A.M. Best Issues Ratings for Andover Companies Pool Members

April 5, 2018

A.M. Best has removed from under review with negative implications, downgraded the Long-Term Issuer Credit Ratings to “aa-” from “aa” and affirmed the Financial Strength Rating of A+ (Superior) for the members of Andover Companies Pool. The outlook assigned to these credit ratings is stable.

Andover Companies Pool consists of Merrimack Mutual Fire Insurance Co. and its majority-owned subsidiary, Bay State Insurance Co., and its affiliate, Cambridge Mutual Fire Insurance Co. All companies are based in Andover, Mass.

Following the release of the updated Best’s Credit Rating Methodology (BCRM), the ratings for Andover were placed under review with negative implications on Oct. 13, 2017. The current rating actions come after A.M. Best’s completed analysis of Andover under the updated BCRM.

These ratings reflect Andover’s balance sheet strength, which A.M. Best categorizes as very strong. A.M. Best also determined Andover’s operating performance to be strong, its business profile to be favorable and appropriate enterprise risk management (ERM) to be in place.

According to a press release issued by A.M. Best regarding the ratings, its stable outlooks reflect Andover’s historically strong operating performance in which material returns are generated in most years, offsetting those impacted by severe catastrophes and supporting balance sheet strength.

A.M. Best found Andover’s balance sheet strength reflects a very strong level of risk-adjusted capitalization, low underwriting leverage, strong liquidity and consistently favorable loss reserve development. However, Andover’s significant position in common stock, which makes the pool more sensitive to shifts in the equity market, partially offsets these positive rating factors, the release stated.

Although Andover’s operating performance experienced some volatility in 2015 and 2017 due to abnormally severe weather-related losses, the loss ratio remains well below the personal property composite, according to the release. Additionally, significant pretax operating income has been generated in most years.

Andover continues to refine its pricing through rate action and monitor exposure concentrations, according to the release. A.M. Best found the pool’s long-standing history in the New England personal property market and its market position as a regional mutual, as well as the geographic diversification efforts derived from its assumed operations, are supportive of the favorable business profile assessment. The release added Andover also benefits from an appropriate ERM program that supports the risk profile of the organization.

Andover Companies does not comment on business-related matters.

Source: A.M. Best Rating Services Inc.

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