A.M. Best Downgrades Credit Ratings of Governmental Interinsurance Exchange

OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best has downgraded the Financial Strength Rating to A-
(Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to
“a-” from “a” of Governmental Interinsurance Exchange (GIE)
(Bloomington, IL). The outlooks of these Credit Ratings (ratings) remain
stable.

The ratings reflect GIE’s balance sheet strength, which A.M. Best
categorizes as very strong, as well as its adequate operating
performance, limited business profile and appropriate enterprise risk
management (ERM).

The rating actions reflect GIE’s limited business profile, which is
based on its moderate to high risk product lines and geographic risk
concentration in Illinois. Due to the company’s stringent underwriting
standards, premium volume has declined substantially in recent years due
to discontinued operations.

Management will remain challenged to supplement lower premiums given the
current strategy to improve the business mix to ensure that its pool of
insured local governments has homogeneous exposures to loss and similar
commitments to risk management. GIE is a public entity risk pool formed
as a reciprocal insurance company to provide certain property/casualty
insurance coverages and related services exclusively to a small select
group of participating local public entities. This concentrated
exposure is mitigated partially by management’s strict underwriting
discipline and extensive knowledge of local government exposures, as
well as the types of claims brought against local public entities.

Balance sheet strength reflects the strongest level of risk-adjusted
capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), high
quality, well-diversified investment portfolio with strong liquidity,
below average underwriting leverage metrics and consistently favorable
loss reserve development trends. Operating performance has been adequate
over the past several years, derived from a steady flow of net
investment income and offset partially by negative underwriting results
due to the company’s significant expense disadvantage. This position is
driven by above average loss adjustment expenses, commissions and
fixed/overhead costs. The ERM program is aligned with the business model
to provide long-term access to high quality insurance and risk-related
services to a select group of local public entities.

The stable outlooks reflect the expectation of continued very strong
balance sheet strength and a return to profitable operating performance
despite volatility in underwriting income.

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
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Maurice Thomas, +1 908-439-2200, ext. 5794
Senior
Financial Analyst

maurice.thomas@ambest.com
or
Michelle
Baurkot, +1 908-439-2200, ext. 5314

Director
michelle.baurkot@ambest.com
or
Christopher
Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim
Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations
james.peavy@ambest.com

leverton

I have been involved with publishing and marketing for the past 32 years. My passion is helping people share their voice. I am able to do this through two important venues: One, with Area-Info.net where people can share everything from opinions to events to news. It is your choice! What do you want to share? Two, through a new program called America's Real Deal I am involved with to help business owners get their voice heard.I schedule speaking engagements with community groups and business groups to share my passion about the importance of "sharing your voice".Contact me directly at lee@leeeverton.coom for scheduling information.