AM Best Downgrades Credit Ratings of Wawanesa General Insurance Company (U.S.); Affirms Credit Ratings of The Wawanesa Mutual Insurance Company and Wawanesa Life Insurance Company
OLDWICK, N.J. — AM Best has downgraded the Financial Strength Rating (FSR) to B (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb” (Good) from “a-” (Excellent) of Wawanesa General Insurance Company (Wawanesa General) (San Diego, CA). Concurrently, AM Best has placed these Credit Ratings (ratings) under review with negative implications.
At the same time, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of The Wawanesa Mutual Insurance Company (Wawanesa Mutual). AM Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Wawanesa Life Insurance Company (Wawanesa Life). The outlook of these ratings is stable. All companies are headquartered in Winnipeg, Manitoba, Canada, unless otherwise specified.
The ratings of Wawanesa General reflect its balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). The downgrade of the ratings of Wawanesa General reflects the significant decline in policyholder surplus during 2022, which accelerated in third-quarter 2022, resulting from a downturn in operating performance driven by an increase in loss costs due in part to the current inflationary environment. The weakened performance has been significantly impacted by the inability to secure adequate rate increases from California’s department of insurance. Results have also been negatively impacted by $54.1 million in adverse reserve development occurring on prior accident years through Sept. 30, 2022. The ratings will remain under review with negative implications pending further discussions with management as AM Best assesses the ongoing impact of the California automobile marketplace on Wawanesa General.
The ratings of Wawanesa Mutual reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The stable outlooks reflect the expectation that Wawanesa Mutual’s rating fundamentals will remain unchanged over the intermediate term. Risk-adjusted capitalization, as measured by BCAR, is expected to remain at the strongest level given the company’s conservative capital management. Although moderately volatile, operating performance is expected to remain adequate, supported by investment earnings that have generally offset underwriting losses and driven organic growth in policyholder surplus.
The ratings of Wawanesa Life reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. Wawanesa Life’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), supports the company’s business, investment and insurance risks. In addition, the company maintains a robust Life Insurance Capital Adequacy Test (LICAT) ratio. The stable outlooks reflect the expectation that Wawanesa Life will maintain a balance sheet assessment at the very strong level over the intermediate term with adequate operating results contributing to surplus growth. In addition, the stable outlooks reflect AM Best’s expectations that Wawanesa Life will maintain its strategic importance to Wawanesa Mutual over the intermediate term.
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.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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