News Column

Fitch Affirms Greater New York Mutual Insurance Company's IFS at 'A-'

July 8, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed Greater New York Mutual Insurance Company's (GNY) Insurer Financial Strength (IFS) rating at 'A-'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

GNY's rating is supported by a strong balance sheet, characterized by low operating leverage, no financial leverage, a conservative investment portfolio and a history of favorable loss reserve development. Balanced against these positive factors are GNY's small and narrowly focused market position and material modeled catastrophe exposure.

GNY's market position and size/scale are categorized by Fitch as 'small' with net written premium of $234 million for the full year 2013 and policyholders' surplus of $418 million as of March 31, 2014. Consequently, absent other mitigating factors, a company with this profile would typically carry an IFS rating in the 'BBB' category.

GNY's combined ratio was 94.8% during 2013, which was a particularly benign catastrophe year for the property/casualty industry. Full year 2012's combined ratio was 108.5% with Superstorm Sandy accounting for nine percentage points. Net income was $23 million in 2013 compared to full year 2012's bottom line of $5.5 million.

Results deteriorated in the first quarter of 2014 as GNY reported a 108.4% combined ratio that included approximately $7 million in catastrophe losses. Annualized return on surplus was modest at 3.9%.

Results deteriorated in the first quarter of 2014 as GNY reported a 108.4% combined ratio that included approximately $7 million in catastrophe losses. Annualized return on surplus was modest at 2.9%.

GNY was scored as 'Adequate' by Fitch's Prism capital model, which is below guidelines for the company's current rating category. Natural catastrophe exposure is a key risk element that increases target capital levels for GNY under Prism, reflecting its commercial property insurance orientation and geographic business concentration.

Other capital measures such as net leverage and NAIC risk-based capital ratio are considered better than median guidelines for GNY's current rating category. Statutory net leverage, calculated as written premiums plus liabilities divided by surplus, is conservative at 1.9 times at year-end 2013. In addition, GNY's NAIC RBC ratio was solid at 431% of the company action level at year-end 2013.

GNY's risky assets ratio was modest at approximately 11% of surplus, up from less than 1% in previous years. GNY added moderate amounts of equity and asset-backed securities to the investment portfolio in an effort to improve total returns. This incremental change in investment strategy did not materially change Fitch's view of investment risk.

GNY has reported favorable reserve development in the most recent five years. Favorable development in 2013 was very small at 10 basis points of surplus. Approximately 80% of total reserves are related to shorter-tail commercial multi-peril claims, while most of the balance is in workers' compensation insurance.

GNY has a niche providing habitational insurance to cooperative apartment buildings, condominium associations and apartment rental risks, and a wide variety of commercial classes of business. The company offers commercial multi-peril insurance predominantly in New York and New Jersey. The company has expanded over time into Midwest and Mid-Atlantic states. Approximately one-quarter of written premium is currently for business outside of New York and New Jersey.

RATING SENSITIVITIES

Key rating triggers for GNY that could lead to a downgrade include:

--A material catastrophe loss representing greater than 15% of current surplus;

--A significant change in GNY's conservative balance sheet such as deterioration in risk-based capital as measured by Fitch's capital model or a trend of unfavorable reserve development.

Key rating triggers for GNY that could lead to an upgrade include:

--Risk mitigation efforts that reduce probable maximum loss estimates from a hurricane making landfall in New York or New Jersey;

--A substantial improvement in market presence as well as diversification by product and geography.

Greater New York Mutual Insurance Company

Insurance Company of Greater New York

Strathmore Insurance Company

GNY Custom Insurance Company

--IFS affirmed at 'A-'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Insurance Rating Methodology' (Jan. 11, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=838594

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analysts:

Douglas M. Pawlowski, CFA

Senior Director

+1-312-368-2054

Fitch Ratings, Inc.

70 West Madison St.

Chicago, IL 60602

or

James B. Auden, CFA

Managing Director

+1-312-368-3146

or

Committee Chairman

Mark E. Rouck, CPA, CFA

Senior Director

+1-312-368-2085

or

Media Relations

Brian Bertsch, New York, +1-212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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