AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B++ (Good) from A (Excellent) and the Long-Term Issuer Credit Rating to bbb from a of American Sentinel Insurance Company (American Sentinel) (Harrisburg, PA). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect American Sentinels balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
These rating actions reflect the sale of American Sentinel to Patrick Kilkenny, a partial owner of K2 Insurance Services LLC, which formerly owned American Sentinel through ownership of Aegis Security Insurance Company. American Sentinel has been operating under a new business plan, following the termination of its prior pooling agreement with Aegis Security Insurance Company in 2018. The new business plan focuses on commercial auto liability, and specifically smaller owner-operator fleets. The company has expanded packaged offerings to support the business that was previously offered by its affiliated agency, First Capital. These expanded offerings, coupled with rate revisions, have led to substantial changes in the companys gross and net premium volumes.
Capital infusions from the companys now exclusive owner have supported premium growth. In addition, the company utilizes a 60% quota share reinsurance contract to mitigate its overall net exposures. Reinsurance partners are all highly rated and financially sound. Furthermore, American Sentinel maintains a high quality and conservative investment portfolio.
AM Best views American Sentinels business profile as limited; while the company is licensed in 49 states and Washington, D.C., much of the business is concentrated in California and Texas. The company does benefit from an affiliated agency to produce business. However, much of the companys operational areas are in the early stages of development. Furthermore, the companys ERM program and processes also are in the early stages of development. Management has provided documentation on the initial structure of the ERM and governance, which appear to be in line with a new operation. In the coming years, AM Best expects that the company will further develop its ERM to continue to correlate with the overall risk management of the company.
American Sentinel lacks a significant track record in its current business lines. However, management has provided extended forecasts for the initial years of operation. The actual results will be monitored continuously against the original forecasts, to ensure that the building block assessments are accurate. The rating outlooks could come under pressure with any material deviation in actual results versus submitted projections or if there is a significant change in business plan.
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