Best’s News & Research Service - September 13, 2016 02:07 PM (EDT)
A.M. Best Revises Issuer Credit Rating Outlook to Positive for Members of Columbia Lloyds Companies
- September 13, 2016 02:07 PM (EDT)
Oldwick //BestWire// - A.M. Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating of B++ (Good) and Long-Term ICR of “bbb” of Columbia Lloyds Insurance Company and MDOW Insurance Company, which are collectively referred to as Columbia Lloyds Companies (Columbia Lloyds). The outlook of the FSR remains stable. Both companies are domiciled in Houston, TX.
The revised outlook for the Long-Term ICR reflects Columbia Lloyds’ improved profitability and operating results, which outperform the composite average. Surplus has grown in four of the past five years, driven by better-than-average underwriting performance that allowed the company to report operating returns notably higher than the composite average. The initiatives driving the profitability trends include rate increases, reduced concentration around Houston and Oklahoma City, and expanded product offerings. Since the group was created, Columbia Lloyds primarily focused on the low value dwelling market. However, in 2011, Columbia Lloyds began to write higher value homeowners policies and small family farms and more recently, in 2015, introduced private passenger auto products to complement this business. These positive Credit Rating (rating) factors are partially offset by Columbia Lloyds’ property focus in Oklahoma and Texas. Columbia Lloyds mitigates this risk through a comprehensive reinsurance program with highly rated carriers, which reduces volatility from frequent and severe weather events. This was particularly evident in the first half of 2016, when hail storm losses in Texas alone surpassed the 10-year average by the end of April.
Maintaining favorable operating results while improving overall risk-adjusted capitalization and underwriting leverage could result in a positive change in ratings. Negative rating pressure could occur with a return to unfavorable operating results, increased leverage or a decline in overall risk-adjusted capitalization.
This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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