AM Best Withdraws Credit Ratings of Western General Insurance Company

AM Best has downgraded the Financial Strength Rating to B- (Fair) from B (Fair) and the Long-Term Issuer Credit Rating to “bb-” from “bb” of Western General Insurance Company (Western General) (Calabasas, CA). The outlook of these Credit Ratings (ratings) is negative. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect Western General’s balance sheet strength, which AM Best categorizes as weak, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect a revision in AM Best’s assessment of Western General’s operating performance to marginal from adequate, given the deterioration in underwriting results, which was driven largely by adverse loss reserve development over the past five years.

The negative outlooks reflect pressure on the company’s balance sheet strength given its extremely elevated net and gross underwriting leverage, which has been trending upward over the past five years, and is well above the industry composite average. Additionally, the negative outlooks reflect Western General’s unstable loss reserving trends over the same period, as the company has reported adverse development in each of the past five calendar years.

The company’s balance sheet strength assessment of weak is supported by its strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), along with its conservative investment portfolio, which are offset by Western General’s elevated underwriting leverage measures and adverse loss reserving trends. AM Best views the company’s business profile as limited, based on its geographic and product concentration as a non-standard auto writer predominately in California. AM Best considers Western General’s ERM practices to be appropriate for its risk profile.

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.

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