OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of Governmental Interinsurance Exchange (GIE) (Bloomington, IL). The outlook of the FSR is stable. Concurrently, AM Best has withdrawn these public Credit Ratings (ratings).
The ratings reflect GIE’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revised Long-Term ICR outlook to negative from stable for GIE is based on the continued erosion of surplus, which has been driven by ongoing weak underwriting and operating results, with performance metrics falling significantly below the commercial casualty composite. Despite the surplus deterioration, GIE continues to maintain risk-adjusted capitalization at the strongest level, as measured by Best Capital Adequacy Ratio (BCAR). The very strong balance sheet assessment is further supported by modest underwriting leverage measures and generally favorably loss reserve development. Operating performance has experienced a significant downward trend, driven by a spike in loss activity and an elevated expense ratio mainly due to expenses arising from legal expense in defense of claims against policyholders. The limited business profile assessment reflects product and geographic concentration in its niche public entity market. AM Best views ERM as appropriate for the company’s size and scope of operations.
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