A.M. Best Co. has downgraded the financial strength rating to C
(Weak) from C+ (Marginal) and the issuer credit rating to “ccc” from
“b-” of Community Mutual Insurance Company (Community Mutual)
(Castleton, NY). Concurrently, A.M. Best has withdrawn the
ratings in response to management’s request to be removed from A.M.
Best’s interactive rating process.
The downgrades follow Community Mutual’s continued unprofitable
underwriting performance and diminished levels of surplus. In
particular, in 2011, statutory surplus declined by 26.6%, and in 2012,
it declined by an additional 18%. Community Mutual has experienced
significant losses attributable to major fires and weather-related
events in recent years. The company’s unfavorable operating performance
is evidenced by its negative five-year average pre-tax returns on
revenue and surplus. Although the company's pure loss ratio compared
favorably to the personal property composite average on a five-year
average basis, elevated loss adjustment expenses and other underwriting
expenses contributed to net underwriting losses in each of the past five
years. Additionally, Community Murtual’s single-state concentration of
risk exposes it to weather-related events as well as to market,
regulatory and judicial issues.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include: “Risk
Management and the Rating Process for Insurance Companies”;
“Understanding BCAR for Property/Casualty Insurers”; and “Catastrophe
Analysis in A.M. Best Ratings.” Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
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