AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Utica First Insurance Co., based in Oriskany, New York.
The ratings agency said it expects that the ratings will eventually be downgraded.
The current credit ratings reflect Utica First’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
However, AM Best said, the revised outlooks reflect continued deterioration of operating performance as underwriting losses have been mounting since 2020.
According to the ratings agency, Utica First experienced its largest underwriting loss to date in 2022, “mainly driven by weather losses in core states of operation and exacerbated by macroeconomic trends. Inflationary pressures have also increased the severity of claims driving up loss costs considerably.”
Consequently, the company’s combined ratio has been above breakeven for three consecutive years and four of the last five years.
Finally, the insurer reported “significant unrealized losses in 2022 due to market volatility,” which coupled with underwriting losses generated a surplus decline of nearly 10%, AM Best said.
According to AM Best, Utica First’s management has implemented initiatives to help mitigate volatility, including increasing inflation guard charges, implementing significant rate increases on all lines of business and reducing policy credits where permissible.
The company continues to refine its underwriting standards and non-renew unprofitable business segments including Connecticut homeowners’ policies, AM Best noted.
AM Best said it expects that these actions will help Utica First improve upon its current level of performance; however, given the absence of improvement, the ratings are likely to be downgraded.
Utica First Insurance was founded by local Utica, New York businessmen in 1903 as Utica Fire Insurance Co. of Oneida County to serve the property insurance needs of the upstate New York residents. Today it is a regional commercial and personal lines insurer writing in Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, and Virginia. In addition to property insurance, its product line includes homeowners, landlord package, restaurant and tavern program, and artisan contractors and business owners policies.
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