A.M. Best Co. has downgraded the financial strength rating of Midland, Mich.-based Dorinco Reinsurance Co. to “A-” (Excellent) from “A” (Excellent).
The rating action reflects deterioration in Dorinco’s operating performance and surplus position, according to an A.M. Best statement. Underwriting and investment losses over the last three years, coupled with prior stockholder dividends, have caused surplus to decline substantially. Underwriting performance was affected by greater than anticipated amounts of current year losses and reserve strengthening to guard against adverse development in earlier accident years.
The negative outlook reflects A.M. Best’s belief that there is a need for additional capital to support Dorinco’s leveraged balance sheet and to reflect A.M. Best’s standard for an “Excellent” rating. In A.M. Best’s opinion, significant improvements in operating earnings are needed to replenish and grow surplus in order to relieve capital strain and to support future writings.
The rating recognizes Dorinco’s strong strategic relationship with its parent, the Dow Chemical Co. and the business profile of its insurance accounts. Dorinco’s risk portfolio remains diversified through the short-tail nature of its third-party business, complementing the longer-tail exposures associated with its Dow Chemical business (approximately 50 percent of total risks).
Furthermore, Dorinco’s unique production sources and cost-efficient operating structure afford it a competitive expense advantage relative to reinsurance peers.
Was this article valuable?
Here are more articles you may enjoy.