Best Affirms Palisades Group ‘B++’ Ratings; Assigns Ratings to High Point Group

A.M. Best Co. announced that it has affirmed the financial strength ratings of B++ (Very Good) of Palisades Group of Berkeley Heights, N.J. and has removed it from under review.

Best also announced that it has assigned initial financial strength ratings of B++ (Very Good) to the High Point Group of Holmdel, NJ., formerly the Prudential Property and Casualty New Jersey Group, which had a financial strength rating of A- (Excellent) prior to the removal of the under review status. The rating outlooks on both companies are stable.

“These rating actions follow the November 1, 2003, purchase of High Point by the lead company of the Palisades Group, Palisades Safety and Insurance Association (New Jersey), from Prudential Financial Inc.”, said Best. “The affirmation of Palisades’ ratings reflects its sustained earnings in recent years and maintenance of solid capitalization through a period of significant growth derived primarily from renewal rights transactions. Operating earnings have been influenced by the group’s focused operating strategy, knowledge of local market conditions and income received in conjunction with assuming New Jersey personal auto business from carriers exiting the market.”

Best’s bulletin also indicated that it had recognized “Palisades’ high business persistency, strict underwriting and claim practices and investments in technology to enhance operating efficiencies.”

Best said: “Negative rating factors include the group’s high underwriting leverage and business concentration in New Jersey, which has historically been a difficult operating environment due to heavy consumer and regulatory pressures.” It also noted that High Point will continue to operate as a separate organization “with its current infrastructure largely intact.” Measured by Net premium written the two companies are now among New Jersey’s leading personal automobile providers.

“The High Point ratings reflect the diminished capitalization driven by the return of capital to the former owner as part of the transaction,” the report continued. “In addition, the group faces some integration risk in its operations, although the majority of staff, distribution sources and information systems remain intact. While the capital position of High Point has declined from levels prior to the sale, it is supportive of the current rating level.

“Moreover, High Point has historically produced favorable earnings reflective of its local market expertise and adherence to sound underwriting fundamentals through a private passenger automobile multi-company and multi-tiered rating system. Earnings have benefited from increased homeowners’ rate levels, improved claims handling procedures and risk mitigation initiatives. “

Best stated that the stable rating outlooks assigned to both Palisades and High Point are reflective of its “expectations of solid earnings and the maintenance of capitalization that is supportive of the current ratings.”