A.M. Best has upgraded the Financial Strength Rating to B+(Good) from B (Fair) and the Long-Term Issuer Credit Rating to "bbb-"from "bb+" of MidroxInsurance Co. The outlooks of these Credit Ratings (ratings) havebeen revised to stable from positive.
The rating upgrades are based on the company's continuingsolid level of risk-adjusted capitalization coupled with steady surplus growth,and underwriting and operating results which have improved to become more inline with its peer group. Although underwriting performance has fluctuated,pre-tax operating profits have been reported in four of the past five years,including 2016, as well as five-year averages that are comparable to thepersonal property composite. Additionally, the balance sheet remains strong asdemonstrated with surplus that has nearly doubled over the past 10 years, soundliquidity measures, redundant loss reserve development and a quality investmentportfolio. Surplus growth continued through second quarter 2017 and althoughsurplus is relatively small, the company maintains a comprehensive reinsuranceprogram to mitigate volatility to surplus from severe weather-related losses.
These positive rating factors are partially offset by Midrox'sconcentration of risk in New York which can expose results to weather-relatedevents, as well as regulatory and judicial challenges, an elevated expenseratio primarily driven by the commission expense ratio and high common stockleverage when compared to the composite average.