AM Best Downgrades Credit Ratings of Kingstone Insurance Company and Kingstone Companies Inc.
July 10 2020 - 8:15AM
Business Wire
AM Best has downgraded the Financial Strength Rating to
B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit
Rating (Long-Term ICR) to “bbb” from “a-” of Kingstone Insurance
Company (KICO) (Kingston, NY). Concurrently, AM Best has downgraded
the Long-Term ICR to “bb" from “bbb-” for Kingstone Companies Inc.
(KINS) (Delaware) [NASDAQ: KINS], the insurance holding company of
KICO.
AM Best also has downgraded the Long-Term Issue Credit Rating
(Long-Term IR) to “bb” from “bbb-” on KINS’ $30.0 million, 5.50%
senior unsecured notes due 2022; and the indicative Long-Term IRs
to “bb” from “bbb-” for senior unsecured notes and to “bb-” from
“bb+” for the subordinated notes of the shelf registration of KINS.
The outlook of these Credit Ratings (ratings) is negative.
The ratings downgrade of KICO reflects its balance sheet
strength, which AM Best categorizes as adequate, as well as its
strong operating performance, limited business profile and
appropriate enterprise risk management (ERM).
These rating actions are driven by a revision in KICO’s
catastrophe reinsurance program effective July 1, 2020, which
significantly reduces the amount of reinsurance protection
previously contemplated and purchased. Accordingly, KICO’s
risk-adjusted capitalization as measured by Best’s Capital Adequacy
Ratio (BCAR) deteriorated considerably, resulting in AM Best’s
revised assessment of capitalization to the adequate level.
The negative outlooks previously reflected deterioration in
underwriting performance over the past two years and corresponding
declines in policyholders’ surplus. These trends were influenced by
execution issues from significant growth, weather-related losses
and reserve strengthening in commercial lines.
In response to these operating performance trends, KICO has
implemented a number of strategic initiatives including senior
leadership changes, slowed its expansion efforts, reorganized
operations and withdrew from commercial lines. While KICO’s
preliminary second quarter 2020 results are favorable, the ultimate
effectiveness and sustainability of these efforts is uncertain and
partially drives the negative outlook. Additionally, the negative
outlook now reflects the change in KICO’s risk tolerance given its
increasingly elevated catastrophic exposure – particularly on a net
basis for tail events. Given the magnitude and scale of the
deterioration in risk-adjusted capitalization, continuation of this
trend could lead to a change in AM Best’s adequate capitalization
assessment or current appropriate assessment of KICO’s ERM
practices.
Lastly, the ratings for the holding company, KINS, reflect its
moderate financial leverage and historically favorable interest
coverage, which fall within the guidelines for the ratings.
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.
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 New York, London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Adib Nassery Senior Financial Analyst +1 908
439 2200, ext. 5205 adib.nassery@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Richard Attanasio Senior Director +1 908 439
2200, ext. 5432 richard.attanasio@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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