A.M. Best Revises Outlook to Negative for Members of Lititz Mutual Insurance Pool
May 29 2015 - 11:20AM
Business Wire
A.M. Best has revised the outlook to negative from stable
and affirmed the financial strength rating of A (Excellent) and the
issuer credit rating (ICR) of “a” of the members of Lititz
Mutual Insurance Pool (Lititz), which includes the operations
of Lititz Mutual Insurance Company and its three reinsured
affiliates: Farmers’ and Mechanics’ Mutual Insurance Company,
Livingston Mutual Insurance Company and Penn Charter Mutual
Insurance Company. All companies are domiciled in Lititz,
PA.
The ratings reflect Lititz’s risk-adjusted capitalization that
remains supportive of the ratings, positive surplus growth in most
years, conservative leverage measures, consistently favorable loss
reserve development and an adequate liquidity position. The revised
outlook reflects Lititz’s underwriting losses and absence of pretax
operating income over several years caused primarily by an increase
in weather-related events and investments in technology. As a
result, Lititz’s underwriting and operating performance measures
currently lag the industry composite relative to its current rating
level.
Management has undertaken key strategic initiatives recently to
address the underwriting performance. These initiatives have
included implementing a new policy administration system,
introducing tier rating in the homeowner line, managing agency
appointments and introducing required minimum deductibles and roof
settlement endorsements in storm prone states. The company’s
investment in a new policy administration system has also allowed
Lititz to pursue rate more aggressively, chief among other
benefits. While the technology investment has raised the expense
ratio over the past couple of years, management expects that the
efficiencies ultimately gained from this will benefit the
underwriting and operating performance going forward.
Further negative rating actions may result if Lititz’s ongoing
and planned initiatives do not lead to the expected improvement in
underwriting performance or if there is a large decline in the
value of its invested assets, which are heavily concentrated in
equities, resulting in a reduction in policyholders’ surplus and/or
deterioration in its risk-adjusted capitalization as measured by
Best’s Capital Adequacy Ratio. Conversely, a revision in outlook
back to stable may ensue if underwriting performance improves and
is sustained while risk-adjusted capital remains strong.
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.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best
Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process
for Insurance Companies
- Understanding BCAR for
Property/Casualty Insurers
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 visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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A.M. Best Company, Inc.Adib Nassery, 908-439-2200,
ext. 5687Financial
Analystadib.nassery@ambest.comorGreg Williams,
908-439-2200, ext. 5815Assistant Vice
Presidentgreg.williams@ambest.comorChristopher
Sharkey, 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com