AM Best has downgraded the Financial Strength Rating (FSR) to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “bbb-” (Good) from “bbb+” (Good) of Claverack Cooperative Insurance Company, Midrox Insurance Company, and Mid-Hudson Co-Operative Insurance Company. These companies are collectively referred to as Mid-Hudson Group and are domiciled in Montgomery, NY. The outlook of the FSR has been revised to negative from stable, while the outlook of the Long-Term ICRs is negative.
The Credit Ratings (ratings) reflect the group’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating downgrades reflect continued deterioration in policyholder surplus at March 31, 2023, which resulted in a corresponding decline in overall risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and weakening balance sheet metrics including increased underwriting leverage measures. A factor that contributed to this decline is an increase in the number of large property fire losses that led to net reserve levels that now exceed policyholder surplus. Also, increased per risk loss retentions, declining liquidity measures and elevated common stock leverage all contributed to a further (-11.7%) decline in policyholder surplus.
In August 2022, there was a negative outlook placed on the group’s adequate operating performance assessment, which reflected deterioration in the group’s operating performance from underwriting losses over the past three years. Since then, the group reported combined ratios of 124% and 159% at Dec. 31, 2022, and March 31, 2023, as a result of increased commercial multi-peril and dwelling fire losses. Accordingly, due to the continued deterioration in operating results the assessment was revised to marginal.
The continuation of the negative outlook of the Long-Term ICRs reflects the uncertainty of the group’s ERM framework and its ability to maintain its current adequate balance sheet strength assessment. While management has implemented corrective actions to improve operating performance and stabilize its balance sheet strength these actions will need to gain positive traction to avoid negative rating action over the intermediate term.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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