OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings to “a-” from “a+” of Baltimore Equitable Society (Baltimore Equitable). The outlook assigned to these Credit Ratings (ratings) is stable. The company is domiciled in Baltimore, MD.
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 current rating actions follow the completion of A.M. Best’s analysis of Baltimore Equitable under the updated BCRM.
The ratings reflect Baltimore Equitable’s balance sheet, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The stable outlooks reflect A.M. Best’s expectation that the very strong balance sheet strength level will be maintained despite the inherent volatility in the investment portfolio due to elevated equity leverage.
Baltimore Equitable’s balance sheet strength reflects the very strong level of risk-adjusted capitalization, a comprehensive reinsurance program and historically favorable reserve development. Partially offsetting these positive rating factors is the elevated common stock leverage compared with the personal property composite. Baltimore Equitable’s operating performance was volatile in the past, driven by fluctuations in the equity market.
However, the significant appreciation in global equity markets recently has allowed Baltimore Equitable to grow surplus to a record level. Baltimore Equitable serves a niche market offering perpetual insurance policies. While Baltimore Equitable has a long-standing history in the mid-Atlantic personal property market, the consistent decline in policies in force reflects its limited business profile. Furthermore, Baltimore Equitable also benefits from an appropriate ERM program that supports the risk profile of the organization.
Further negative rating action could occur if there is a material decline in risk-adjusted capitalization or if there is a sustained deterioration in total returns.
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