Posted on 03 Feb 2009
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of B+ (Good) and issuer credit rating (ICR) of "bbb-" of Great Northwest Insurance Co., which is headquartered in St. Paul, Minn.
The rating agency said the outlook revision and rating affirmations of GNIC are based on its operating performance over the last two years, which has seen a 35 percent decrease over year-end 2006's capital base. Consequently, GNIC's surplus will receive a $1 million infusion from its parent company, GNW Acquisition Corp. of Idaho.
GNIC's performance, which generated the capital losses, was due to an increase in severe weather frequency in GNIC's operating region over the last two years. Many of these events, while severe, created losses below GNIC's reinsurance attachment point and remained wholly the responsibility of the company. GNIC is challenged to stem the volatility within its book of business in the near term, according to A.M. Best analysts.
Great Northwest Insurance (GNW) is an auto, home, and small business underwriter using the independent agency system, in conjunction with an organizational structure that it call a micro-insurance company to lower overhead costs. It operates in 15 states: Arizona, hawaii, Idaho, Montana, Minnesota, North Dakota, Nebraska, New Mexico, Nevada, Oklahoma, Oregon, South Dakota, Tennessee, Washington and Wisconsin.
With its proprietary Internet-based technology and its MIC business model, GNW says it has eliminated the underwriting, processing, billing, claims and customer service duplication inherent in other standard agency models.
Additionally, A.M. Best has affirmed the ICR of "b" of GNWAC. The outlook for this rating remains stable. GNWAC has a debt-to-capital ratio of 43.7 percent, which for a company at its rating level is well within acceptable boundaries. GNWAC has enough liquidity to manage day-to-day operations without asking for assistance from its subsidiaries, A.M. Best said.
Source: Best's Ratings
The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.