A.M. Best Revises Outlook to Stable for Chautauqua Patrons Insurance Company

A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Chautauqua Patrons Insurance Company (Chautauqua) (Jamestown, NY).

The revised outlook is based on Chautauqua's improved operating performance in recent years. Through 2012, the company's five-year average for pre-tax return on revenue compared favorably to the personal property composite average. Chautauqua's ratings are supported by its solid risk-adjusted capitalization, which is reflective of low underwriting leverage ratios and consecutive years of policyholder surplus growth, aided in large part by net investment and other income that mitigated the impact of underwriting losses in several years. Results were particularly favorable in 2012, when the company recorded double-digit returns for pre-tax return on revenue and total return on surplus. Also, the company has recorded an underwriting profit and added to surplus again in 2013. Chautauqua benefits from its local market knowledge and a core book of business that has performed well, as indicated by a five-year average pure loss ratio that was less than 50 percent.

Partially offsetting Chautauqua's positive rating factors is its single-state geographic concentration of business in New York, which exposes it to the potential impact of frequent and severe weather- related events as well as to regulatory and judicial constraints, and a higher than average common stock leverage. In addition, the company's underwriting expense ratio is elevated relative to the composite average, primarily driven by commission expenses.

There could be pressure on Chautauqua's ratings if its favorable operating performance is not maintained or its 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. Best's Credit Rating Methodology: ambest.com/ratings/methodology.

A.M. Best Company is an insurance rating and information source.

((Comments on this story may be sent to [email protected]))