AM Brightens Outlook to Bad for Discovery Insurance Company

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AM Best has revised its outlook to negative from stable and affirmed the Financial Strength of B+ (Good) and the Long-Term Issuer Rating of “bbb-” (Good) for Discovery Insurance Company (Discovery) (Kinston, NC).

Credit Cards (ratings) reflect the strength of Discovery’s balance sheet, which AM Best considers strong, as well as its operational efficiency, limited business history and marginal enterprise risk (ERM) management.

The negative outlook reflects a decline in Discovery’s performance and earnings over the past year, which led to a decline in policyholder balances. This decrease is due to a decline in underwriting results due to a decrease in premiums written and received due to pressure on pricing due to increased entrants into the general insurance market in North Carolina. The record results have been marred by difficulties in the auto market, which include parts sales issues, job losses and rising used car prices. Although management plans to take various pricing actions to return to profitable operations, it is unclear whether or not this will be enough to return Discovery to its previous operating profit in the middle years. AM Best will continue to monitor the performance of the management’s schedule and how it will affect the workload of Discovery.

Discovery’s strong balance sheet continues to be supported by its strong risk-adjustment ratio, as measured by Best’s Capital Adequacy Ratio (BCAR), loss-retention strategies and an appropriate return program. A comprehensive performance review shows a high level of performance, which is often in line with the AM Best non-conventional group over a five- and 10-year average. Marginal ERM reflects a company’s ERM practices, which have limited ability to deal with price risk effectively in a timely manner from recent competitive pressures.

This article relates to the Credit Ratings published on the AM Best website. For more information on ratings related to issuance and relevant disclosures, including details of the office responsible for issuing all ratings listed in this publication, please see AM Best’s. Recent Actions Web page. For more information on the application and limitations of the Credit Rating concept, please see Best’s Credit Ratings Guide. For more information on the appropriate use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best’s social media, please see Tips for Effectively Using Quality Scores & Tests.

AM Best is a global credit agency, news publisher and data analytics provider specializing in the insurance industry. The company is headquartered in the United States, and does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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Kevin Dorsey

Senior Financial Analyst

+1 908 439 2200, ext. 5401

[email protected]

Joseph Burton


+1 908 439 2200, ext. 5525

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Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Jeff Mango

General Manager,

Strategy & Communications

+1 908 439 2200, ext. 5204

[email protected]

Source: AM Best