CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 11, 2012 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit rating to “a-” from “a” of Badger Mutual Insurance Company (BIC) (Milwaukee, WI). The outlook for both ratings has been revised to stable from negative.
The rating downgrades reflect BIC’s deteriorating operating performance trends over the past five years as a result of increased underwriting losses, which has led to the recent material decline in its policyholders’ surplus.
Additionally, BIC’s negative five-year returns on revenue and policyholders’ surplus unfavorably compares to its private passenger and homeowners’ composite. Several years of underwriting losses have resulted from frequent and severe wind/hail storms on concentrated property exposures and adverse loss reserve development, which primarily impacted the company’s homeowners’ and private passenger automobile liability lines of business.
BIC’s management has already taken several corrective actions to improve underwriting profitability in the near term and mitigate exposure to weather-related losses in its primary states by increasing wind/hail storm deductibles, increasing rates and continuing to increase writings in its developing states.
Although A.M. Best believes the company is well-positioned at its current rating level, negative rating actions may occur if it does not meet or exceed its projections and/or there is a deterioration in its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s 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”; “Understanding BCAR for Property/Casualty Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology 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.