Best’s News & Research Service - April 04, 2018 03:09 PM (EDT)
A.M. Best Removes From Under Review, Downgrades Issuer Credit Ratings of Members of Andover Companies Pool
- April 04, 2018 03:09 PM (EDT)
Oldwick //BestWire// - A.M. Best has removed from under review with negative implications and downgraded the Long-Term Issuer Credit Ratings to “aa-” from “aa” and affirmed the Financial Strength Rating of A+ (Superior) for the members of Andover Companies Pool (Andover), which consists of Merrimack Mutual Fire Insurance Company and its majority-owned subsidiary, Bay State Insurance Company, and its affiliate, Cambridge Mutual Fire Insurance Company. The outlook assigned to these Credit Ratings (ratings) is stable. All companies are domiciled in Andover, MA.
The ratings were placed under review with negative implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The current rating actions follow the completion of A.M. Best’s analysis of Andover under the updated BCRM.
The ratings reflect Andover’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM). The stable outlooks reflect Andover’s historically strong operating performance whereby material returns are generated in most years, offsetting those impacted by severe catastrophes and supporting balance sheet strength.
Andover’s balance sheet strength reflects a very strong level of risk-adjusted capitalization, low underwriting leverage, strong liquidity and consistently favorable loss reserve development. Partially offsetting these positive rating factors is Andover’s significant position in common stock, which makes the pool more sensitive to shifts in the equity market.
Operating performance experienced some volatility in 2015 and 2017, due to abnormally severe weather-related losses. Despite this activity, the loss ratio remains well below the personal property composite and significant pretax operating income has been generated in most years. Andover continues to refine its pricing through rate action and monitor exposure concentrations. The pool’s long-standing history in the New England personal property market and its market position as a regional mutual, as well as the geographic diversification efforts derived from its assumed operations, are supportive of the favorable business profile assessment. Andover also benefits from an appropriate ERM program that supports the risk profile of the organization.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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