Oldwick, NJ -(BusinessWire)- A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-”of Arrow Mutual Liability Insurance Company (Arrow Mutual) (Chestnut Hill, MA).
The stable outlook is based on Arrow Mutual’s improving reported underwriting and operating performance and its ability to maintain a superior level of risk-adjusted capitalization despite recent operating losses. The unique nature of Arrow Mutual’s business, which is issued on being the low cost provider of insurance to its customers by providing coverage on a retrospective rating basis and paying multiple dividends, is also considered in the stable outlook.
The ratings reflect Arrow Mutual’s superior level of risk-adjusted capitalization and low underwriting leverage measures. The ratings acknowledge the company’s business model and its high-touch operation focused on loss control and mitigation. These positive rating factors are offset by Arrow Mutual’s poor reported underwriting results in recent years, common stock leverage that is elevated relative to the peer group average and a limited insured base that results in increased accident year volatility. In addition, Arrow Mutual operates as a monoline workers’ compensation insurer with limited geographic spread, which exposes its operations to changes in the economic, competitive and regulatory environments.
A.M. Best does not anticipate favorable actions on Arrow Mutual’s ratings over the near to mid term.
Negative actions could be taken should operating results not be in line with A.M. Best’s expectations or if there is a significant deterioration in the company’s risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio.