Fitch Affirms Greater New York Mutual Insurance Company's IFS at 'A-'

CHICAGO--()--Fitch Ratings has affirmed the 'A-' Insurer Financial Strength (IFS) rating of 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 rating is supported by a conservatively-structured balance sheet, characterized by low operating leverage, no financial leverage, a relatively low-risk investment portfolio and a history of favorable loss reserve development. Balanced against these positive factors are GNY's small market position and material modeled catastrophe exposure.

GNY's market position and size/scale are categorized by Fitch as "small" based on net written premium of $254 million and policyholders' surplus of $431 million as of Dec. 31, 2014. Consequently, absent other mitigating factors, a company with this profile would typically carry an IFS rating in the 'BBB' category.

GNY was scored as "Adequate" by Fitch's Prism capital model, which is below guidelines for the company's current rating category. 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.

Other capital measures such as operating leverage, net leverage and NAIC risk-based capital ratio are considered better than median guidelines for GNY's current rating category. Statutory operating leverage is trending modestly higher, but remains strong at 0.7 times (x) at June 30, 2015. Statutory net leverage, calculated as written premiums plus liabilities divided by surplus, is conservative at 2.1x at June 30, 2015. In addition, GNY's NAIC RBC ratio was solid at 402% of the company action level at year-end 2014.

GNY has reported favorable reserve development in the most recent five years. Favorable development year-to-date June 30, 2015 was 1.1 percentage points on the combined ratio, compared to 3.1% of favorable development in the same period in 2014. 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's combined ratio was 103.5% during the first half of 2015, including 10 percentage points of catastrophe losses. Full year 2014's combined ratio was 99.1% with $18 million in catastrophe losses or 7.4% of earned premium. Year-to-date June 30, 2015 net income was nearly $1 million, down from $1.8 million for the same period in 2014. GNY's annualized return on surplus was modest at 0.4% through the first six months of 2015.

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 one-quarter of written premium is currently for business outside of New York and New Jersey.

RATING SENSITIVITIES

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.

Fitch has taken the following rating actions:

Greater New York Mutual Insurance Company

Insurance Company of Greater New York

Strathmore Insurance Company

GNY Custom Insurance Company

--IFS affirmed at 'A-'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992633

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992633

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analysts:
Douglas M. Pawlowski, CFA, +1-312-368-2054
Senior Director
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst:
Martha M. Butler, CFA, +1-312-368-3191
Senior Director
or
Committee Chairperson:
Mark E. Rouck, CPA, CFA, +1-312-368-2085
Senior Director
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
New York
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analysts:
Douglas M. Pawlowski, CFA, +1-312-368-2054
Senior Director
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst:
Martha M. Butler, CFA, +1-312-368-3191
Senior Director
or
Committee Chairperson:
Mark E. Rouck, CPA, CFA, +1-312-368-2085
Senior Director
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
New York
alyssa.castelli@fitchratings.com