A.M. Best downgrades Peace Hills General insurance

A.M. Best Co. has downgraded Peace Hills General Insurance’s financial strength rating (FSR) to B (fair) from B+ (good).
A.M. Best also downgraded the insurer’s credit rating to “bb” from “bbb-”. The outlook for both ratings is negative.
“These ratings actions reflect the further decline in Peace Hills’ risk-adjusted capitalization due primarily to investment and underwriting losses,” an A.M. Best release says.
“Capitalization was adversely impacted by an additional 10.7% loss of shareholders’ equity, further elevating the company’s above-average underwriting leverage ratio.”
An increase in the frequency and severity of property losses from fire, as well as declining asset values from the downturn in the investment markets, have weakened the company’s balance sheet strength, the release says.
“The outlook on the ratings is negative due to Peace Hills’ minimal capitalization relative to the ratings and several significant challenges to rebuilding capital,” it continues.
“These include the uncertainty concerning the final status of the minor injury cap in the Alberta auto market and rate adequacy in that market; declining earnings; soft commercial lines pricing; strong competitive pricing pressure; and the potential for unanticipated loss due to an increasing trend of more frequent and severe weather events across Canada.”
Initiatives by the Peace Hills management team to reduce investment leverage and earnings volatility, increase premium rates across all major lines and to slow growth partially offset the negative ratings factors, A.M. Best says.