AM Best has revised its outlook with respect to the Andover Companies Pool. In its annual update, the rating agency announced that it has moved its outlook from negative to stable for the Long-Term Issuer Credit Ratings (Long-Term ICR). It also affirmed the company’s Financial Strength Ratings (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent). Based in Andover, the Andover Companies Pool includes the Merrimack Mutual Fire Insurance Company and its majority-owned subsidiary, Bay State Insurance Company, as well as its affiliate, the Cambridge Mutual Fire Insurance Company.
The following are additional comments made in the release:
“The Credit Ratings (ratings) reflect Andover’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The revised Long-Term ICR outlook to stable from negative is based on AM Best’s expectation that Andover will maintain its very strong overall balance sheet strength, benefitting from management’s strategic initiatives that will support more stable operating performance over the intermediate term, as well as a rebound in the market value of its substantial equity portfolio. Andover’s high common stock leverage is somewhat mitigated by its diversification, through investment guidelines that set minimum investment quality standards and its buy and hold approach to securities. The outlook revision also considers refinement of its assumed property reinsurance business, including non-renewals of select programs and improved terms and conditions, which should benefit its favorable business profile. Andover is one of the largest regional mutual insurers in the Northeast region’s personal lines market with a modest share of the homeowners market in Massachusetts.
Andover’s adequate operating performance assessment is based on underwriting and operating performance metrics, which on average, perform better than the AM Best personal lines composite, despite modest volatility from weather-related events on both its direct and assumed business.
Andover’s ERM is assessed as appropriate for its risk profile, based on a formal program that includes participation from an ERM team, the executive leadership team and its board of directors.”
