The counterparty risk of default and financial strength assessments for a number of Atlantic Mutual units—including Atlantic Mutual Insurance, Centennial Insurance and Atlantic Specialty Insurance—will be affected by the New York-based S&P's downgrade. The outlook on all these companies is negative, S&P said.
Additionally, the ratings agency has also lowered its surplus note rating on Atlantic Mutual Companies to "Double-B-Plus" from "Triple-B-Minus".
S&P listed a number of concerns about Atlantic Mutual's financial health. They include: the company's adverse reserve development over the last two years; reduced investment income; increased reliance on financial reinsurance to maintain surplus; the potential for further reserve strengthening, and limited financial flexibility.
John Iten, credit analyst at S&P, commented that Atlantic Mutual is pursuing "various initiatives" to reduce its reliance on financial reinsurance for surplus relief and to improve operating results. Still, Mr. Iten warned, if the company fails to fully execute these initiatives, "ratings could be lowered further."
Headquartered in New York, Atlantic Mutual Companies offers commercial, personal, and marine property-casualty insurance to individuals and businesses. In 2002, the company reported $17.7 million in net income and $754 million in sales.