A.M. Best Downgrades Peachtree Casualty Due to Florida Auto Results

Jan 30, 2012

The following article was published in The Insurance Journal on January 30, 2012:

A.M. Best Downgrades Peachtree Casualty Due to Florida Auto Results

A.M. Best has downgraded the financial ratings of Peachtree Casualty Insurance Co., citing the insurer’s poor underwriting results due in part to rising costs associated with Florida’s troubled no-fault automobile insurance market.

A.M Best downgraded Peachtree Casualty Insurance Co.’s financial strength rating to B (fair) from B++  (good) and its issuer credit rating to bb from bbb. The outlook for both ratings has been revised to stable from negative.

The financial rating organization said the downgrades reflect several factors including Peachtree running substantial underwriting losses due to negative trends in the insurer’s Florida personal injury protections and bodily injury insurance. As a result, the insurer is seeing a downward trend in its risk-adjusted capitalization.

A.M. Best did note that changes in the insurer’s underwriting criteria and reinsurance structure should improve its capitalization over the course of 2012.

Also factoring into the change in Peachtree’s ratings is the fact that it was recently acquired by PGIA Holdings, LLC., a newly formed entity whose management is experienced in personal automobile insurance. That deal included a substantial issuance of preferred stock, which A.M. Best considers to be a debt-like instrument. As a result, A.M. Best calculated the deal placed more pressure on its debt-to-capital ratio.

Looking forward, A.M. Best said that Peachtree’s financial rating could improve if its debt-to-capital ratio becomes more favorable and it improves its underwriting performance. Conversely, the insurer may experience a further downgrade in its rating if its underwriting performance continues to be unprofitable, placing even more pressure on the insurer’s risk-adjusted capital.

Peachtree’s home office is in Longwood, Florida. It also has an office in Smyrna, Georgia. All of Peachtree Casualty’s outstanding common shares are owned by Network Holding Inc. Its managing general agency affiliate, First Insurance Network Inc., has an exclusive contract for binding authority, underwriting, premium collection, claims adjustment and claims payment for all programs.

Find this article here:  http://www.insurancejournal.com/news/southeast/2012/01/30/233331.htm