OLDWICK, NJ–(BUSINESS WIRE)–AM Best revised the outlook from negative to stable and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Western Pacific Mutual Insurance Company, A Risk Retention Group (WPMIC) (Littleton, CO).
The credit ratings (ratings) reflect the strength of WPMIC’s balance sheet, which AM Best rates as the strongest, as well as its adequate operating performance, limited business profile and appropriate management of business risks.
The outlook revised from stable to negative is based on AM Best’s expectation that WPMIC will see a stabilization of its key underwriting metrics due to higher levels of net premiums earned that are anticipated in the coming years. The expected growth in earned premiums, which is based on the company’s 10-year home warranty earnings schedule, should help stabilize some of the recent volatility that has been on display in the loss and claim expense ratio. losses (LAE) of the company. In 2019 and 2020, the company experienced increased underwriting losses and also reported pre-tax operating losses for the year, prompting AM Best to revise the company’s outlook from stable to negative. The volatility of the company’s losses and LAE ratio is not only attributed to the lower amounts of premiums earned in those years, but is also associated with a higher number of losses in those years due to the national program franchise of Western builders. Timing issues related to builder reimbursements of deductibles under the deductible program have contributed to the deterioration of claims experience in recent calendar years. However, despite volatility in 2019 and 2020, results improved in 2021 and were favorable in the first nine months of 2022. Looking forward, AM Best expects the business to maintain an adequate level of operational performance , as has been the case historically, and to maintain the supportive risk-adjusted capitalization necessary for its current volume of business.
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