AM Best Maintains Under Review With Negative Implications Status for Credit Ratings of Topa Insurance Company and Dorchester Insurance Company, Ltd.
12 Julio 2024 - 12:35PM
Business Wire
AM Best has maintained the under review with negative
implications status for the Financial Strength Rating of B++ (Good)
and the Long-Term Issuer Credit Ratings of “bbb+” (Good) of Topa
Insurance Company (Calabasas, CA) and its subsidiary, Dorchester
Insurance Company, Ltd. (U.S. Virgin Islands). These companies are
wholly owned subsidiaries of Topa Equities, Ltd. and collectively
referred to as Topa Insurance Group (Topa).
The Credit Ratings (ratings) reflect Topa’s balance sheet
strength, which AM Best assesses as very strong, as well as its
marginal operating performance, limited business profile and
appropriate enterprise risk management.
The ratings of the members of Topa remain under review with
negative implications in light of news that a recently formed
private holding company has entered into a definitive stock
purchase agreement, dated June 14, 2024, with Topa Equities, Ltd.
to acquire 100% of Topa's intermediate holding company, Topa
Insurance Group, Inc. (TIG). TIG is the parent company of Topa
Insurance Company and its subsidiary, Dorchester Insurance Company,
Ltd. The agreement is anticipated to provide significant financial
and operational benefits to Topa; however, if the transaction does
not close as expected, negative rating action likely would
ensue.
Topa reported a decline in policyholder surplus in 2023, due to
an increase in pre-tax operating losses driven by weakened
underwriting results, offset partially by a capital contribution
from the ultimate parent, Topa Equities, Ltd., in the amount of $30
million. The increase in losses was due in part to adverse loss
reserve development occurring on prior-year reserves. The group
took substantial reserve strengthening actions to increase its
year-end 2023 carried reserve position up to the midpoint estimate
of the actuarial range. AM Best notes the negative impact of this
reserve strengthening on the group’s surplus and risk-adjusted
capitalization. Additional deterioration of this kind could weaken
the group’s balance sheet strength metrics further and likely lead
to negative rating action.
The ratings will remain under review with negative implications
pending the close of the transaction and an assessment by AM Best
of the post-transaction details. The transaction is subject to
regulatory approval from the California Department of Insurance and
the U.S. Virgin Islands Department of Banking, Insurance and
Financial Regulation.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Gordon McLean Senior Financial Analyst +1 908
882 2109 gordon.mclean@ambest.com Robert Valenta, CPCU
Senior Financial Analyst +1 908 882 2407
robert.valenta@ambest.com Christopher Sharkey Associate
Director, Public Relations +1 908 882 2310
christopher.sharkey@ambest.com Al Slavin Senior Public
Relations Specialist +1 908 882 2318
al.slavin@ambest.com