The ratings of
Partially offsetting these strengths are the group’s elevated common stock leverage as a percentage of surplus, unfavorable underwriting results in 2011 and 2012, and the recent trend of modest adverse development. In keeping with IAT Re’s strategy of capitalizing on equity market opportunities, the group maintains high common stock leverage. This exposes its policyholders’ surplus to fluctuating market values, which resulted in significant net realized and unrealized capital losses in 2015. In the years 2012-2014, substantial net realized and unrealized capital gains resulted in significant surplus increases, with the increase in 2013 being particularly strong. Concerns with fluctuating equity market values are somewhat mitigated by the investment expertise and financial support of IAT Re, as evidenced by its historical capital contributions to offset substantial investment losses in its insurance subsidiaries. Although loss and loss adjustment expense reserves have historically been redundant, there is modest adverse development being seen, particularly for accident years 2012, 2013 and 2014. The group attributes this to a restructuring of the claims department, as well as adverse development on the run-off of the public auto line.
Factors that could lead to positive rating actions include the group achieving and sustaining solid underwriting and overall operating performance relative to the performance of the commercial casualty composite and a strong level of risk-adjusted capitalization. The ratings of the group may come under negative pressure if operating performance or risk-adjusted capitalization falls markedly short of
The rating affirmations of IAT Re acknowledge its supportive level of risk-adjusted capitalization, solid liquidity and generally positive operating returns. The company continues to generate net investment income and generally favorable capital gains, which partially offset underwriting losses during the latest five year period, as its profitability is driven by the business it assumes from its subsidiaries in its role as their primary reinsurer.
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Senior Financial Analyst
Manager, Public Relations
Jacqalene Lentz, CPA, +1 908-439-2200, ext. 5762
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations