The lowered rating for Gulf Insurance Group, which is part of Travelers Property Casualty Corp., has a "stable" outlook, A.M. Best added.
The adverse developments at Gulf Insurance, the Oldwick, N.J.-based insurance ratings firm explained, have largely been caused by losses from the company's discontinued residual value insurance (RVI) business.
These losses also take into account a recent settlement of a claims-coverage dispute and the reserve strengthening for Gulf Insurance's RVI business.
A.M. Best noted that the company's prior-year loss reserves for its RVI units were "significantly strengthened" in the past year, including an additional $239 million in the 2003 first quarter.
Furthermore, the company's reserve strengthening was not limited to its RVI business, A.M. Best said, noting that Gulf Insurance also boosted reserves for some of its core businesses by $30 million earlier this year.
The ratings agency said the company may still need further reserve strengthening, "particularly as it relates to professional liability lines where litigation and loss cost trends have been rapidly rising."
A.M. Best did note that the company's fundamentals in its core lines have been showing improvements. The ratings agency cited a number of encouraging attributes at Gulf Insurance, including: the company's pricing conditions; its specialized and diversified product offerings; its market leadership position in many of its specialty product lines; and benefits of being part of Travelers Property Casualty Corp.