Best’s News & Research Service - May 27, 2015 10:20 AM (EDT)
A.M. Best Upgrades Issuer Credit Ratings of Members of Ohio Mutual Insurance Group
- May 27, 2015 10:20 AM (EDT)
Oldwick //BestWire// - A.M. Best has upgraded the issuer credit ratings (ICR) to "a+" from "a" and affirmed the financial strength rating (FSR) of A (Excellent) of the members of Ohio Mutual Insurance Group (OMIG) (Bucyrus, OH). The outlook for the ICRs has been revised to stable from positive and the outlook for the FSR remains stable. (See below for a detailed listing of the companies and ratings.)
The ICR upgrade reflects OMIG's strong risk-adjusted capitalization, favorable five-year operating returns relative to its industry composite average and consistent surplus growth. These results were produced despite the impact of significant storm losses in OMIG's operating territory over the previous five-year period.
OMIG's positive rating factors are derived from its moderate underwriting leverage, conservative investment risk profile and solid regional market presence. Long-standing agency relationships are maintained with its distribution network of independent agents who share common values of profitable underwriting, commitment to service and product development initiatives. OMIG's favorable five-year operating performance has been the result of a steady stream of investment income and other income, partially offset by modest underwriting losses. Additionally, OMIG's five-year pre-tax returns on revenue and equity have outperformed the private passenger standard auto and homeowners composite average. Although operating returns have trended upward in recent years, five-year returns have been below historical norms due to increased underwriting losses. These underwriting losses were primarily due to storm losses as OMIG's core book of business continued to perform well. Despite weather-related issues, OMIG continued to produce pre-tax operating gains and positive net income in each of the past five years. Consequently, additions to surplus have been reported on a regular basis, and surplus appreciation has been solid over the previous five-year period. These strengths are further supported by OMIG's conservative investment philosophy, favorable loss reserve trends and strong internal controls.
Partially offsetting these positive rating factors is OMIG's geographic concentration in Ohio. Consequently, its earnings and surplus are subject to weather-related events, regulatory risk and competitive market pressures. As evidenced by increased storm activity reported over the previous five-year period, OMIG is exposed to tornadoes and hailstorms, as well as moderate earthquake exposure due to its writings along the New Madrid fault line. In response, OMIG maintains a comprehensive reinsurance program that reduces exposure to these events to a modest level of surplus. Management has implemented several initiatives to improve underwriting results and mitigate potential weather-related losses. These actions include significant rate increases, increased deductibles, termination of poor performing agencies and improved diversification efforts with a controlled expansion in New England with the addition of Casco Indemnity Company.
Positive rating actions could occur with a continued trend of favorable underwriting and operating results, while negative rating actions could occur from a significant and sustained decline in operating results or risk-adjusted capitalization.
The ICRs have been upgraded to "a+" from "a" and the FSR of A (Excellent) has been affirmed for the members of Ohio Mutual Insurance Group:
- Ohio Mutual Insurance Company
- United Ohio Insurance Company
- Casco Indemnity 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 .
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center.
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