AM Best recently adjusted its outlook for Prime Insurance Company, headquartered in Chicago, IL, changing it from positive to stable in relation to its Long-Term Issuer Credit Rating (ICR).
Despite this change, the company continues to hold a strong Financial Strength Rating (FSR) of A (Excellent) and maintains an ICR of “a” (Excellent), with the FSR outlook remaining stable.
Financial Health and Operational Performance
These ratings highlight Prime’s strong balance sheet, recognized by AM Best as solid, alongside commendable operational performance, a neutral business profile, and robust enterprise risk management (ERM) practices.
Prime’s financial health is underscored by its exceptional risk-adjusted capitalization, as demonstrated by the Best’s Capital Adequacy Ratio (BCAR).
The company has recorded positive earnings year after year that contribute to surplus growth and boasts adequate liquidity, fueled by favorable cash flows from operations.
However, the strength of its balance sheet faced challenges due to substantial adverse loss development in the third quarter of 2024, prompting the group to predict an overall pre-tax operating loss for the year.
Looking ahead, AM Best anticipates a rebound in capital generation and improved operating performance by 2025.
Prime’s balance sheet benefits from a quota share agreement with reputable reinsurers, including RLI Insurance Company, which serves not only as a reinsurer but also as an equity partner.
Market Position and Risk Management
Commercial auto liability is Prime’s primary focus, a sector that has been grappling with increasing loss trends in recent years.
Still, as a writer in the excess and surplus lines market, Prime has effectively leveraged the current market conditions to realize impressive growth and profitability.
When compared to its peers, Prime has consistently delivered favorable operational results, even amid recent reserve challenges.
As a prominent surplus lines insurer authorized to operate across all 50 states, Prime also holds a license as an admitted insurer in jurisdictions requiring such status.
The effectiveness of its ERM framework stands out, acting as a vital component that weaves through its operations as a focused insurance entity.
Outlook for Recovery and Growth
Overall, Prime Insurance Company remains resilient, navigating challenges while aiming for a steady path toward recovery and growth in the coming years.
Source: Ambest
