A.M. Best Revises Outlook to Negative for Lititz Mutual Insurance Pool and Its Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A+ (Superior) and issuer credit rating of “aa-” of Lititz Mutual Insurance Pool (Lititz), which includes the operations of Lititz Mutual Insurance Company and its three reinsured affiliates: Farmers’ and Mechanics’ Mutual Insurance Company, Livingston Mutual Insurance Company and Penn Charter Mutual Insurance Company. All companies are domiciled in Lititz, PA.

The revised outlook reflects the trend in Lititz’s underwriting losses over several years caused by an increase in the frequency and severity of weather-related and catastrophe events in its operating territories. As a result, Lititz’s five- and ten-year average operating performance declined to a level that lags the industry composite, and the risk-adjusted capitalization, while very strong, declined from historical levels. Despite this, Lititz’s policyholders’ surplus increased 5.8% driven by strong investment performance in 2010.

The revised outlook also reflects A.M. Best’s prospective viewpoint that Lititz’s operating results will likely continue to trend unfavorably in the near term as the impact of severe weather patterns will continue to affect the organization, as has already been evident through the first half of 2011.

Despite the negative outlook, Lititz’s ratings recognize its strong risk-adjusted capitalization driven by low underwriting leverage and favorable loss reserve development, solid liquidity position and market presence among its long-standing independent agents.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Natural Catastrophe Stress Test Methodology”; “Rating Members of Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; and “Catastrophe Risk Management Incorporated Within the Rating Analysis.” Methodologies 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 © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Company
Adrienne Tortoriello, 908-439-2200, ext. 5088
Financial Analyst
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or
Rick Decker, 908-439-2200, ext. 5423
Assistant Vice President
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or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
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or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.