AM Best revises outlook of Providence Mutual to negative

Rating agency AM Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) for US insurance company Providence Mutual.

The revised outlook reflects Providence Mutual’s unprofitable underwriting results over several years as a result of persistent significant weather events and its elevated expense ratio, according to AM Best.

Several weather events over the past five years have been significantly greater than the company had experienced in its history, particularly the early part of 2015 when the New England region experienced several weeks of record-setting snowfall and freezing temperatures. The company was especially vulnerable to this winter weather event due in part to its geographic concentration of property risks in the New England region, according to the rating firm.

“While Providence Mutual’s policyholders’ surplus is expected to decline in 2015, the company continued to maintain an adequate risk-adjusted capital position due to its below average underwriting leverage,” said AM Best.

“In addition, management has taken significant actions designed to mitigate the impact of future catastrophe weather events on overall performance and capitalisation.”

Included in the company’s risk management process are a comprehensive reinsurance programme and ongoing aggressive pricing and underwriting strategies.

AM Best said negative rating action could occur if frequent and severe weather events continue to impact the group’s underwriting performance or if other market disruptions cause operating losses that negatively impact risk-adjusted capitalisation.

The revised outlook reflects Providence Mutual’s unprofitable underwriting results over several years as a result of persistent significant weather events and its elevated expense ratio, according to AM Best.

Several weather events over the past five years have been significantly greater than the company had experienced in its history, particularly the early part of 2015 when the New England region experienced several weeks of record-setting snowfall and freezing temperatures. The company was especially vulnerable to this winter weather event due in part to its geographic concentration of property risks in the New England region, according to the rating firm.

“While Providence Mutual’s policyholders’ surplus is expected to decline in 2015, the company continued to maintain an adequate risk-adjusted capital position due to its below average underwriting leverage,” said AM Best.

“In addition, management has taken significant actions designed to mitigate the impact of future catastrophe weather events on overall performance and capitalisation.”

Included in the company’s risk management process are a comprehensive reinsurance programme and ongoing aggressive pricing and underwriting strategies.

AM Best said negative rating action could occur if frequent and severe weather events continue to impact the group’s underwriting performance or if other market disruptions cause operating losses that negatively impact risk-adjusted capitalisation.