AM Best Revises Outlooks to Stable for STICO Mutual Insurance Company, Risk Retention Group

OLDWICK, N.J.--(BUSINESS WIRE)--AM 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 (Long-Term ICR) of “a-” (Excellent) of STICO Mutual Insurance Company, Risk Retention Group (STICO) (Burlington, VT).

These Credit Rating (ratings) reflect STICO’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revised Long-Term ICR outlook reflects AM Best’s expectation that the risk retention group (RRG) will maintain a balance sheet assessment in the very strong range supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best also expects moderate volatility in STICO’s underwriting results sustained through excellent loss and loss adjustment expense ratios, complemented by improving expense ratios. Attraction of new members should continue to enhance premium growth and diversification, and the company appears sufficiently covered under the new excess layer it added in 2021 to support members desiring higher limits.

STICO’s very strong balance sheet strength is supported by the strongest level of risk-adjusted capitalization, as measured by BCAR, conservative reserving philosophy and low underwriting leverage. The RRG has produced consistent policyholder surplus growth from its strong net investment income returns, which has provided additional support in underpinning its balance sheet strength.

STICO’s adequate operating performance is reflective of its pre-policyholder dividend underwriting profitability, which highlights its favorable loss ratios due from consistently favorable loss development and a decline in the frequency of claims. This is offset partially by an elevated expense ratio, which has declined in recent years, but still lags the industry composite. Also, the RRG has reported increases in gross premiums written in each of the past three years, primarily due to the addition of new members. STICO has made concerted efforts to expand and diversify its membership base into tanks for industries such as personal care, pharmaceuticals, and food and beverage, reducing concentration on those for the energy sector.

The RRG’s limited business profile is reflective of the company being a niche writer with a concentrated product focus in the commercial general liability and environmental impairment liability lines of business. As an RRG, STICO has done an excellent job in member retention with a historical retention ratio of 95%. AM Best considers STICO’s ERM framework and risk management capabilities to be appropriate for the size and complexity of its organization. The company does have exposures to high severity liability claims, which it mitigates through its comprehensive reinsurance program.

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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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