|[February 25, 2014]
A.M. Best Downgrades Ratings of Delta Lloyds Insurance Company of Houston Texas
OLDWICK, N.J. --(Business Wire)--
A.M. Best has downgraded the financial strength rating (FSR) to
B++ (Good) from A- (Excellent) and issuer credit rating (ICR) to "bbb+"
from "a-" of Delta Lloyds Insurance Company of Houston Texas
(Delta Lloyds) (Houston, TX). The outlook for the FSR has been revised
to stable from negative, while the outlook for the ICR is negative.
The rating downgrades primarily reflect Delta Lloyds' volatile operating
performance due to a continuing unfavorable underwriting performance.
This was particularly evidenced in 2011 and 2013 by a series of frequent
and severe weather-rated events that resulted in sizable underwriting
losses as well as a decline in overall risk-adjusted capitalization. As
a single state property writer, Delta Lloyds' surplus and operating
results are exposed to frequent and severe weather-related events.
However, a prudent reinsurance program is maintained to partially
mitigate this risk. In addition, management has on-going initiatives to
improve overall performance, which include but are not limited to
stricter underwriting guidelines and reductionin unprofitable business
along with significant rate increases.
These negative rating factors are partially offset by Delta Lloyds'
adequate risk-adjusted capitalization, moderate underwriting leverages,
generally positive realized capital gains and favorable balance sheet
liquidity. In addition, despite an unfavorable underwriting performance,
Delta Lloyds continues to report loss reserve redundancies on both an
accident and calendar year basis.
A.M. Best has maintained the negative outlook on the ICR. Pressure may
be put on the ratings if Delta Lloyds has a continuation of underwriting
losses and adverse operating results, which also could lead to weaker
risk-adjusted capitalization. Removal of the negative outlook on the ICR
is contingent upon Delta Lloyds' ability to reverse its adverse
operating performance to a longer pattern of operating profitability
while maintaining supportive risk-adjusted capitalization.
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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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