AM Best Downgrades Credit Ratings of Stillwater Insurance Company and Subsidiary

AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “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). The outlook of the FSR has been revised to stable from negative and the outlook of the Long-Term ICR is negative.

Concurrently, AM Best has downgraded the Long-Term ICR to “bb+” (Fair) from “bbb-­” (Good) of WT Holdings, Inc. (Memphis, TN). Stillwater is ultimately owned by WT Holdings, Inc. The outlook of this Long-Term ICR is negative.

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

The rating downgrades reflect continued deterioration in Stillwater’s net underwriting results that started in 2022, stemming from multiple fire losses and weather-related events, as well as rapid and atypical increases in inflation along with supply chain disruptions. Stillwater’s homeowners’ line of business accounts for 71.5% of its premium volume and has been impacted by increasing costs of material and labor along with supply chain constraints. Stillwater’s auto line of business results also was impacted by higher prices for new and used vehicles, increased rental length periods and longer average repair times due to supply chain issues. As a result, loss ratios were higher, and the average severity of claim settlements increased during the year.

The unfavorable net underwriting results continued in 2023, primarily due to losses from weather-related events, and to a smaller degree, inflationary pressures. The unfavorable underwriting results trend extended to 2024, primarily due to losses from weather-related events. Stillwater’s operating performance results are more in line with other carriers that also have a marginal assessment level. In response, management has implemented a series of initiatives, including several rate actions, increased deductibles as well as reducing the company’s geographic footprint in catastrophe prone areas in order to return to profitability.

The negative outlook is based on Stillwater’s decline in overall risk-adjusted capitalization and weakening balance sheet metrics, primarily driven by net underwriting losses in recent years resulting in a capital decline. The expectation is for operating metrics to improve in the near term to alleviate further pressure on capitalization. Further deterioration in overall risk-adjusted capitalization could potentially result in a downgrade in the balance sheet strength assessment.

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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