Market Overview

A.M. Best Downgrades Credit Ratings of Antilles Insurance Company


A.M. Best has downgraded the Financial Strength Rating (FSR) to
A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating
(Long-Term ICR) to "a-" from "a" of Antilles Insurance Company (Antilles)
(San Juan, PR). The outlooks of these Credit Ratings (ratings) remain

The ratings reflect Antilles' balance sheet strength, which A.M. Best
categorizes as very strong, as well as its adequate operating
performance, limited business profile and appropriate enterprise risk
management (ERM).

The rating actions reflect a significant decline in Antilles'
policyholders' surplus, primarily driven by substantial stockholder
dividends, unrealized capital losses in 2014 and 2015 and deterioration
in underwriting performance in the most recent years. The deterioration
in underwriting results was largely due to the company's high
underwriting expense structure, along with a significant decline in its
premium volume. The reduction in premium volume was driven by a reduced
assumption percentage on its reinsurance agreement for the Puerto Rico
compulsory auto book of business. This assumed book has declined over
the past five years from a high of $34 million to $0 in 2017 as the
contract ended in year-end 2016.

To counter the loss of the compulsory auto book of business, Antilles
has developed a new dwelling product that will be distributed mainly
through independent agencies as opposed to the current bank-owned
agencies. Currently, the vast majority of dwelling business in Puerto
Rico is run through banking agencies, which requires an elevated
commission rate inclusive of a profit commission. This new product will
refund a percentage of the company's dwelling premiums directly to its
policyholders based on favorable loss experience. However, A.M. Best has
some concerns with Antilles' ability to reach the economies of scale
required to make this a profitable product in this challenging

There may be additional negative rating action if there is further
decline in operating results, or a material weakening in Antilles'
risk-adjusted capitalization. Additional contraction in policyholders'
surplus or if the new dwelling book of business fails to improve
underwriting performance also would create negative rating pressure.
Positive rating action, most likely in the form of an outlook revision
to stable, could occur if underwriting and operating performance
stabilizes in the near term.

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best's
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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