OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlook for the issuer credit rating (ICR) to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the ICR of “a” of Utica First Insurance Company (Utica First) (Oriskany, NY). The outlook for the FSR is stable.
The revised outlook to positive for the ICR reflects Utica First’s favorable operating results, strong return measures and surplus generation over several years. The company’s combined ratio, on a five- and 10-year average basis, has outperformed the average of its commercial casualty peer composite. Management continues to undertake profitability initiatives which have included increased deductibles, rate increases, stricter coastal guidelines, technological advancements and geographic diversification. Further, Utica First’s risk-adjusted capitalization remains solid and well supportive of the current ratings.
Partially offsetting these positive attributes are the company’s product and geographic concentration in the Northeast and the potential for volatility in operating results due to the greater concentration of property business within its book of business relative to the commercial casualty composite. As such, results are subject to regional weather and economic conditions. This concentration led to the uptick in the company’s 2011 combined ratio as storms resulted in a sharp increase in property and business interruption losses. However, despite the increased loss activity in 2011, Utica First’s surplus position remained relatively unchanged (less than 1% decline).
Future positive rating action is contingent upon Utica First’s ability to sustain its current levels of operating profitability while maintaining solid overall risk-adjusted capitalization. Negative rating action may follow a material decline in risk-adjusted capitalization or a sustained deterioration in operating performance.
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
• Evaluating U.S. Surplus Notes
• Risk Management and the Rating Process for Insurance Companies
• The Treatment of Terrorism Risk in the Rating Evaluation
• 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.
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