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A.M. Best Downgrades Credit Ratings of Tower Bonding and Surety Company

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A.M. Best has downgraded the Financial Strength Rating to B-
(Fair) from B (Fair) and the Long-Term Issuer Credit Rating to "bb-"
from "bb" of Tower Bonding and Surety Company (Tower Bonding)
(Old San Juan, PR). The outlook of these Credit Ratings (ratings)
remains negative.

The ratings reflect Tower Bonding's balance sheet strength, which A.M.
Best categorizes as adequate, as well as its marginal operating
performance, limited business profile and marginal enterprise risk
management.

The rating actions reflect a significant decline in Tower Bonding's
policyholder surplus, primarily driven by unrealized capital losses in
2017 and the continued deterioration in underwriting performance over
the past five years. The deterioration in underwriting results was
largely due to the company's high underwriting expense structure, along
with a sizable decline in its premium volume. The reduction in premium
volume was reflective of the lower demand for criminal bonds. However,
in first half of 2018, the company's premium volume has increased for
the first time in more than 10 years due to a lack of competition.

There could be additional negative rating action if there is a further
decline in the operating results, or a material weakening in Tower
Bonding's risk-adjusted capitalization. Positive rating action in a form
of an outlook change could occur if the company's underwriting and
operating performance stabilizes.

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
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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