A.M. Best Revises Outlooks to Stable for Members of Lititz Mutual Insurance Pool
OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of the members of Lititz Mutual Insurance Pool (Lititz), which includes Lititz Mutual Insurance Company and its three reinsured affiliates: Farmers’ and Mechanics’ Mutual Insurance Company, Livingston Mutual Insurance Company and Penn Charter Mutual Insurance Company. All companies are domiciled in Lititz, PA.
The ratings reflect Lititz’s supportive risk-adjusted capitalization, positive surplus growth in recent years, conservative leverage measures and consistently favorable loss reserve development. The revised outlooks reflect sustained improvement in operating performance following aggressive corrective actions, which included the introduction of tier rating in the homeowners line, effective agency management, refinement of required minimum deductibles and enhanced roof valuation methods. As a result of these efforts, Lititz has reported pretax operating income over the past two years, following periods that were impacted significantly by weather events and rate inadequacy.
Lititz also implemented a new policy administration system to increase operating efficiencies. While the technology investment raised the expense ratio over the past couple of years, it provided significant operational benefits, with the ability to more aggressively pursue rate chief among them. Results are expected to continue to benefit from the updated system, especially as related costs are now fully recognized.
Partially offsetting these rating factors are the company’s geographical concentration of risk and an elevated expense structure that is impacted by the commission expense, although not uncommon for companies that utilize independent agencies. Additionally, Lititz’s investment philosophy focuses on long-term total return through equity investments, which increases its common stock leverage to a level substantially above the composite.
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