Oldwick, N.J.-based A.M. Best issued revised outlooks for two commercial automobile insurance specialists yesterday—Canal Insurance Company and Lancer Insurance Company—changing Canal’s outlook to negative and Lancer’s to stable.
Previously, the “A-minus” financial strength rating of Greenville, S.C.-based Canal Insurance Company and its wholly owned, 100 percent reinsured subsidiary, Canal Indemnity Company—together known as Canal Group—had a stable outlook.
Best said the negative outlook reflects Canal Group’s weak operating results, which have tracked unfavorably to composite norms for an extended period of time.
Underwriting losses were heightened by soft market conditions and unfavorable loss reserve development, leading to unprofitable operating results. Operating results also have been negatively impacted by declining levels of net investment income.
For Chicago, Ill.-based Lancer, Best said the revision of the outlook for the “A-minus” rating to stable from positive is based on Lancer’s declining operating results over the past two years, driven by some deterioration in underwriting results, as well as a significant decline in investment income.
In support of the current ratings of each of the specialty insurers, Best offered the following:
For Canal Group, ratings reflect very strong risk-adjusted capitalization, management’s actions to improve operating results and the group’s recognized leadership position in the commercial trucking segment.
Since 2009, Canal Group has made significant investments in improving operating results, which have included new talent at the senior management level and technology to improve price sophistication and its ease of doing business.
In addition, in recent years, Canal Group’s new management team revised its marketing focus to emphasize more profitable niches while non-renewing unprofitable ones. The group also has attained rate increases across all lines of business.
For Lancer, ratings reflect solid market presence in the specialty transportation market, strong risk-adjusted capitalization and overall favorable return measures over a five and 10-year period.
These positive rating factors are derived from the company’s strong market profile as one of the largest specialty passenger transportation insurers of motor coaches, school buses, transit buses, limousines and vanpools in the United States.
Both insurers suffered underwriting losses in 2013, according the A.M. Best rating statements about the outlook changes.
At Canal, while operating results were favorable in 2012, underwriting results unexpectedly deteriorated in 2013 leading to pre-tax operating losses. This unexpected outcome led management to adjust its turnaround strategy, Best said, adding that Best analysts will continue to review the success of this strategy to determine future rating actions.
The ratings could be downgraded if Canal Group’s underwriting and operating performance do not materially improve during 2014.
At Lancer, the severity of losses increased in 2013, leading to underwriting losses for the entire year, Best said, adding that soft market conditions have led to rising loss ratios over the past three years.
A.M. Best also has affirmed the “B-double-plus” financial strength rating of Lancer Indemnity Company.
Source: A.M. Best