AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of WT Holdings, Inc. and Subsidiary

AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Stillwater Insurance Company (SIC) (Santa Barbara, CA) and its wholly owned subsidiary, Stillwater Property and Casualty Insurance Company (SPAC) (Jericho, NY). These companies are collectively known as Stillwater Insurance Group (Stillwater). Concurrently, AM Best has removed from under review with negative implications and affirmed the Long-Term ICR of “bbb-­” (Good) of WT Holdings, Inc. (Memphis, TN). Stillwater is ultimately owned by WT Holdings, Inc. The outlook assigned to these Credit Ratings (ratings) is negative.

The ratings reflect Stillwater’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings for Stillwater were placed under review with negative implications due primarily to a significant decline in its surplus position at year-end 2022 from substantial unrealized capital and net underwriting losses. These unrealized capital losses were largely driven by the equity markets volatility impacting Stillwater due to its high equity exposure. The company’s net underwriting results stemmed from multiple fire losses and weather-related events, as well as rapid and atypical increases in inflation that have plagued the entire industry. Stillwater’s homeowners’ line of business accounts for about 72% of its premium volume and has been impacted by increasing costs of material and labor along with supply chain constraints. The company’s auto line of business results also has been impacted by higher car prices for new and used vehicles, increased rental length and longer average repair times due to supply chain issues. As a result, loss ratios are higher and the average severity for claim settlements have increased. The unfavorable net underwritings results continued in 2023, primarily due to losses from weather-related events, and to a smaller degree, inflationary pressures.

The removal of the under review with negative implications status is based on a series of initiatives implemented by management to replenish capital, increase overall risk-adjusted capitalization and strengthen balance sheet metrics at Stillwater. Some of those initiatives included capital infusion from its parent, the implementation of a quota share reinsurance treaty for the property book of business, increased top layer catastrophe coverage and a further reduction of common stock holdings in the investment portfolio to remove market risks.

The negative outlooks are based on Stillwater's deteriorating net underwriting results in recent years and corresponding decline in overall risk-adjusted capitalization and weakening balance sheet metrics. The expectation is for operating metrics to improve in the near term to alleviate further pressure on capitalization. Further deterioration in operating results or overall risk-adjusted capitalization could potentially result in a downgrade in either the balance sheet or operating performance assessments.

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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