excellent) to “A-” (Excellent). The rating applies to the five pool members led by Ohio Casualty Insurance Company and a separately rated affiliate. A silent outlook has been placed on the group’s rating.

According to A.M. Best, the rating action reflects the sharp deterioration in the group’s earnings and the significant reduction in policyholders’ surplus over recent years, led by rising loss cost trends and expenses and adverse prior accident year loss reserve development. In addition, this rating action reflects the significant challenges that management will face in its efforts to restore earnings to levels consistent with A.M. Best’s “A” (Excellent) rating standards.

A.M. Best further indicated that the group’s calendar year underwriting results have deteriorated significantly over the last two years due mostly to pricing inadequacy (particularly in commercial lines) and catastrophe losses. Declining surplus levels, coupled with double-digit growth in written premium from the acquisition of Great American Insurance Company’s commercial lines book, has led to a meaningful increase in operating leverage measures to levels that exceed the group’s composite norm. Capitalization is further constrained by above average investment leverage, attributable to Ohio Casualty’s sizable common stock portfolio and holdings of non-investment grade fixed income securities.

Despite this negative rating action, A.M. Best stated that the group has maintained its Excellent rating status due to its solid capitalization, as well as the strategic initiatives put in place by management. These include a new management team which has been proactive in implementing directives aimed at returning the group to operating profitability. At the forefront of management’s strategy is an aggressive expense containment policy that directly affects all areas of the organization.

Topics Ohio AM Best Casualty