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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 10, 2013 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating (FSR) to B+ (Good) from B++ (Good) and issuer credit ratings (ICR) to “bbb-” from “bbb” for the members of Palisades Group (Palisades) (Berkeley Heights, NJ) and the members of High Point Homeowners Group (High Point) (Red Bank, NJ). The outlook for all ratings has been revised to stable from negative. These entities are all operating subsidiaries of their parent company, Palisades Safety and Insurance Association. (See below for a detailed listing of the companies.)
The rating downgrades reflect Palisades and High Point’s unfavorable underwriting performance in recent years leading to declines in surplus, thin risk-adjusted capitalization in relation to potential future catastrophic losses, and elevated leverage measures from both underwriting and equity investment perspectives. While the core books of business have shown recent improvement in operating performance, frequent and severe weather events have created challenges for the organization, leading to operating losses and deterioration in surplus. Risk-adjusted capitalization is adequate for the current rating level; however, there is little margin to absorb continued weather events or deterioration in core operating results. As single state writers, Palisades and High Point remain susceptible to localized weather and to competitive, judicial and regulatory issues.
Positive rating attributes are Palisades and High Point’s well established market positions and local expertise in New Jersey, with multiple distribution channels. Both groups have refined underwriting criteria, adjusted rates and reduced some expenses in order to improve overall results and the spread of risk within New Jersey.
In future rating cycles, negative rating actions could occur if Palisades and High Point’s results deviate materially from projections and/or there is a reduction in risk-adjusted capitalization to a level that does not support their current ratings.
The FSR has been downgraded to B+ (Good) from B++ (Good) and the ICRs to “bbb-” from “bbb” for the following members of the Palisades Group:
-Palisades Safety and Insurance Association
-Palisades 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 FSR has been downgraded to B+ (Good) from B++ (Good) and the ICRs to “bbb-” from “bbb” for the following members of High Point Homeowners Group:
-High Point Preferred Insurance Company
-Palisades Property and Casualty Insurance Company
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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