AM Best

A.M. Best Downgrades Ratings of Baltimore Equitable Society


Angelo V Lozano
Financial Analyst
(908) 439-2200, ext. 5169

Rick Decker
Assistant Vice President
(908) 439-2200, ext. 5423
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK - MARCH 06, 2015 04:09 PM (EST)
A.M. Best has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and the issuer credit rating to "a+" from "aa-" of Baltimore Equitable Society (Baltimore) (Baltimore, Maryland). The outlook for both ratings has been revised to stable from negative.

The downgrade reflects the decline in risk-adjusted capitalization over several years driven by fluctuating surplus levels and the increasing investment risk stemming from a well above average allocation to equity holdings. Total investment returns are critical to Baltimore's policyholders' surplus growth. In addition, total return on equity over the past 10 years has fluctuated and resulted in the average to fall well below the industry average. Current macroeconomic factors and the changing business environment continue to be a challenge for the company and its market position since it targets a very specific property market, primarily through customer referrals and direct mailings versus more diversified product distribution systems. Recently, the generation of new business has not out-paced business lost.

Partially offsetting these negative rating factors are Baltimore's strong liquidity measures as current assets significantly exceed overall liabilities, illustrating the ability of the company to satisfy any return of policyholder deposits. Furthermore, Baltimore continues to benefit from a strong, enduring market presence as a Maryland property writer of perpetual business. Management has a solid understanding of the perpetual homeowners business and is focused on growing this line. Further negative rating action could be taken if risk-adjusted capitalization declines, a sustained deterioration in operating performance or total investment returns occurs, or there is a weakening in the liquidity measures.

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

Key insurance criteria reports utilized:

  • Analyzing Perpetual Insurers

  • Catastrophe Analysis in A.M. Best Ratings

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for Property/Casualty Insurers

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.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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AMB# Company Name
003225 Baltimore Equitable Society