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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 28, 2011 12:00 AM (EST)
A.M. Best Co. has assigned a financial strength rating of B++ (Good) and an issuer credit rating of "bbb+" to The Members Insurance Company (Members) (Charlotte, NC). The outlook assigned to both ratings is stable.
The ratings reflect Members' solid risk-adjusted capitalization, as well as the strategic advantages of its affiliation with the nationally recognized brand, the American Automobile Association, Inc. (AAA). These positive rating factors are partially offset by Members' concentration of business in North Carolina, which subjects its operating results to changes in the regulatory, judicial and competitive market environment. The stable outlook is based on the company's solid risk-adjusted capitalization and business profile enhanced by its affiliation with the AAA franchise.
Through its affiliation with AAA, the company is provided with access to an extended customer base, which can be leveraged for member retention and lower acquisition costs. Additionally, these strengths are enhanced by support from Members' parent, Carolina Motor Club, Inc.'s (AAA Carolinas), which includes recent capital contributions, joint use of facilities and back-office systems. Members' management also is taking steps to strengthen profitability in the near to medium term, including ensuring rate adequacy, diversifying its product mix and continuing expense management.
Members' has had a somewhat unfavorable operating performance in recent years, primarily due to a high expense ratio as it has been writing business only since 2008. However, the expense ratio has been trending down as premium writings have been scaling up. In addition, the company's capital position remains exposed to investment risks, as evidenced by relatively high common stock leverage and unrealized capital losses recorded during the recent equity market downturn.
Factors that could result in an upward movement in the assigned ratings include a sustained improvement in underwriting and operating performance, continued financial and operational support from AAA Carolinas and an improvement in the company's business profile from further geographic and/or product diversification. However, factors that could result in downward movement include a deterioration in underwriting and operating performance, a sudden large or catastrophic loss event that materially hinders Members' risk-adjusted capitalization and any material deviation from the company's submitted financial projections, or if financial or operational support from AAA Carolinas is no longer forthcoming.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; and "Catastrophe Analysis in A.M. Best Ratings." Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.