OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb+” from “a-” of Chautauqua Patrons Insurance Company (Chautauqua) (Jamestown, NY). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.
The rating downgrades of Chautauqua are based on the company’s deteriorating underwriting and operating performance in recent years, largely impacted by weather-related losses, as well as an increase in the frequency and severity of fire and liability losses. The company’s unfavorable underwriting performance is evidenced with net underwriting losses in each of the past four years, elevating the five-year average combined ratio more than 10 points above the personal property industry composite. Similarly, the company’s pre-tax return on revenue and total return on surplus have diminished in recent years, with five-year averages that also compare unfavorably with the personal property composite averages. However, operating results benefit from a steady stream of net investment and other income, and have generated net income in each of the past five years. As a single state writer in New York, results are susceptible to potentially severe and frequent weather-related events as well as to regulatory and judicial challenges.
Partially offsetting these negative ratings factors are a number of management profitability initiatives, including an upcoming third party claims review, underwriting adjustments, expansion to under-utilized areas in the state, as well as significant rate actions. Additionally, the balance sheet strength benefits from a comprehensive reinsurance program including relatively low retentions, which helps shield surplus from extreme weather-related events.
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