Best’s News & Research Service - April 19, 2016 01:43 PM (EDT)
A.M. Best Downgrades Issuer Credit Rating of Associated Mutual Insurance Cooperative
- April 19, 2016 01:43 PM (EDT)
Oldwick //BestWire// - A.M. Best has downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating (FSR) of B++ (Good) of Associated Mutual Insurance Cooperative (Associated Mutual) (Woodridge, NY). The outlook for the FSR has been revised to negative from stable while the outlook for the ICR remains negative.
The ICR downgrade is a reflection of Associated Mutual’s continued underwriting losses, resulting in elevated combined ratios and an overall drop in surplus over the last five years. Capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains supportive of the ratings; however, due to increased writings and decreased surplus, overall risk-adjusted capitalization has fallen from previous years. The company’s geographic concentration of risk exposes surplus to frequent and severe weather-related events amid an extremely competitive marketplace. In recent years, premium volume risen as the company began to offer homeowners insurance in downstate New York. The homeowners line has performed well and diversifies the company’s overall book of business.
Partially offsetting these negative rating factors are the company’s pure loss ratios, technological improvements and proactive succession planning. Associated Mutual’s pure loss ratio compares favorably with the commercial casualty composite, and the company’s five-year average pure loss ratio is significantly lower than the commercial casualty composite. While the company’s expenses are the driver of elevated combined ratios, initiatives have been put into place to reduce expenses, particularly loss-adjusted expenses. Additionally, a number of technological advancements have been implemented, which have cut down on expenses and streamlined work processes. Expenses were somewhat skewed as key staff was duplicated for an extended period of time in an effort to aid in a smooth transition.
Further negative rating action may occur if Associated Mutual’s underwriting results continue to decline or if capital strength, as measured by A.M. Best’s capital model, further deteriorates. Removal of the negative outlooks may be warranted if there is improvement in Associated Mutual’s underwriting results and strengthened risk-adjusted capitalization.
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 see A.M. Best’s Recent Rating Activity web page.
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