NOVEMBER 21, 2019 04:22 PM (EST)

AM Best Downgrades Issuer Credit Rating of Mountain West Farm Bureau Mutual Insurance Company

 Dan Hofmeister, CFA, CAIA, CPCU
Financial Analyst
+1 908 439 2200, ext. 5385

Richard Attanasio
Senior Director
+1 908 439 2200, ext. 5432

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - NOVEMBER 21, 2019 04:22 PM (EST)
AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” from “bbb+” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Mountain West Farm Bureau Mutual Insurance Company (Mountain West) (Laramie, WY). The outlook of the FSR has been revised to negative from stable while the outlook of the Long-Term ICR remains negative.

The Credit Ratings (ratings) reflect Mountain West’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The negative outlooks reflect the group’s unfavorable trends in balance sheet strength and enterprise risk management (ERM).

The downgrade of the Long-Term ICR reflects the revision of the balance sheet strength assessment to strong from very strong. The group experienced elevated weather losses in third-quarter 2019, specifically in August, which resulted in an underwriting loss in excess of $52 million and exhaustion of the group’s aggregate reinsurance treaty. As a result, the group purchased additional reinsurance coverage to shield the balance sheet from further deterioration. However, the elevated losses combined with the additional reinsurance expenses reduced surplus over 30%, and the group does not anticipate material improvement in fourth-quarter 2019. The reduction in surplus has resulted in deterioration in underwriting leverage ratios and risk-adjusted capitalization.

The continuation of the negative outlooks reflects the continued uncertainty regarding the group’s risk management capabilities and future balance sheet strength. The group is revising its reinsurance program in 2020 to better align with historical storm experience. However, some execution risk may exist regarding the details of the program structure relative to the risk profile. Additionally, the group’s continuation of underwriting volatility continues to stress the ERM assessment of appropriate, as a continuation of this trend brings into question the group’s ability to manage the risks inherent to its operations.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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