A.M. Best Affirms Ratings of Arrow Mutual Liability Insurance Company, Revises Outlook...

A.M. Best Affirms Ratings of Arrow Mutual Liability Insurance Company, Revises Outlook to Stable

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating (FSR) of
A- (Excellent) and issuer credit rating (ICR) of "a-" of Arrow Mutual
Liability Insurance Company (Arrow) (Chestnut Hill, MA). The outlook
for both ratings has been revised to stable from negative.

The ratings reflect Arrow Mutual's excellent capitalization,
improved operating profitability and unique business model whereby the
company provides low cost coverage through active sharing of the
operating profits with its policyholders in the form of dividends and
retrospectively returned premium.

Offsetting these positive rating factors are Arrow Mutual's
reliance on realized capital gains to generate growth in policyholder
surplus, the limited insured base, which increases accident year
volatility, and the challenges associated with operating primarily as
a mono-line, mono-state insurer. Arrow Mutual's susceptibility to
regulatory changes operating as a mono-state insurer is evidenced by
changes in Massachusetts' mandated premium rates resulting in large
base rate decreases in workers' compensation rates since 1994. Despite
these concerns, the outlook reflects the company's excellent
capitalization and expectations for recent results to be sustained
over the near term.

The ratings also acknowledge Arrow Mutual's not-for-profit
business strategy providing workers' compensation insurance to a
limited number of employers primarily within Massachusetts. Arrow
Mutual retrospectively returns premium to its policyholders based upon
the underwriting performance of each individual account and pays
dividends based upon investment income earned and the longevity of
each account with the company. Accordingly, Arrow Mutual's unique
business model results in extremely high renewal retention levels.

For Best's Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

A.M. Best Co.
Analysts:
Gordon McLean, 908-439-2200, ext. 5304
gordon.mclean@ambest.com
or
Michelle Baurkot, 908-439-2200, ext. 5507
michelle.baurkot@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

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