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" of Loudoun Mutual Insurance Company (Loudoun) (Waterford, VA).
The ratings reflect Loudoun’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revised outlooks to negative reflect Loudoun’s underwriting losses in recent years driven by significant and frequent weather-related events that have resulted in a downturn in underwriting and operating performance metrics. While management has undertaken several corrective initiatives to improve the company’s long-term performance that included weather analytics for claims and underwriting, as well as targeted rate strengthening in select territories, the current strong assessment will continue to face pressure over the near term.
Loudoun’s balance sheet strength is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and a high quality investment portfolio that is dominated by fixed-income securities, somewhat offset by above-average common stock leverage and volatility in reserves with adverse development experienced in recent years. The limited business profile reflects the company’s property predominate book of business and geographic concentration in Virginia that exposes operations to the impact of weather-related events as observed in recent years. AM Best views Loudoun’s ERM as appropriate with risk identification and controls in place and stress testing performed on the organization’s largest risks.
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