|[December 13, 2013]
A.M. Best Downgrades Ratings of Springfield Insurance Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has downgraded the financial strength rating (FSR)
to B (Fair) from B+ (Good) and issuer credit rating (ICR) to "bb+" from
"bbb-" of Springfield Insurance Company (Springfield) (Covina,
CA (News - Alert)). The outlook for the FSR is stable, while the outlook for the ICR
has been revised to negative from stable.
The rating actions are based on Springfield's declining risk-adjusted
capitalization during 2012 and through the first nine months of 2013.
The deterioration in the company's risk-adjusted capitalization was
primarily driven by adverse loss reserve development on the more recent
accident years, which drove underwriting losses and increased
underwriting and loss reserve leverage. In addition, Springfield has a
large premium dependence on California workers' compensation, where
pricing and regulatory reform volatility can cause adverse results.
Offsetting these negative rating factors are management's expertise and
knowledge of the groery marketplace, Springfield's conservative
underwriting strategy and the initiatives management has taken to
improve both rate and loss reserve adequacy. The negative outlook on the
ICR reflects A.M. Best's view that Springfield faces execution risk in
returning to a profitable footing, without which capital could continue
to erode through losses. Should the ICR be downgraded to "bb", the FSR
would remain at B (Fair). As a result, the current outlook for the FSR
Further negative rating actions could occur if Springfield continues to
experience weakened combined and operating ratios, further material
adverse development or capital adequacy declines materially as measured
by Best's Capital Adequacy Ratio (BCAR).
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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