Press Release - JUNE 01, 2012
A.M. Best Affirms FSR of Grange Mutual Casualty Company and Its Subsidiaries; Revises ICR Outlook to Negative
Senior Financial Analyst
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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 01, 2012
A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of a+ of Grange Mutual Casualty Company and its pooled subsidiaries and affiliate (collectively known as the Pool). The outlook for the ICR has been revised to negative from stable, while the outlook for the FSR is stable.
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of a- of Grange Life Insurance Company (Grange Life). Grange Life is jointly owned by Grange Mutual Casualty Company and Integrity Mutual Insurance Company, an affiliate within the Pool. The outlook for these ratings is stable. All the above named companies are domiciled in Columbus, OH. (See below for a detailed listing of the companies.)
The revised ICR outlook for the Pool is the result of increased variability in underwriting results and operating performance over the past several years despite steady growth in surplus over the long term, primarily stemming from investment income. The organizations operating results have been adversely impacted by limited margins in pricing and significant weather-related events in recent years, which were the major factors contributing to its financial performance. Underwriting and pricing strategies have been implemented to improve future operating performance; however, near-term improvement in the Pools results will be challenged due to changing market conditions and the time required for all actions to be reflected in its results.
The Pool continues to maintain solid risk-adjusted capitalization, which is derived from its conservative investment portfolio and moderate underwriting leverage. Extensive product management, solid enterprise risk management capabilities and redundant loss reserve development trends continue to be positive factors reflected in the ratings. These strengths are further supported by an experienced management team, broad product offerings and a long-standing regional market presence.
Negative rating actions could occur if the Pools underwriting and operating results continue to lag its peers with significant erosion of risk-adjusted capitalization.
The ratings of Grange Life recognize its favorable capitalization, premium, trends and shared resources with its parent. Offsetting rating factors include the companys limited product and earnings diversification and geographic concentration.
The FSR of A (Excellent) and the ICRs of a+ have been affirmed for Grange Mutual Casualty Company and its following subsidiaries:
- Trustgard Insurance Company
- Grange Indemnity Insurance Company
- Grange Insurance Company of Michigan
- Grange Property & Casualty Insurance Company
- Integrity Mutual Insurance Company
- Integrity Property & Casualty Insurance Company
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: Risk Management and the Rating Process for Insurance Companies; Rating Members of Insurance Groups; Catastrophe Analysis in A.M. Best Ratings; Understanding BCAR for Life/Health Insurers; Understanding BCAR for Property/Casualty Insurers; and Assessing Country Risk. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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