A.M. Best upgrades ratings for members of the Optimum General Companies

A.M. Best has upgraded the ratings for the members of the Optimum General Companies, also giving the ratings a stable outlook.

The companies, which include Optimum Insurance Company Inc. (OIC), Optimum Farm Insurance Company Inc. and Optimum West Insurance Company (OWIC), have had their financial strength ratings upgraded from B++ (good) to A- (excellent).

They have also had their issuer credit ratings upgraded from bbb+ to a-.

“The rating upgrades reflect the OGC members’ consistently solid operating results, favorable reserve development on both an accident and calendar year basis, historically steady investment stream as well as a seasoned management team,” A.M. Best said Thursday.

Competitive pricing pressures, particularly in commercial lines, however, did partially offset the positive rating factors, the company noted. The group is also susceptible to catastrophic events in the territories where it does business, A.M. Best added.

“Management continues to demonstrate its ability to effectively operate through insurance cycles and within a rapidly changing investment market,” it also noted.

“Although the OGC members have experienced substantial improvement during the latest 10-year period, going forward, it may be challenging for them to balance profitability and leverage with projected future growth,” the ratings firm said.

“The OGC members remain somewhat behind the industry average for surplus appreciation, even though surplus growth has been steady and consistent at an average of over 7% per year for the past 10 years, and OIC and OWIC have been simultaneously paying dividends to their holding company, Optimum General, Inc.,” it added.

A.M. Best said it doesn’t expect to downgrade the companies in the near to midterm, as that would occur only if the group were to experience “material losses in its capitalization; have a severe reduction in the profitability of its core book of business; be unable to contain its exposure to catastrophic events within its underwriting footprint with the current set of preventative measures or have substantial adverse reserve development relative to its peers, as well as the industry’s averages.”