OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and downgraded the Long-Term Issuer Credit Rating to “aa-” from “aa” and affirmed the Financial Strength Rating of A+ (Superior) of Otsego Mutual Fire Insurance Company (Otsego) (Burlington Flats, NY). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings were placed under review with negative implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The ratings have been removed from under review, as A.M. Best has completed its analysis of Otsego under the updated BCRM.
The ratings reflect Otsego’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Otsego’s balance sheet strength is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), reflective of historically redundant calendar and accident year loss reserves, extremely conservative underwriting leverage, and a high quality investment portfolio. Surplus is bolstered year over year with operating earnings. However, the company has high reinsurance dependence, limited financial flexibility and limited scale. Otsego’s operating performance on a five- and ten-year average basis is very strong, and consistent with key operating metrics that generally experience low volatility and compare very favorably with peer averages. The company’s long-standing, regional niche market position in New York and strong management team are supportive of the neutral business profile assessment. Although the product is generally limited to homeowners products, the company’s loyal agency force and strict underwriting standards continue to produce exceptionally strong underwriting ratios. Otsego also benefits from appropriate ERM, including a comprehensive reinsurance program.
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