AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of bbb+ of Broome Co-operative Insurance Company (Broome) (Vestal, NY).
The ratings reflect Broomes balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The positive outlooks reflect the companys improved operating performance as a result of several key underwriting initiatives, demonstrated by three consecutive years of underwriting income and the below break-even combined ratio through 2018. Underwriting results have been impacted historically by severe and frequent winter events in New York, with elevated loss levels in four of the past 10 years. However, major technological advances, a focus on cost reduction and a re-underwritten book of business collectively have aided underwriting performance. As a result, a pattern of stability is more established and the underwriting and operating ratios compare similarly to the personal property composite averages. A continuation of these favorable operating performance trends could result in further positive rating action in future rating cycles.
Broomes balance sheet strength is supported by its risk-adjusted capitalization being at the strongest level, as measured by Bests Capital Adequacy Ratio (BCAR), reflective of low underwriting leverage, a high quality investment portfolio and stable loss reserving trends. The balance sheet strength also is supported by strong liquidity measures and consistent surplus growth. Offsetting rating factors include limited financial flexibility and limited scale of operations.
AM Best views the companys business profile as limited based on writing predominantly property business and its geographical concentration in New York, which exposes results to weather-related events, as well as changes in the regulatory, judicial and economic environments. However, Broome adheres to an appropriate risk management program that identifies major risks to the organization while correlating mitigation strategies to offset those risks. In addition, the company maintains a comprehensive reinsurance program, including catastrophe coverage, which helps to shield surplus and mitigate tail risk from weather events.
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