The ratings of Dallas-based commercial property/casualty insurance company Gramercy Insurance Co. (GIC) have been downgraded by A.M. Best Co.
The company’s financial strength rating was lowered to B (Fair) from B+ (Good) and its issuer credit rating to “bb” from “bbb-.” The outlook for both ratings has been revised to negative from stable, according to the A.M. Best announcement.
A.M. Best said the rating actions reflect the deterioration in GIC’s operating performance due to significant underwriting losses combined with significant premium growth that considerably has increased underwriting leverage and weakened overall capitalization through 2011.
The ratings also reflect the increased dependence on reinsurance to support operations given strong premium growth in recent years, as well as the execution risk associated with refocusing operations while achieving profitability projections given competitive market conditions.
Positive rating factors include recent management initiatives to improve performance, including the discontinuation of GoAuto beyond 2011; additional quota share reinsurance on GoAuto and Trucking risks during the fourth quarter of 2011, which provides surplus aid; the company’s conservative investment portfolio; and sound overall liquidity position.
The outlook revision reflects recent poor operating performance that has weakened capitalization, as well as the challenges associated with profitably refocusing operations given the increased reinsurance utilization over the near term.
Further weakening in overall capitalization driven by ongoing premium growth and/or weak operating performance likely will result in additional negative rating pressure.
According to the Gramercy Insurance website, the company specializes in commercial auto, builder’s risk, extended warranty and specialty risk, and surety lines of insurance.
Source: A.M. Best
Topics AM Best
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