Best’s News & Research Service - May 22, 2014 04:12 PM (EDT)
A.M. Best Revises Issuer Credit Rating Outlook to Stable for Frankenmuth Mutual Insurance Company and Affiliates
Oldwick //BestWire// - A.M. Best has revised the outlook to stable from negative and affirmed the issuer credit ratings (ICR) of "a+" of Frankenmuth Mutual Insurance Company and its affiliates, Ansur America Insurance Company, Patriot Insurance Company (Yarmouth, ME), ASure Worldwide Insurance Company and Fortuity Insurance Company (collectively referred to as Frankenmuth). A.M. Best also has affirmed Frankenmuth's financial strength rating (FSR) of A (Excellent). The outlook for the FSR is stable.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a" of Patriot Life Insurance Company (Patriot Life), a subsidiary of Frankenmuth Mutual Insurance Company. The outlook for both ratings is stable. All companies are headquartered in Frankenmuth, MI, unless otherwise noted.
The revised outlook for the ICRs reflects Frankenmuth's improved underwriting results since 2011. Frankenmuth's management team continues to implement strategies that have driven the improvements, including various underwriting initiatives (such as rate increases, re-underwriting and mitigating its geographic risk concentration) and targeted agency management plans.
The affirmation of Frankenmuth's ratings reflects its strong risk-adjusted capitalization, solid regional market presence and positive after-tax income in eight of the past 10 years.
Offsetting these strengths was the modest decline in underwriting results experienced in two of the past five years, which were driven by weather-related losses and severity in personal automobile and workers' compensation.
While a change to Frankenmuth's ratings is unlikely in the near- to mid-term, positive rating actions could be taken if the group's operating results improve relative to similarly rated peers and are sustained at that level over the long term. Negative rating actions may occur if there is a decline in Frankenmuth's operating results and/or a considerable deterioration in its risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio.
The ratings of Patriot Life reflect the formal guaranty issued by Frankenmuth with respect to Patriot Life's liabilities, as well as its favorable risk-adjusted and absolute capital, well-managed investment portfolio and high levels of liquidity.
Partially offsetting these strengths are Patriot Life's operating losses resulting from modest premiums and product development and other related start-up expenses as it establishes a market presence. Patriot Life has a limited business profile given its modest and narrow geographic presence. A.M. Best will continue to monitor the company's ability to expand geographically, enhance its product profile and demonstrate an ability to generate operating profitability over time.
A.M. Best believes positive rating actions for Patriot Life are unlikely in the near term given the start-up nature of its operation and its current limited seasoning of its business model. Downward rating pressure could occur if A.M. Best were to view Patriot Life as having lesser strategic value to its parent company or if there is a significant drop in the reported risk-adjusted capitalization. Rating pressure also may occur if there were negative rating actions taken on its parent company.
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.