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AM Best Downgrades Issuer Credit Rating of Alabama Municipal Insurance Corporation

BY Business Wire | CORPORATE | 08/23/24 10:53 AM EDT

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to ?bbb? (Good) from ?bbb+? (Good) and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Alabama Municipal Insurance Corporation (AMIC) (Montgomery, AL). The outlook of the Long-Term ICR has been revised to stable from negative, while the outlook of the FSR is stable.

These Credit Ratings (ratings) reflect AMIC?s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The Long-Term ICR downgrade reflects persistent volatility in underwriting results in consecutive years, which has contributed to erosion in the company?s capital position. Deterioration in underwriting performance has been impacted by elevated property losses, influenced by weather-related events and inflation. Claims inflation in the company?s law enforcement liability line, stemming from court delays and defense costs, has challenged operating performance further. Most law enforcement liability claims go to federal court, circumventing state-level tort caps and resulting in higher frequency and severity of defense costs. The company has introduced significant rate increases and has incorporated a scoring tool to further refine risk selections.

The stable outlooks reflect AM Best?s expectation that the company will maintain its very strong balance sheet strength despite remaining challenges in operating performance. While surplus has declined over consecutive years, the company maintains risk-adjusted capitalization, as measured by Best?s Capital Adequacy Ratio (BCAR), that supports the very strong balance sheet strength assessment. Underwriting and reserve leverage, along with solid liquidity metrics, remains in favorable positions. AMIC has a commanding market share within its territory, benefiting from a well-established distribution network.

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 use of Best?s Credit Ratings, Best?s Performance Assessments, Best?s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best?s Ratings & Assessments.

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 ? 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Source: AM Best

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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.

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