Best’s News & Research Service - January 26, 2017 03:09 PM (EST)
A.M. Best Downgrades Credit Ratings of Saucon Mutual Insurance Company
- January 26, 2017 03:09 PM (EST)
Oldwick //BestWire// - 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 Saucon Mutual Insurance Company (Saucon) (Bethlehem, PA). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.
While Saucon maintains adequate risk-adjusted capitalization, the rating downgrades are related to the company’s limited business profile as agency distribution of its perpetual products is inactive with no direct new business is being written. Saucon has in-force perpetual homeowners’ policies for risks located in eastern Pennsylvania, but has had a new business moratorium in place since 2008. Restructuring plans that have the potential to change the company’s business profile with regard to the source of new business and type of exposures insured have been discussed over the past few years. This new structure and profile pose execution risk and potential staffing implications. A.M. Best will continue discussions with management as progress is made regarding this change.
As a perpetual homeowner writer, Saucon does not recognize policy deposits as premium revenue. Therefore, the evaluation of operating performance and the company’s ability to generate capital appreciation is focused on total investment returns. In recent years, investment income and capital gains have been volatile, as reflected in the company’s total return on invested assets and equity measures. Continued strain is expected on the investment portfolio as a result of the low interest rate environment and volatile equity market.
Negative rating action could occur if there is a sudden and unexpected material decline in risk-adjusted capitalization or a significant increase in underwriting risk from other direct or assumed business that puts pressure on the capitalization of the company.
This press release relates to rating(s) 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.
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