AM Best Downgrades Issuer Credit Rating of Standard Casualty Company

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating of B++ (Good) of Standard Casualty Company (Standard Casualty) (New Braunfels, TX). The outlook of the Long-Term ICR has been revised to stable from negative, while the outlook of the FSR is stable.

The Credit Ratings (ratings) reflect Standard Casualty’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). Additionally, the ratings recognize the synergistic advantages and financial support derived from the company’s relationship with its ultimate parent, Cavco Industries, Inc. (Cavco) [NASDAQ; CVCO].

The downgrading of the Long-Term ICR reflects the continuing volatility in Standard Casualty’s operating performance, which aligns closer to composite peers with a marginal assessment. Results have primarily been influenced by an escalation in losses driven by more frequent weather-related events, coupled with inflationary pressures. Given its scale, the company maintains an elevated expense position, which creates a need for better-than-average loss performance as it relates to attaining overall underwriting profitability. Management has responded by diversifying into non-hurricane prone states, increasing rates, limiting flood-exposed business and continuing to implement stricter underwriting guidelines.

The stable outlooks reflect AM Best’s expectation that the company will maintain its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is categorized as strong, as well as sustain improvement in loss reserve development as evidenced by favorable one-year development in each of the last two years. Gross and net underwriting leverage remains elevated when compared with the personal property composite. Standard Casualty’s operating performance is expected to remain challenged given its relative product and geographic concentrations. The company is expected to continue to benefit from advantages gained from Cavco, a leading producer of manufactured homes in the United States. Benefits include distribution channel enhancements and quicker and more cost-efficient repairs, as well as capital contributions sourced from an affiliated insurance agency. Despite a challenging reinsurance market, Standard Casualty maintains a comprehensive reinsurance program, as well as a developed ERM program to mitigate risk exposures.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Quentin Harris

Senior Financial Analyst

+1 908 882 1816

quentin.harris@ambest.com

Christopher Sharkey

Associate Director, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Christopher Draghi

Associate Director

+ 1 908 882 1749

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Al Slavin

Senior Public Relations Specialist

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al.slavin@ambest.com

Source: AM Best