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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 09, 2010 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to B++ (Good) from B+ (Good) and issuer credit rating to "bbb" from "bbb-" of Bunker Hill Insurance Company (Bunker Hill) (Boston, MA). The outlook for both ratings is stable.
The ratings reflect Bunker Hill's strong risk-adjusted capitalization, trend of positive operating income and financial support provided by its ultimate parent, The Plymouth Rock Company. In addition, the ratings recognize the benefits derived from management's extensive knowledge of its marketing territories and agency relationships.
Partially offsetting these positive rating factors are the company's limited product offerings, dependence on reinsurance, significant catastrophe exposure and its concentration of property risks in Massachusetts and Connecticut.
In addition, the ratings recognize that Bunker Hill generated pre-tax operating profits over the past five years primarily from net investment income. Underwriting income was generated in four of the last five years due to milder weather, termination of non-performing business segments, reduced exposures and increased investments in technology and improved operating efficiencies.
Bunker Hill also has strengthened agency relationships by increasing cross-selling opportunities through its affiliation with Plymouth Rock Assurance Corporation. Nevertheless, Bunker Hill's policyholders' surplus remains exposed to a sizeable catastrophic loss, as represented by its net probable maximum loss (PML) from a 100-year hurricane event. However, these risks have been reduced over several years by implementations of various risk mitigation strategies, including a strengthened reinsurance program, reduced coastal exposures, enhanced policy provisions and renewal of its capital support agreement with The Plymouth Rock Company.
Furthermore, Bunker Hill's limited business scope and property concentration in New England has resulted in significant dependence on reinsurance. The company's exposure to hurricane loss events is expected to improve further as a result of management's ongoing underwriting, pricing and reinsurance initiatives.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.