OLDWICK, N.J., June 16, 2022--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" (Excellent) of AMERIND Risk Management Corporation (AMERIND) (Pueblo of Santa Ana, New Mexico).
The Credit Ratings (ratings) reflect AMERIND’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The revision of the rating outlooks to negative is due to a decline in the company's underwriting and operating results in the two most-recent years, which currently appear to be trending toward levels that are no longer commensurate of an operating performance assessment of strong, as evidenced by elevated combined ratios. While a lowering of AMERIND’s operating performance assessment could occur, its risk-adjusted capitalization remains at the strongest level due to management’s adherence to conservative reserving practices and the embedded reserve equity associated with it.
Each of the past two years have been unprecedented high claim years for AMERIND due to weather and wildfire events, primarily in the first quarter of each year, portending a weaker assessment in operating performance relative to similarly assessed companies. A positive note is that the first quarter of 2022 has been relatively benign for AMERIND. However, in 2020 and 2021, the company’s loss ratios increased significantly, contributing to higher ultimate loss expectations for existing policies and growth in its book. Further, management takes a long view and, given its status as a non-taxable Tribal company uniquely serving Tribal Nations, conservatively carries reserves to the 90% confidence level to fortify its balance sheet. Buttressing the reserves in the past two years added an incremental 10 points annually to the loss and loss adjusted expense ratios, and the combined ratios in building incurred but not reported losses. The strong reserves also add intrinsic value to the company’s balance sheet strength beyond the nearly $100 million organic surplus growth to $121 million through 2021, which the company has achieved under current leadership that took the helm in 2012. This could drive an improved balance sheet strength assessment in the near to medium term, absent more high claim years.
Negative rating action could occur if underwriting results continue to weaken such that the company's operating performance is no longer commensurate with companies assessed at the strong level.
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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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