Market Overview

A.M. Best Downgrades Ratings of Ability Insurance Company and Its Affiliate


A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit ratings to “bb” from “bbb-” of Ability Reinsurance (Bermuda) Ltd. (Hamilton, Bermuda) and Ability Insurance Company (AIC) (Omaha, NE), collectively referred to as Ability Re. All ratings remain under review with negative implications.

The downgrades reflect AIC's significant statutory losses incurred year-to-date through September 30, 2012, the ongoing uncertainty regarding pending litigation and a material decline in the absolute capitalization of AIC. The weakness in its operating results continues to reflect deterioration in its long-term care insurance block as well as increased litigation costs.

A.M. Best believes that given the magnitude of the losses, Ability Re has reduced financial flexibility. The company is currently exploring strategic solutions, and the ratings will remain under review as A.M. Best monitors the company's ultimate litigation risk as well as any changes in its overall strategy.

The ratings of Ability Re were originally placed under review with negative implications on April 16, 2012. The under review action reflected the uncertainty surrounding the ultimate financial impact on the company following a Montana court jury award of roughly $34 million in compensatory and punitive damages to an Ability Re long-term care policyholder. The litigation is currently pending and Ability Re is awaiting the outcome.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.
Louis Savarese, 908-439-2200, ext. 5168
Senior Financial Analyst
Rosemarie Mirabella, 908-439-2200, ext. 5892
Managing Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations

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