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AM Best Withdraws Credit Ratings of Saucon Insurance Company
[January 14, 2020]

AM Best Withdraws Credit Ratings of Saucon Insurance Company


AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb+" of Saucon Insurance Company (Saucon) (Bethlehem, PA). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn these Credit Ratings (ratings) at the company's request to no longer participate in AM Best's interactive rating process.

The ratings reflect Saucon's balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, very limited business profile and appropriate enterprise risk management (ERM).

As a perpetual homeowner writer, Saucon does not recognize policy deposits as premium revenue. Refundable deposits are instead recorded as liabilities and proceeds invested with correlating investment income acting as the primary source of operating income. Saucon's balance sheet strength reflects the strongest level of risk-adjusted capital, as measured by Best's Capital Adequacy Ratio (BCAR), and is partially offset by elevated common stock leverage, which is common in the perpetual model. Exposure to the equity market has caused moderate surplus volatility through unrealized capital gains, with growth most recently occurring as the market rebounded from a low point in 2018. In accordance with the company's business model, operating performance considers a total return on invested assets in which Saucon has outperformed the personal property composite on a five-year average basis. However, volatility has caused surplus to decline in two of the last five years. AM Best expects Saucon to continue to be challenged by a low interest rate environment and potential equity market volatility.

The ratings also reflect AM Best's assessment of Saucon's business profle as very limited, given an ongoing moratorium on new business since 2008 and continued erosion of perpetual policies in force. While a holding company structure was developed effective Jan.1, 2018, which has a neutral impact on the rating, there are no immediate plans to expand the scope of operations. Any change in strategic direction also would require additional expertise to evaluate new risks to the company properly.



AM Best views Saucon's ERM as appropriate and reflective of a recently more defined and structured framework with established tolerance statements and investment-related stress tests.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.


AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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