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FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 18, 2015 02:25 PM (EST)
A.M. Best has revised the outlook to negative from stable while affirming the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of Saucon Mutual Insurance Company (Saucon) (Bethlehem, PA).
While Saucon maintains risk-adjusted capitalization that supports its ratings, the revision of the outlook reflects the inherent execution risk involved with the current activity to create a new holding company, Saucon Holding Company (SHC), and the demutualization of Saucon. Saucon, along with its current wholly-owned subsidiary Saucon Insurance Agency, Inc., will become wholly-owned subsidiaries of SHC. This move represents a significant change in Saucon's organization and establishes a structure that is intended to allow Saucon to begin taking on new underwriting risks in several years. This change will also have staffing implications in the future, since the company has had a new business moratorium in place since 2008.
The rating affirmation reflects Saucon's strong capital base, its long-standing market presence in eastern Pennsylvania as a writer of perpetual homeowners business and strong investment performance. In addition, Saucon realized improved capital levels as evidenced by an improved Best Capital Adequacy Ratio (BCAR). Furthermore, despite having seen moderate levels of deterioration in its underwriting performance year over year, investment results have been strong enough to offset these losses.
The ratings could be negatively impacted if there were a sudden, unexpected and material decline in risk-adjusted capitalization, a sustained deterioration in operating performance or total investment returns, diminished liquidity measures, or a material disruption in business operations during the execution of the company restructuring and ongoing business practices.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
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 visit A.M. Best's Ratings & Criteria Center.
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