AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” (Good) of Aegis Security Insurance Co., based in Harrisburg, Pennsylvania. The outlook assigned by AM Best to the FSR is stable, while the outlook assigned to the Long-Term ICR is negative.
AM Best said the ratings reflect Aegis’ balance sheet strength, which its analysts assess as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
The negative outlook assigned to the Long-Term ICR reflects Aegis’ overall risk-adjusted capitalization at the lower end of the very strong assessment, elevated underwriting leverage ratios and adverse reserve development. AM Best said it placed the ratings under review initially due to concerns regarding prospective balance sheet strength and shifting premium volumes. Most recently, overall balance sheet metrics somewhat improved through June 30, 2022, as Aegis sold its wholly owned subsidiary, American Sentinel Insurance Co. As a result, policyholder surplus increased and a decline in premium volume resulted in lower underwriting leverage ratios, AM Best reports.
Despite this improvement, the company’s overall risk-adjusted capitalization remains somewhat challenged relative to the current assessment, and underwriting leverage ratios remain well above the personal property composite, according to AM Best. In addition, adverse reserve development mainly on the commercial auto and homeowners lines of business has resulted in reported accident-year deficiencies for two consecutive years, with this trend continuing through the first half of 2022.
AM Best said that company management has developed a plan to improve balance sheet metrics and lower underwriting leverage ratios, which includes non-renewing a sizable book of property business that will begin on Nov. 1, 2022. “If management fails to execute this business plan and overall risk-adjusted capitalization does not improve along with a corresponding reduction in underwriting leverage measures and improved reserve development it could result in a downgrade of the company’s Long-Term ICR,” the ratings firm stated.
The stable outlook assigned to the FSR reflects the company’s current balance sheet assessment and adequate operating performance, AM Best said.
American Sentinel was sold to Patrick Kilkenny, a partial owner of K2 Insurance Services, which formerly owned American Sentinel through its ownership of Aegis Security Insurance Co. K2 spun off Aegis Security Insurance Co. in 2019.
AM Best placed Aegis Security under review in June, 2019. In May of this year, it downgraded Aegis.
In September, 2021, AM Best withdrew its ratings for American Sentinel after its sale to Pie Carrier Holdings (created by workers’ compensation carrier Pie) was withdrawn and its business was rolled into Aegis.
Aegis Security specializes in insurance for manufactured homes, motorcycles, travel trailers, select-value dwellings and other specialty insurance products.
Topics AM Best
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