AM Best

MAY 28, 2010 12:00 AM (EDT)

A.M. Best Downgrades Ratings of Church Mutual Insurance Company

Edward Keane
(908) 439-2200, ext. 5291

Michelle Baurkot
(908) 439-2200, ext. 5507

Public Relations
Rachelle Morrow
(908) 439-2200, ext. 5378

Jim Peavy
(908) 439-2200, ext. 5644


OLDWICK, N.J. - MAY 28, 2010 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and issuer credit rating to "a+" from "aa-" of Church Mutual Insurance Company (Church Mutual) (Merrill, WI). The outlook for both ratings has been revised to stable from negative.

The rating actions reflect the sharp decline in Church Mutual's reported underwriting performance in 2008, 2009 and through first-quarter 2010, driven primarily by competitive market conditions and significant catastrophe-related losses recorded in these years. As a result, Church Mutual's underwriting results and operating performance measures have deteriorated to levels that are no longer reflective of a Superior-rated company.

Church Mutual recorded an underwriting loss of $24.2 million in 2009, following an underwriting loss of $26.9 million in 2008. In addition, the company reported an $11.1 million underwriting loss in first quarter 2010. Church Mutual's catastrophe-related losses were driven by losses associated with the high frequency of weather-related events in 2008 and 2009 and the severity of Hurricane Ike in 2008.

The rating actions also consider A.M. Best's concern that Church Mutual's operating earnings will not return to historical levels, given the ongoing challenges the company faces to improve underwriting results over the near term due to the competitive environment in its specialty niche market and its continued exposure to weather-related losses. Additionally, given the magnitude of Church Mutual's catastrophe-related losses in recent years, in addition to the high level of investment losses posted in 2008, A.M. Best remains concerned with management's overall risk management.

The ratings reflect Church Mutual's strong capitalization, prominent position in the religious institutional marketplace and management's extensive knowledge of this specialty niche market. The company also benefits from its low-cost, countrywide direct distribution system and geographic diversification throughout the United States. The ratings further acknowledge Church Mutual's historically conservative loss reserving standards that have allowed for substantial favorable loss reserve development in prior accident years.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

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AMB# Company Name
000259 Church Mutual Insurance Company, S.I.