A.M. Best Ratings Recap
Outlooks Positive: Northwest G.F. Mutual Insurance Co.
A.M. Best revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Northwest G.F. Mutual Insurance Co. (NWGF) in Eureka, South Dakota.
The ratings reflect NWGF’s balance sheet strength, which A.M. Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The company specializes in small farm and personal lines of insurance and has been serving the Dakotas for more than 115 years. It distributes its products through independent agents.
The revised outlooks reflect the significant improvement in underwriting results that have been reported in recent years, in sharp contrast to more marginal performance over the longer term. This is attributed to the efforts of new management to implement stricter underwriting standards as part of a broader effort to improve operating performance.
The marginal assessment on balance reflects the considerable volatility in underwriting performance over the longer term, which contrasts with the improved operating performance in recent years.
Ratings Upgrade: Michigan’s Wolverine Mutual Insurance
A.M. Best upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Wolverine Mutual Insurance Co. (Wolverine), in Dowagiac, Michigan.
The outlook of the Long-Term ICR has been revised to stable from positive while the outlook of the FSR remains stable.
The ratings reflect Wolverine’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. Wolverine has strengthened its capitalization in recent years and improved its underwriting income. Surplus growth has outpaced overall premium growth, and the company’s modest investment leverage and consistently favorable loss reserve development also are factors in the more robust capitalization levels.
Underwriting performance continues to improve due to re-underwriting and re-inspecting property lines, as well as focused efforts on fighting automobile fraud and excessive medical billing claims. The company’s leverage measures are elevated when compared with the composite; however, they are on a downward trend due to the continued surplus growth.
Wolverine’s geographic concentration exposes surplus to frequent and severe weather events, which the company has experienced in recent years, as well as the judicial and regulatory environment. Most notable is automobile personal injury protection coverage, which continues to be a challenge for all companies with this exposure in Michigan. However, management’s extensive expertise contributes to the company’s profitable automobile book of business.
Ratings Assigned: Midwest Family Advantage Insurance
A.M. Best assigned a Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” to Midwest Family Advantage Insurance Co. (Midwest Advantage). The outlook is stable.
Concurrently, A.M. Best affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Midwest Family Mutual Insurance Co., the parent of Midwest Advantage. The outlook is stable.
Collectively, the companies are referred to as Midwest Family Insurance Group (Group), and operate under an inter-company quota share reinsurance agreement. Both are domiciled in Chariton, Iowa.
Established in November 2017, Midwest Advantage was initially capitalized with a $10 million investment from its parent and initially will serve as a specialty commercial insurer.
The rating affirmations reflect the group’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The group’s very strong balance sheet strength is supported by improved operating performance derived from underwriting results that outperformed the composite, a high-quality investment portfolio and favorable reserve development trends in most years.
The business profile is diverse across product lines and geographies due to recent expansion efforts. Risk management capabilities are considered appropriate for the risk profile of the group with improved capabilities observed in management’s ability to assess risk tolerance levels.
Partially offsetting these positive rating factors is the group’s exposure to weather-related events, elevated underwriting leverage and above-average reinsurance dependence.
To mitigate the group’s exposure to weather-related events, improved enterprise risk management capabilities in recent years combined with an effective reinsurance program with high quality reinsurers have helped to stabilize operating results.