Press Release - DECEMBER 22, 2016
A.M. Best Revises Outlooks to Positive for Members of Permanent General Insurance Group
FOR IMMEDIATE RELEASE
OLDWICK - DECEMBER 22, 2016
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and Long-Term ICR of “a” of the members of the American Family Insurance Group (AFIG), which is led by American Family Mutual Insurance Company (AFMIC) (Madison, WI). In addition, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of AFMIC’s life insurance subsidiary, American Family Life Insurance Company (AFLIC) (Madison, WI). The outlook for these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies.)
The ratings for PGIG are based on the group’s adequate risk-adjusted capitalization, implicit and explicit support from its parent AFMIC, good balance sheet liquidity, historically positive earnings, geographic diversification and use of multiple distribution channels. These positive rating factors are partially offset by a concentration in private passenger non-standard auto lines of business, increased claims frequency and severity, a recent increase in losses driven by a geographically expanded book of business and a low interest rate environment.
A.M. Best foresees future positive rating movement for PGIG with continued implicit and explicit support from AFMIC. While A.M. Best views negative ratings movement in the near term as unlikely, such actions would ensue if PGIG were to have its relationship to AFMIC and its support change in a manner that affects the operational stance of the group, or if the group were to incur material losses in its capitalization.
The ratings are based on AFIG’s strong risk-adjusted capitalization and its significant market presence in the Midwest as a leading personal lines group that is supported by its exclusive agency distribution system, all of which is founded upon management’s prudent operating philosophy, as evidenced by the group’s moderate underwriting leverage, conservative reserving practices and high-quality investment portfolio. Somewhat offsetting these positive rating attributes are the group’s above break-even underwriting results, caused partially by weather-related losses that the group is highly susceptible to throughout its geographic footprint, as well as elevated common stock leverage that exposes the group’s investment portfolio to earnings volatility.
While A.M. Best does not expect to lower the ratings of the members of AFIG, or revise the outlook to negative, in the near to intermediate term, such actions would ensue if the group were to incur material losses in its capitalization; have a recurrence of the diminished profitability in its core book of business; be unable to contain the group’s exposure to catastrophic events within its underwriting footprint with the current set of preventative measures that have been recently put in place; or have substantial adverse reserve development relative to its peers, as well as the industry’s averages.
The ratings of AFLIC reflect its position in AFIG. The ratings also reflect AFLIC’s well-established marketing and distribution operations in the Midwest, solid operating performance, strong stand-alone risk-adjusted capitalization and sound liquidity. Partially offsetting these strengths are the company’s limited product portfolio and continued challenge to improve ordinary life insurance sales growth through its multiline agent channel, which relies heavily on its property/casualty-oriented sales force.
Positive rating actions could occur if the life company is able to demonstrate a growth trend on a stand-alone basis without reliance on the property/casualty operations. Downward pressure on the ratings could occur if there is a negative rating action on the property/casualty parent company’s operations that puts into question the strength and viability of AFLIC’s stand-alone rating profile, AFLIC’s capitalization, operating performance or changes in business model.
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed for the following members of Permanent General Insurance Group:
The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed for the following members of American Family Insurance Group:
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.
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