AM 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 Lebanon Valley Insurance Company (Lebanon Valley) (Wyalusing, PA). The outlook of the Long-Term ICR has been revised to stable from positive, while the outlook of the FSR is stable.
These Credit Ratings (ratings) reflect Lebanon Valley’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The upgrade of the Long-Term ICR reflects a change in AM Best’s assessment of Lebanon Valley’s operating performance to adequate from marginal, driven by its recent trend of profitable underwriting results after experiencing volatility in earlier years. Lebanon Valley’s recent improvement followed management’s profitability initiatives, including increased rate activity, agency tiering, and the adoption of a more conservative claims reserving philosophy. In 2020, the management team elected to stop writing workers’ compensation business given the relatively small book of business and high capital requirements.
Lebanon Valley’s balance sheet strength is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), conservative investment portfolio and favorable reserve development. These strengths are offset somewhat by Lebanon Valley’s limited size and scale of operations. The company’s limited business profile reflects its geographic concentration as a single-state writer in Pennsylvania, which exposes it to market, regulatory and catastrophe risk, somewhat offset by a comprehensive reinsurance program. AM Best views Lebanon Valley’s ERM program as appropriate for its risk profile and coordinated through the entire Tuscarora Wayne organization. The ratings further consider explicit and implicit support provided by Tuscarora Wayne Companies, demonstrated via a surplus note, information technology support, claims administration, and shared management and board of directors.
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