A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to “bb” from “bbb-” of Gateway Insurance Co.y (Gateway) of St. Louis, Mo. The outlook for both ratings is negative.
The ratings agency said its actions reflect the substantial deterioration in Gateway’s underwriting and overall operating performance over the past three years, most notably in its long-haul trucking and construction programs, and Florida book of commercial auto lines, as well as the company’s significant operating losses in 2010 and 2011.
Effective May 1, 2012, Gateway will discontinue and begin running off the long-haul trucking program that has contributed significantly to its large operating losses.
In addition, there is substantial uncertainty surrounding the company’s operating outlook given the execution risk associated with its operating plans, particularly relating to the planned run-off of its trucking operations; the potential for adverse prior year loss reserve development; and the current competitive environment in property/casualty markets.
These negative rating factors are largely offset by Gateway’s adequate risk-adjusted capitalization, favorable historical operating results on its core book of commercial auto lines — excluding the Florida business — and the financial flexibility provided by its ultimate parent, Diane M. Hendricks Enterprise Inc. (DMHE Inc.), which has demonstrated explicit financial and operational support since purchasing the company in 2005.
Source: A.M. Best
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