OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of North Country Insurance Company (North Country) (Watertown, NY).
The ratings reflect North Country’s favorable operating performance in recent years and its solid risk-adjusted capitalization, reflective of low underwriting leverage ratios. North Country’s solid capital position has been derived from surplus growth in each of the past five years, driven by consecutive years of underwriting gains and supplemented by net investment and other income. The company has recorded double-digit pre-tax returns on revenue in each of the last five years. Contributing to North Country’s favorable operating performance has been the re-underwriting of unprofitable business, strict adherence to underwriting guidelines, an evaluation of insurance–to-value and rate increases.
Partially offsetting these positive rating factors are North Country’s geographic risk concentration in New York, which exposes its operating performance to weather-related events, as well as changes in regulatory and competitive market conditions. However, extensive reinsurance coverage mitigates this risk, and the net tax-affected probable maximum loss from a modeled storm with a 100-year return period is a manageable level of surplus. Also, the company’s underwriting expense ratio is elevated relative to the personal property composite average, primarily due to commission expenses.
The outlook could return to stable and/or there could be a downgrading of North Country’s ratings if its favorable operating performance of recent years is reversed or risk-adjusted capitalization was to weaken. There could be an upgrading of the ratings if the company’s favorable operating performance continues and risk-adjusted capitalization remains solid.
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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