AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Constitution Insurance Company (Constitution) (Cambridge, NY). The outlook of these Credit Ratings (ratings) is stable.

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

Constitution is wholly owned by Steven Menzies, its chief executive officer, and participates in a quota share reinsurance transaction of workers’ compensation business from a commonly owned insurer.

Constitution is well-capitalized on a risk-adjusted basis as of year-end 2023 and holds no debt on its balance sheet. The company maintains a conservative investment portfolio composed of approximately half in high quality long-term bonds with the remaining invested assets in real estate, cash and cash equivalents, and other invested assets. The company has historically favored cash in its investment portfolio, though recently acquired more longer duration fixed income investments to take advantage of the higher interest rate environment.

Constitution’s evolving business profile has resulted in volatility in performance metrics over the past several years, but these have largely trended in a favorable direction as operations stabilized. This can be seen in the combined ratio, which has declined from a high of 309.3% in 2018 to 85.8% in 2023. Earlier, less favorable combined ratios were driven primarily by low premium volumes, as the company transitioned to its current business plan.

Constitution’s business profile maintains some geographic and product concentrations, though the quota share contracts assumed from a related party have alleviated concerns to some degree as it has increased diversification and improved overall performance.

Constitution’s ERM practices are appropriate for its size and scope. Risk management is a focal point for management, and the company is well-attuned to the risks impacting its markets. The company maintains well-established conservative underwriting guidelines that have been historically profitable.

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