OLDWICK – JULY 14, 2023 – AM Best, a leading global credit rating agency specializing in the insurance industry, has announced that it has placed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) for GuideOne Insurance Company and its subsidiaries under review with negative implications. This announcement impacts all companies collectively known as GuideOne Insurance Companies (GuideOne), based in West Des Moines, IA.
This decision reflects AM Best’s concerns regarding a significant weakening in GuideOne’s financial stability. Specifically, the review was triggered by a notable decrease in the company’s surplus and risk-adjusted capital ratios. These ratios are key indicators of an insurance company’s ability to meet its financial obligations and absorb unexpected losses.
The decline in these critical financial metrics has prompted GuideOne to actively seek capital solutions. The company is exploring strategic options, potentially including an affiliation or merger with a mutual holding company. These solutions may also involve reinsurance arrangements or other forms of capital guarantees designed to bolster its financial position.
AM Best acknowledges that a successful execution of these capital-raising strategies could potentially mitigate the observed decline in GuideOne’s risk-adjusted capitalization. This capitalization is measured by Best’s Capital Adequacy Ratio (BCAR), a proprietary tool used by AM Best to assess an insurer’s financial strength. The deterioration in GuideOne’s surplus in 2022, which is the primary driver for the BCAR weakening, was largely due to a net loss compounded by unrealized capital losses.
A significant contributor to the net loss was adverse prior-year reserve development within GuideOne’s direct, open market Excess and Surplus (E&S) Specialty business. This particular segment of GuideOne’s operations, which has since been discontinued, experienced substantial claims development from prior years. Furthermore, the company faced current accident year reserve strengthening across its remaining business lines. This strengthening was necessary due to rising loss costs throughout the insurance industry and an increase in the frequency of claims, particularly within the aforementioned E&S business before its exit. AM Best has observed that GuideOne’s current BCAR score has weakened to a level that is no longer in line with its current rating grade.
The ratings will remain under review with negative implications as AM Best closely monitors GuideOne’s progress in securing and implementing a suitable capital solution. AM Best will assess the full impact of any transaction once it is finalized. It is critical to note that failure to successfully execute a transaction within a reasonable timeframe will likely lead to a downgrade of GuideOne’s balance sheet assessment and consequently, its overall credit rating.
The Financial Strength Rating of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) are under review with negative implications for the following subsidiaries of GuideOne Insurance Company:
- GuideOne Specialty Insurance Company
- GuideOne America Insurance Company
- GuideOne Elite Insurance Company
- GuideOne National Insurance Company
- GuideOne Property & Casualty Insurance Company
For further information and detailed rating disclosures related to this announcement, please refer to AM Best’s Recent Rating Activity web page. Additional information regarding the use and limitations of credit rating opinions can be found in Guide to Best’s Credit Ratings. For guidance on the appropriate use of Best’s Credit Ratings, Performance Assessments, Preliminary Credit Assessments, and AM Best press releases, please consult Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is recognized globally as a reputable source of credit ratings and information within the insurance sector. Headquartered in the United States, AM Best operates in over 100 countries and maintains regional offices in key global hubs including London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City. The agency provides news publishing and data analytics services in addition to its core credit rating offerings, serving the insurance industry and its stakeholders worldwide.
