OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to Mid-Hudson Co-Operative Insurance Company (Mid-Hudson) (Montgomery, NY). The outlook assigned to both ratings is stable.

The ratings reflect Mid-Hudson’s favorable operating performance, conservative underwriting leverage and long-standing local market presence. Mid-Hudson’s solid capital position has been derived from surplus growth generated by positive pre-tax operating income and net income in each of the last five years. Over this five-year period, Mid-Hudson recorded a double-digit average pre-tax return on revenue, driven by profitable underwriting results in most years and supplemented by net investment income and other income. The company’s average pure loss and loss plus loss adjustment expense ratios compared very favorably to the personal property composite averages.

Partially offsetting these positive rating factors is Mid-Hudson’s geographic concentration of risk in New York State, which exposes its operating performance to weather-related events, as well as changes in regulatory and competitive market conditions. Also, the company’s underwriting expense ratio is above the personal property composite average, driven in recent years by expenditures on technology. Additionally, Mid-Hudson’s common stock leverage as a percentage of policyholder surplus is elevated relative to the composite average. This exposes surplus to fluctuations in the equity market, as evidenced by a moderately negative total return in 2008 due to unrealized capital losses.

There could be negative rating pressure on Mid-Hudson's ratings going forward if its favorable operating performance were to deteriorate or if risk-adjusted capitalization were to weaken.

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.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Bob Podolski
Senior Financial Analyst
908-439-2200, ext. 5731
bob.podolski@ambest.com
or
Gary Davis
Assistant Vice President
908-439-2200, ext. 5665
gary.davis@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Co.