Ala.’s Alfa Ratings Lowered One Notch to ‘A+’; Outlook Stable

While its outlook remains stable, Standard & Poor’s Ratings Services lowered Alfa Insurance Group’s credit and financial strength ratings to ‘A+’ from ‘AA-‘. Alfa is the second-largest personal automobile and homeowners insurance writer in Alabama based on premiums written.

Standard & Poor’s also said that it lowered its commercial paper rating on holding company Alfa Corp. to ‘A-1’ from ‘A-1+’.

“These rating actions reflect Alfa’s continued underwriting underperformance within its core lines of business,” said Standard & Poor’s credit analyst Polina Chernyak. “Alfa’s profitability continues to lag that of its peers.”

The downgrade is also based on the competitive market conditions, especially in Alfa’s automobile line of business, and the group’s ongoing, albeit reduced, susceptibility to severe weather-related events because of its significant geographic presence in the Gulf Coast and the mid-Atlantic states.

The ratings on Alfa are based on its leading position as a personal lines insurance provider in its home state of Alabama, extremely strong capitalization, consistently solid investment results, and low operating leverage. These factors stem from management’s conservative operating philosophy and exceptional customer service as well as the group’s firmly entrenched personal lines market position in Alabama. Offsetting these strengths are the company’s good (though weaker than competitors’) operating performance and geographic business concentration along the Gulf Coast and in the mid-Atlantic states.

The stable outlook incorporates the expectation that the successful management of Alfa’s catastrophe exposure will result in reduced operating performance volatility and earnings performance consistent with the rating. Alfa is also expected to continue to diversify its geographic concentration and business risk.

Source: Standard & Poor’s

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