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TMCNet:  A.M. Best Downgrades Ratings of Springfield Insurance Company

[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 is stable.


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 RESERVED.


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