AM Best Upgrades Credit Rating of Texas Mutual

AM Best has upgraded the Financial Strength Rating to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Rating to “aa-” (Superior) from “a+” (Excellent) of Texas Mutual Insurance Company (Texas Mutual) based in Austin, Texas. The outlook of these Credit Ratings (ratings) has been revised to stable from positive.

The ratings reflect Texas Mutual’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

AM Best said the rating upgrades reflect Texas Mutual’s strong market presence in the Texas workers’ compensation segment, which has resulted in a history of favorable operating performance and organic surplus growth.

Texas Mutual holds a workers’ compensation market share of 41.4% in Texas and is ranked the 16th largest workers’ compensation writer by direct premiums written in the United States as of 2023.

The company’s strong presence in this segment underscores its competitive position and diversified profile across all industries in the Texas economy, AM Best said.

As the market of last resort in Texas, the company further benefits from the flexibility of a multitier underwriting and pricing flexibility approach along with the exemption from federal income taxes. While Texas Mutual’s business is limited to the workers’ compensation product, the market position enabled the company to achieve strong profitability on a five- and 10-year basis.

Texas Mutual maintains the strongest level of risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR). Consistent organic surplus expansion outpaced the growth of premium leading to favorable underwriting leverage metrics. Balance sheet strength is further enhanced by conservative reserving practices and low reinsurance dependence. The investment portfolio primarily consists of high-quality fixed income with a growing share of alternative assets. However, the level of capitalization is more than sufficient to support current risks.

Source: AM Best