AM Best Downgrades Credit Ratings of Trans City Casualty Insurance Company and Trans-City Life Insurance Company

BY Business Wire | CORPORATE | 06/11/21 01:03 PM EDT

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to ?bbb+? (Good) from ?a-? (Excellent) for Trans City Casualty Insurance Company (TCC) and Trans-City Life Insurance Company (TCL). Both companies are domiciled in Scottsdale, AZ. The outlook of these Credit Ratings (ratings) has been revised to stable from negative.

The ratings of TCC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect deterioration in underwriting results, which has resulted in operating performance that no longer supports the strong assessment. The continued decline in operating performance has been driven by increased claim activity and negative development, particularly in more recent years. Furthermore, the company has experienced a consistent decline in premium volume and will remain challenged to grow its business. As a result, key operating performance metrics, such as return on equity, underwriting cash flows and its expense ratio have been negatively impacted.

TCC?s balance sheet strength reflects the strongest level of risk-adjusted capitalization, as measured by Best?s Capital Adequacy Ratio (BCAR), and a high quality investment portfolio with solid liquidity. The limited business profile assessment reflects TCC?s risk exposure writing guaranteed cost workers? compensation insurance and contractual liability for vehicle service contracts for auto dealerships and groups in Arizona. AM Best views the company?s ERM practices as appropriate for its risk profile.

In addition, the ratings also reflect TCL?s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate ERM.

The rating downgrade of TCL reflects the removal of rating enhancement from TCC. TCL offers credit life and credit disability insurance coverage exclusively to automobile dealers in Arizona that have an ownership interest, in line with the company?s founding principles.

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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright ? 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Source: AM Best

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

fir_news_article