Best’s News & Research Service - April 06, 2022 01:29 PM (EDT)
AM Best Downgrades Credit Ratings of Tuscarora Wayne Ins Co and Affiliate; Affirms Credit Ratings of Lebanon Valley Ins Co
- April 06, 2022 01:29 PM (EDT)
Oldwick //BestWire// - AM Best has downgraded the Financial Strength Rating (FSR) to A (Excellent) from A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” (Excellent) from “aa-” (Superior) of Tuscarora Wayne Insurance Company and its affiliate Keystone National Insurance Company. Together these companies are collectively referred to as Tuscarora Wayne Companies. Concurrently, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Lebanon Valley Insurance Company (Lebanon Valley). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Wyalusing, PA.
The ratings of Tuscarora Wayne Companies reflect their balance sheet strength, which AM Best assesses as strongest, as well as their strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The rating downgrades of Tuscarora Wayne Companies reflect a change in their operating performance assessment to strong from very strong, reflective of the deterioration in underwriting and operating performance metrics in recent years as a result of weather-related events and an increased severity in fire losses. Despite the deterioration, the group’s five-year average returns on equity and revenue modestly outperform its composite. Tuscarora Wayne Companies’ strongest level of balance sheet strength is supported by risk-adjusted capital at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), historical favorable reserve development, high quality investment portfolio and prudent reinsurance program to mitigate the impact of weather-related losses. The neutral business profile reflects the companies’ niche product offering in both commercial and personal lines and affiliation with Keystone Insurance Group, which allows for profitable expansion opportunities. AM Best considers the company’s ERM to be appropriate for the risk profile of the organization, with scenario analysis and stress testing performed.
The ratings of Lebanon Valley reflect its balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The balance sheet strength is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), conservative investment portfolio and favorable reserve development. These strengths are offset by Lebanon Valley’s limited size and scale of operations. The adequate operating performance is driven by net income being reported over the most recent five-year period driven by corrective underwriting actions, modest investment income, and a prudent reinsurance program. This is partially offset by an elevated expense ratio compared with its composite due to an above average commission structure and technology improvement costs. The company’s limited business profile reflects its geographic concentration as a single-state writer in Pennsylvania, which exposes it to market, regulatory and catastrophe risk, somewhat offset by a comprehensive reinsurance program. AM Best views Lebanon Valley’s ERM program as appropriate for its risk profile and coordinated through the entire Tuscarora Wayne organization. The ratings further consider explicit and implicit support provided by Tuscarora Wayne Companies, demonstrated via a surplus note, information technology support, claims administration, and shared management and board of directors.
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.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.