AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Armed Forces Insurance Exchange (AFIE) (Leavenworth, KS).
The ratings reflect AFIE’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).
The negative outlooks reflect AM Best’s concerns over the company’s operating performance given its prolonged inability to generate favorable operating results, which has led to surplus erosion and a decline in overall risk-adjusted capitalization. Adverse operating results have persisted for five consecutive years and resulted in the exchange’s five-year average combined and operating ratios reaching levels that compare unfavorably with AM Best’s personal property composite. The adverse operating results were due to frequent and severe weather-related events, particularly in 2020 with 13 named hurricanes making landfall in the United States. As a result, the company’s policyholder surplus has fallen nearly 38% during the latest five-year period. Management has implemented numerous actions to stabilize performance and increase capitalization. These actions include aggressive rate increases, property inspections, and adding affinity partnerships. However, the benefit from these actions remains to be seen.
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