CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 21, 2011 12:00 PM (EST)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength ratings (FSR) of B++ (Good) and issuer credit ratings (ICR) of "bbb" of the Palisades Group (Palisades) (Berkeley Heights, NJ), its members and the currently separately rated affiliate, High Point Preferred Insurance Company (Preferred) (Lincroft, NJ). The lead member of the Palisades group is Palisades Safety and Insurance Association. (See below for a detailed listing of the companies.)
The revised outlook reflects Palisades' adequate risk-adjusted capitalization, declining operating performance over the recent five-year period and the 2010 decline in policyholders' surplus. The group has reported four years of underwriting losses, while maintaining elevated underwriting and loss reserve leverage, and a dependence on reinsurance. The group's business is concentrated exclusively in New Jersey, which exposes it to potentially unfavorable judicial decisions, regulatory actions, increased competitive market conditions and catastrophic weather-related losses.
The underwriting losses in 2010 resulted from frequent and severe winter weather events, which were within the company's catastrophe retention. In addition, Palisades experienced an increased frequency of automobile liability losses.
Offsetting factors include Palisades' well-established market position and extensive local market expertise as a leading writer of personal lines business in New Jersey.
The affirmation of Preferred's ratings recognize its generally favorable performance in the homeowners' book of business, as well as its adequate capitalization, which is offset by catastrophe exposure and the rating factors in Palisades.
The assignment of separate ratings to Preferred is the result of a change in its strategic position within the Palisades group as a result of its January 1, 2011 reorganization wherein, High Point Property and Casualty Insurance Company (High Point) replaced Preferred as the lead High Point company within the Palisades group of companies. Going forward, Preferred will be the writer of the High Point group's homeowners' business.
The FSR of B++ (Good) and ICRs of "bbb" have been affirmed for the Palisades Group and its following members:
- Palisades Insurance Company
- Palisades Property and Casualty Insurance Company
- Palisades Safety and Insurance Association
- High Point Preferred Insurance Company
- High Point Property and Casualty Insurance Company
- High Point Safety and Insurance Company
- Twin Lights Insurance Company
- Teachers Auto Insurance Company of New Jersey
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Rating Members of Insurance Groups"; "A.M. Best's Ratings & the Treatment of Debt"; and "Equity Credit for Hybrid Securities." Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.