AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Chautauqua Patrons Insurance Company (Chautauqua) (Jamestown, NY). The outlook of the Long-Term ICR has been revised to stable from negative, while the outlook for the FSR is stable.
These Credit Ratings (ratings) reflect Chautauqua’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).
The downgrade of Chautauqua’s Long-Term ICR reflects AM Best’s concern related to the effectiveness of the company’s ERM program and current risk mitigation strategies given its demonstrated trend of volatility in operating results over the long term. Chautauqua faces several challenges, including the successful implementation of its new business model, growth initiatives and future profitability expectations. Following review of Chautauqua’s risk management framework, AM Best expects that the company’s use of strong corporate governance practices will help it better manage risks with less volatility over the long term.
Chautauqua’s balance sheet strength assessment remains at the very strong level, supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), moderate underwriting leverage and solid liquidity measures. AM Best considers Chautauqua’s operating performance to be marginal, largely driven by volatility in underwriting results that are partially offset by net investment income. The limited business profile reflects the company’s geographic and product concentration, as a predominantly property writer in New York state, which exposes operations to weather-related events, as well as regulatory, judicial and legislative matters.
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