A.M. Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to a- from bbb+ of Wayne Cooperative Insurance Company (Wayne Cooperative) (Clyde, NY). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect Wayne Cooperatives balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The rating upgrades reflect Wayne Cooperatives very strong balance sheet strength underpinned by its risk-adjusted capitalization being at the strongest level, as measured by Bests Capital Adequacy ratio (BCAR), as well as improved and less volatile underwriting performance in the most recent five-year period. Following managements corrective actions to improve overall profitability, the underwriting performance has stabilized, as demonstrated by four consecutive years of a below break-even combined ratio.
Risk-adjusted capitalization is reflective of moderate underwriting leverage, a conservative investment portfolio comprised of 78% fixed income securities, and favorable calendar and accident year loss reserving trends. The capital position is further enhanced through consistent surplus growth, which averaged 8.0% through 2017 on a five-year compound average basis. Liquidity measures are strong and enhanced by positive operating cash flows year-over-year. However, Wayne Cooperative is limited in terms of financial flexibility and scale.
The operating performance has improved in the most recent five-year period. Solid and improved underwriting performance, owing to managements strict underwriting standards and controlled growth into underutilized areas of New York state, is demonstrated by the five-year average combined ratio of 96.1%. The first six months of 2018 have been profitable, yielding sizeable surplus growth and the largest net underwriting income recorded for a single reporting period. Underwriting income, paired with steady net investment earnings, have produced favorable operating return measures that compare similarly to the personal property composite averages.
Wayne Cooperative is a single-state property writer in New York, which exposes results to severe weather-related events and to regulatory and judicial challenges. However, the company maintains a comprehensive reinsurance program, including property catastrophe coverage, to help mitigate such risks.
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