OLDWICK: Global rating agenct AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Kingstone Insurance Company (KICO).
Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” of Kingstone Companies Inc. (KINS) (Delaware), the insurance holding company of KICO.
AM Best also has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “bbb-” on KINS’ $30.0 million, 5.50% senior unsecured notes due 2022; and the indicative Long-Term IRs of “bbb-” for senior unsecured notes and “bb+” for subordinated notes of the shelf registration of KINS. The outlook of these Credit Ratings (ratings) remains negative.
The rating affirmations of KICO reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. Despite modest deterioration recently, KICO’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Additionally, KICO’s five-year and 10-year operating performance measures remain generally favorable relative to the personal property industry composite average.
The negative outlooks reflect deterioration in underwriting performance over the past two years and corresponding declines in policyholders’ surplus. These trends were influenced by execution issues from significant growth, weather-related losses and reserve strengthening in commercial lines.
In response, KICO has implemented a number of strategic initiatives including senior leadership changes, slowed expansion efforts, reorganized operations and withdrawal from commercial lines. However, the ultimate effectiveness of these efforts is uncertain and drives the negative outlook.
Lastly, the ratings for the holding company, KINS, reflect its moderate financial leverage and historically favorable interest coverage, which fall within the guidelines for the ratings.