AM Best has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of a- (Excellent) of Ardellis Insurance Ltd.

The credit ratings reflect Ardellis’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

Ardellis’s ultimate parent is UFP Industries Inc, an American manufacturer and distributor of wood and wood alternative products, pressure-treated wood, engineered roof systems for site-built construction and manufactured housing. It is also a solid-sawn lumber buyer.

Ardellis provides reimbursement coverage for workers’ compensation, medical stop-loss, general liability, auto liability and property to its parent.

In addition, Ardellis assumes medical stop-loss exposure from third parties.

The revision of the outlook to positive reflects Ardellis’s favourable operating performance, with loss and expense ratio metrics outperforming the general property/casualty industry over several years.

The favourable loss ratios are attributable to Ardellis’s underwriting expertise and a consistent approach to loss control and safety practices. The low expense ratios reflect the company’s low overhead.

Approximately 40 per cent of the company’s net written premiums come at present from its parent and the remainder from third-party medical stop-loss.

Ardellis experienced rapid growth in its third-party medical stop-loss business over several recent years. This growth has moderated more recently. Both the affiliated business and the third-party business are at present profitable.

AM Best expects Ardellis’s balance sheet strength to remain very strong, supported by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best considers the company’s ERM framework and risk-management capabilities appropriate for its risk profile. Further, Ardellis benefits from being an integral part of its ultimate parent’s ERM framework.