A.M. Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Columbia Lloyds Insurance Co. and MDOW Insurance Co., which are collectively referred to as Columbia Lloyds Companies (Columbia Lloyds). Both companies are based in Houston.
The outlook for the Long-Term ICR has been revised to stable from positive while the outlook for the FSR remains stable.
The Long-Term ICR upgrade reflects Columbia Lloyds’ solid profitability and operating results, which outperformed the composite average. Surplus has grown in four of the past five years, driven by better-than-average underwriting performance that allowed the company to report operating returns higher than the composite average.
The initiatives driving the profitability trends include rate increases, reduced concentration around Houston and Oklahoma City, as well as expanded product offerings.
Columbia Lloyds initially focused on the low-value dwelling market after its creation; however, in 2011, Columbia Lloyds began writing higher value homeowners policies and small family farms, and more recently, in 2015, introduced private passenger auto products to complement this business.
These positive rating factors are partially offset by Columbia Lloyds’ property focus in Oklahoma and Texas.
This risk is mitigated through a comprehensive reinsurance program with highly rated carriers, which reduces volatility from frequent and severe weather events. This was particularly evident in recent years and so far in 2017, when above-average hail storm losses and other weather events, including Hurricane Harvey, impacted Texas and underwriting performance remained favorable.
A continuation of favorable operating results, while improving overall risk-adjusted capitalization and underwriting leverage, could result in further positive movement in the ratings.
Negative rating pressure could occur with a return to unfavorable operating results, increased leverage or a decline in overall risk-adjusted capitalization.
Source: A.M. Best