Best’s News & Research Service - January 09, 2025 04:23 PM (EST)
AM Best Downgrades Credit Ratings of Ontario Insurance Company
- January 09, 2025 04:23 PM (EST)
//BestWire// - AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “a” (Excellent) of Ontario Insurance Company (Ontario) (Shortsville, NY). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.
The ratings reflect Ontario’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The downgrade of Ontario’s ratings reflects its unfavorable operating performance results, which have shown a high degree of volatility in recent years. Ontario reported an elevated combined ratio of 108.5% through the third quarter of 2024, which followed the worst two underwriting years in company history, as it reported a 117.5% and 124.9% combined ratio in 2022 and 2023, respectively. Driving these results was historically high loss activity, as the company saw inflationary increases in property losses, as well as increases in attorneys’ fees due to a higher percentage of casualty claims that were litigated. Fire losses and weather-related losses were the biggest drivers of the heightened loss experience the company reported over this period, and weather activity such as hail and windstorms impacted results throughout 2024. As a result of the elevated loss experience, the company's five-year average pre-tax and total returns on revenue and equity lag its industry composite peers. Additionally, since 2019, the combined ratio trend of Ontario has aligned much closer to the median combined ratio trend of companies with an adequate operating performance assessment within its composite.
The ratings also reflect Ontario’s balance sheet strength assessment of very strong, which is driven by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The business profile assessment of limited reflects the company’s product concentration, as 100% of direct writings are in New York, leaving results susceptible to weather-related events. Ontario’s ERM assessment of appropriate reflects its risk management capabilities that are commensurate with the complexity its business and align with its risk profile.
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.