Best’s News & Research Service - January 17, 2018 01:13 PM (EST)
A.M. Best Revises Outlooks to Negative for Tri-State Consumer Insurance Company
- January 17, 2018 01:13 PM (EST)
Oldwick //BestWire// - A.M. 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-” of Tri-State Consumer Insurance Company (Tri-State) (Jericho, NY).
The negative outlooks are based on recent trends in underwriting results that have deteriorated to levels not consistent with prior years and have fallen short of expectations. The outlooks further reflect the lack of a demonstrated effective corrective action plan to restore operating results to prior-year levels.
The Credit Rating (rating) affirmations reflect Tri-State’s balance sheet strength, which A.M. Best categorizes as strong, as well as its historically strong operating performance, limited business profile and appropriate enterprise risk management. The company’s strong balance sheet is driven by below-average underwriting leverage, a high quality investment portfolio and favorable loss reserve development trends, partially offset by ongoing dividend payments to its immediate parent, Tri-State Consumer, Inc., as well as elevated catastrophe risk. Tri-State’s historically strong operating performance was driven by a steady stream of net investment income derived from above average total investment returns.
Partially offsetting these positive rating factors is the recent deterioration in Tri-State’s operating performance due to competitive market conditions, increased loss activity and its elevated underwriting expense ratio, which was mainly a result of downstate New York’s highly litigious operating environment. In addition, the company maintains a limited business profile as reflected by its geographic and product risk concentration, which exposes it to market competition, regulatory changes and judicial decisions. Lastly, the company maintains a competitive disadvantage as it lacks pricing sophistication and modeling capabilities to more accurately identify and price its risks.
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