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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 07, 2012 12:00 AM (EST)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-”of Inland Mutual Insurance Company (Inland) (Huntington, WV).
A predominant portion of Inland’s business is personal lines written in Ohio, and to date, all property policies are written on named peril forms with first party actual-cash-value indemnification rather than replacement cost. The company’s target market includes mobile homes and modest valued dwellings that may be ineligible for coverage in the “standard” market.
Inland’s revised outlook reflects its weakened underwriting performance in recent years and the potential adverse impact from a 2012 rollover book of property business. This new business will be subject to Inland’s current strict underwriting standards and a higher rating plan. However, it remains a question if the losses will be greater than management’s expectations and increase the company’s loss ratio. In the past, Inland’s increased combined ratio stemmed primarily from growing underwriting expenses that when combined with declining written premiums, caused an elevated expense ratio.
Despite these concerns, Inland sustains excellent risk-adjusted capitalization, which is derived from its low underwriting leverage. Furthermore, the company maintains sound risk management, which includes a prudent reinsurance program and a long-standing local market presence.
These strengths are partially offset by Inland’s modest size and geographic concentration relative to other companies within the property composite. As a result, its earnings are susceptible to frequent and severe weather-related losses, market pressures and regulatory changes. Due to Inland’s modest premium base, small changes in operating expenses can significantly impact its expense ratio. However, these factors are partially mitigated by its pure loss ratio, which historically has compared favorably to the composite average.
Key rating factors that could trigger negative rating actions include a material deterioration in Inland’s underwriting and operating results with significant erosion of its risk-adjusted capitalization.
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 “Catastrophe Analysis in A.M. Best Ratings.” 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.