Oklahoma’s GHS Property and Casualty Insurance Co. Ratings Downgraded

A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit rating to “bbb+” from “a-” of GHS Property and Casualty Insurance Co. (GHS), located in Oklahoma City.

Best said he rating downgrades reflect GHS’ trend of underwriting losses that has continued into 2011 and resulted in significant decline in its surplus. The company’s five-year average combined ratio is significantly worse than the private passenger automobile composite. GHS’ management has implemented risk management strategies, increased rates and began exiting the Oklahoma property market where frequent and severe catastrophic events were the primary cause of the company’s underwriting losses.

In addition, although GHS’ surplus benefited from approximately $20 million of capital contributions from its parent, Health Care Service Corp., a Mutual Legal Reserve Company (HCSC) (which operates Blue Cross and Blue Shield plans in Illinois, Texas, New Mexico and Oklahoma); severe storms throughout the past five years eroded much of this capital. The ratings of GHS also reflect HCSC’s financial support, brand name recognition and regional market presence.

Key drivers that could result in a further downgrading of GHS’ ratings include a continued deterioration in underwriting performance, further erosion of its capital base or lack of financial support from HCSC. Key rating triggers that could result in the removal of the negative outlook include sustained improvement in GHS’ underwriting performance, while maintaining strong risk-adjusted capitalization.

Source: A.M. Best

Topics Property Oklahoma Property Casualty Casualty