Best’s News & Research Service - November 05, 2015 02:18 PM (EST)
A.M. Best Revises Outlook to Positive for Colonial Surety Company
- November 05, 2015 02:18 PM (EST)
Oldwick //BestWire// - A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Colonial Surety Company (CSC) (headquartered in Woodcliff Lake, NJ).
The revised outlook reflects CSC’s excellent risk-adjusted capitalization, consistently favorable pre-tax operating income and conservative investment and underwriting philosophy. The company’s surplus growth is attributable to profitable underwriting income and a steady stream of net investment income. Surplus has increased annually since 2005 and has continued to grow through the first half of 2015.
These positive rating factors are partially offset by the company’s limited business profile, relatively high reinsurance dependence and geographic concentration. Historically, CSC has offered one product with a concentration in New Jersey and New York, with some business written in neighboring states. The geographical concentration exposes surplus to changes in the judicial, competitive and legislative environments. However, bond offerings have expanded through diversification into California, and expansion efforts are continuing. Overall, the surety line continues to run favorable loss ratios. As a result, the company’s combined ratio has been below 85% since at least 2005, and CSC compares favorably to the Fidelity and Surety Composite. Positive rating pressure may occur following a period of profitable growth with commensurate increases expected in surplus through organic earnings, as well as a continued meaningful decrease in reinsurance dependence and geographic expansion.
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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