OLDWICK, N.J.--(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 of “a-” of Chautauqua Patrons Insurance Company (Chautauqua) (Jamestown, NY).
The rating outlook reflects Chautauqua’s unprofitable underwriting performance in recent years, primarily due to weather-related claims including unprecedented catastrophe losses in 2015, as well as an increase in the frequency and severity of fire losses. The company’s unfavorable operating performance is evidenced by five-year averages for pre-tax return on revenue and surplus and a combined ratio that compared unfavorably with the personal property composite averages.
The ratings affirmations reflect the company’s excellent level of risk-adjusted capitalization, long-standing agency relationships, local market knowledge and generally favorable loss reserve development. In addition, the development of a new administrative and processing system will allow for improved operational efficiency and data mining that can be utilized for predictive modeling to enhance rating and underwriting decisions.
Partially offsetting these positive rating factors are the company’s single-state concentration of risk, which exposes it to weather-related events as well as to market, regulatory and judicial issues and its elevated common stock leverage which, while manageable, adds some volatility to its overall balance sheet and earnings.
Negative rating actions could result in the near term if Chautauqua’s operating performance continues to weaken due to deterioration in underwriting results beyond A.M. Best’s expectation or if there were a significant weakening of its overall risk-adjusted capitalization.
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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