OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with positive implications and upgraded the Financial Strength Rating (FSR) to A- (Excellent) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a-” from “bbb-” of Midrox Insurance Company (Midrox) (Roxbury, NY). The outlook assigned to these Credit Ratings (ratings) is stable. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of Mid-Hudson Co-Operative Insurance Company (Mid-Hudson) (Montgomery, NY) and Claverack Cooperative Insurance Company (Claverack) (Kinderhook, NY). Mid-Hudson, Claverack, and Midrox are collectively known as Mid-Hudson/Claverack Cooperative Companies. The outlook of these ratings is stable.
The ratings reflect the group’s balance sheet strength, 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 ratings were placed under review with positive implications in December 2017 following a signed 100% quota share reinsurance agreement between Mid-Hudson and Midrox, anticipated to be effective Jan. 1, 2018, following state approval. Additionally, Mid-Hudson assumed board control of Midrox with the majority of board members represented by Mid-Hudson. The contract was approved by the New York Department of Financial Services in January 2018.
The ratings have been removed from under review, as A.M. Best has completed its analysis of the transaction and the impact on Midrox’s rating fundamentals.
The rating actions reflect the 100% quota share reinsurance agreement, whereas Midrox reinsures substantially all its insurance risk with Mid-Hudson. Midrox benefits from the existing technology advancements at Mid-Hudson, management team, and sound risk management practices. The transaction improves Midrox’s capital position, reduces the volatility of operating results, broadens product offerings and operating territories through the use of a shared agency force, and serves as a succession plan for the company.
Balance sheet strength is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), reflective of a high quality investment portfolio, generally favorable loss reserving trends, and a comprehensive reinsurance program with relatively low retentions to help shield surplus. Surplus growth is fairly consistent and helps to somewhat alleviate the strain of limited financial flexibility. Solid underwriting performance is driven by a favorable pure loss ratio, credited to conservative underwriting practices and pricing discipline. Net underwriting earnings are supplemented with consistent net investment income to produce profitable operating return measures. The business profile is viewed as limited, as all business is concentrated in New York, which exposes results to weather-related events and to judicial and regulatory challenges. Lastly, ERM is considered appropriate based on risk management practices at Mid-Hudson, which is an evolving process.
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