AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of Discovery Insurance Company (Discovery) (Kinston, NC).

The Credit Ratings (ratings) reflect Discovery’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).

The revised outlooks to stable reflect Discovery’s improved risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as of the second quarter 2025. The position benefits from a material decline in premium risk driven by management’s strategic initiatives to lower premium risk, coupled with modest growth in capital. Surplus erosion in prior years was primarily driven by increased volatility in underwriting results, largely reflective of higher loss costs primarily due to inflationary pressures that plagued the industry. Despite improvement, the capital position remains highly sensitive to material changes in premium volume.

Discovery’s operating performance assessment reflects inconsistent trends, heavily influenced by elevated underwriting losses in earlier years. The business profile assessment reflects the company’s product and geographic risk concentration as an insurer of nonstandard automobile insurance with business written exclusively in North Carolina. ERM reflects the effectiveness of Discovery’s evolving ERM practices, as evidenced by volatility in underwriting performance and capital erosion in the last three years. 

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.

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