CHICAGO--()--Fitch Ratings has assigned an Insurer Financial Strength (IFS) rating of 'A-' to Greater New York Mutual Insurance Company (GNY). The Rating Outlook is Stable. A full list of ratings can be found below.
KEY RATING DRIVERS
GNY's financial strength rating is supported by a strong balance sheet, characterized by low operating leverage, no debt outstanding, a history of favorable reserve development and a conservative investment strategy. Balanced against these positive factors are GNY's small and narrowly focused market position and material catastrophe exposure.
GNY's market position and size/scale are categorized by Fitch as 'small' with net written premium of $213 million and policyholders' surplus of $389 million. Absent other mitigating strengths listed above, a company of GNY's size/scale would typically carry an IFS rating in the 'BBB' category.
Superstorm Sandy losses on a pre-tax basis, net of reinsurance, were $16.5 million, amounting to 9 percentage points of annual earned premium. The company's underwriting and overall risk management performed well during Superstorm Sandy which hit GNY's geographic concentration in New York and New Jersey. GNY's combined ratio was 108.5% for 2012, improving from 128.6% in 2011.
During 2011, the company reported material catastrophe losses attributable to winter storms and Hurricane Irene, amounting to $31 million of incurred losses. Prior to Sandy, the company reported a statutory net profit of $8 million in the first nine months of 2012, compared with a loss of $20 million in full year 2011.
Capitalization at GNY is considered 'Adequate' as measured by Fitch's Prism capital model. Natural catastrophe exposure is a key risk element that increases target capital levels for GNY under Prism, reflecting its commercial property insurance orientation and geographic business concentration. Statutory operating leverage as measured by net leverage (written premiums plus liabilities divided by surplus) is conservative at approximately 1.9 times and NAIC risk based capital ratios are strong at 385% of the company action level at Dec. 31, 2011.
The investment portfolio has minimal 'risky' assets, which are counted as unaffiliated equity investments, below investment grade fixed income securities and affiliated investments. Unaffiliated equity securities were responsible for all 'risky' assets and amounted to less than one-half percent of total surplus. Mortgage-backed security investments are primarily in lower risk government agency paper.
GNY has reported favorable reserve development in the most recent consecutive four year period. Approximately 80% of total reserves are related to shorter-tail commercial multi-peril claims, while most of the balance is in workers' compensation insurance.
GNY has a niche providing habitational insurance to cooperative apartment buildings, condominium associations and apartment rental risks, and a wide variety of commercial classes of business. The company offers commercial multi-peril insurance predominantly in New York and New Jersey. The company has expanded over time into Midwest and Mid-Atlantic states. Approximately 25% of written premium is currently for business outside of New York and New Jersey.
Key rating triggers for GNY that could lead to a downgrade include:
--A material catastrophe loss representing greater than 15% of current surplus;
--A significant change in GNY's conservative balance sheet such as deterioration in risk-based capital as measured by Fitch's capital model or a trend of unfavorable reserve development.
Key rating triggers for GNY that could lead to an upgrade include:
--Risk mitigation efforts that reduce probable maximum loss estimates from a hurricane making landfall in New York or New Jersey;
--A substantial improvement in market presence as well as diversification by product and geography.
Greater New York Mutual Insurance Company
Insurance Company of Greater New York
Strathmore Insurance Company
GNY Custom Insurance Company
--IFS assigned at 'A-'
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria & Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
Applicable Criteria and Related Research
Insurance Rating Methodology - Amended