In a May 20th announcement, AM Best announced that it has revised its Issuer Credit Rating Outlook with respect to the Preferred Mutual Insurance Company. Based in New Berlin, NY, Preferred Mutual has been providing property and casualty insurance coverage since 1896. The insurer provides coverage to more than 232,000 individual and business customers in select Northeast states including New York, New Jersey, Massachusetts, and New Hampshire via its more than 500 independent agency partners. The following is a reprint of AM Best’s reasoning behind its decision:
AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a+” of Preferred Mutual Insurance Company (Preferred) (New Berlin, NY). The outlook of the FSR remains stable.
The Credit Ratings (ratings) reflect Preferred’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The Long-Term ICR outlook revision to negative is a result of the recent trend in the company’s balance sheet strength, including consecutive years of adverse reserve development, which has caused deterioration in the company’s underwriting performance, and a decline in policyholders’ surplus. Factors that could result in negative rating action include continuation of the unfavorable trend in reserve development or a material decline in risk-adjusted capitalization.
AM Best’s balance sheet strength assessment of strongest is supported by Preferred’s risk-adjusted capitalization being at the strongest level, along with generally positive growth in policyholders’ surplus over the long term that was offset partially by limitation in its financial flexibility. Preferred’s neutral business profile assessment is driven largely by its solid regional niche market with a broad product offering.