AM Best has maintained the under review with negative implications status for the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of "bb" of Weston Insurance Company (Weston) (Coral Gables, FL).
These Credit Ratings (ratings) reflect Weston’s balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The under review with negative implications status considers AM Best’s latest review of Weston and its ultimate parent, Weston Insurance Holdings Corporation, following the announcement of its pending acquisition of Anchor Specialty Insurance Company. Weston’s ratings were placed under review with negative implications on Nov. 19, 2019 after management had communicated plans to reduce elevated pressure from the increasing financial leverage at the holding company, which is a consideration embedded in AM Best’s overall balance sheet strength assessment of Weston. The under review with negative implications status has been maintained based on revised plans that incorporate higher debt levels and an increased level of common equity needed to reduce financial leverage. The added debt will be used to facilitate the announced acquisition of Anchor Specialty Insurance Company and recapitalize it.
While the acquisition improves geographic diversification, it also increases underwriting risk given the significant amount of new risk being added to the organization from the new entity that has operated at a loss historically. Furthermore, Weston Insurance Holdings Corporation plans to raise a higher level of common equity in its revised plan to quickly satisfy the new debt, redeem preferred shares and settle accumulated dividends, ultimately reducing the holding company’s financial leverage. These actions involve considerable execution risk. The ratings will remain under review until management finalizes and executes these plans, and AM Best evaluates the financial and risk impact on the holding company.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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