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TMCNet:  A.M. Best Withdraws Credit Ratings of Golden Insurance Company, A Risk Retention Group

[June 12, 2018]

A.M. Best Withdraws Credit Ratings of Golden Insurance Company, A Risk Retention Group

A.M. Best has downgraded the Financial Strength Rating to C++ (Marginal) from B- (Fair) and the Long-Term Issuer Credit Rating to "b" from "bb-" of Golden Insurance Company, A Risk Retention Group (Golden) (Denver, NC). The outlook of these Credit Ratings (ratings) is negative. Concurrently, A.M. Best has withdrawn the ratings as the company has requested to no longer participate in A.M. Best's interactive rating process.

The ratings reflect Golden's balance sheet strength, which A.M. Best categorizes as weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.

The rating downgrades are driven by the company's adverse reserve development in the general liability business, which has led to surplus deterioration in recent years. The surplus declines have placed added stress on underwriting leverage ratios and risk-adjusted capitalization. In addition, the company's five-year average pre-tax and total returns on revenue and equity are negative and compare unfavorably with the composite. Further, the company has somewhat mitigated the stress on its balance sheet through revising the quality and quantity of its reinsurance. Additionally, the company has enacted multiple underwriting changes in earlier years to prevent these issues from reoccurring.

The underwriting changes to the general liability business appear to show early favorable results. However, the adverse development from earlier years has continued to flow into the morerecent years' results, and has led to significant underwriting and operating losses. The negative outlooks reflect the continued uncertainty around the prior year development and the potential for any additional adverse development. The general liability business results are somewhat mitigated by a profitable book of warranty business, for which the company identifies as its core business.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

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