A.M. Best Downgrades Issuer Credit Rating of Madison Mutual Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating of B++ (Good) for Madison Mutual Insurance Company (MMIC) (Edwardsville, IL). The outlook for both ratings has been revised to negative from stable.

The ICR downgrade reflects MMIC’s declining trend in risk-adjusted capitalization as a result of continuing pre-tax operating losses over the past several years. The company’s negative operating performance was driven by underwriting losses, mostly due to weather-related events combined with more recent above-average loss experience in the automobile line of business. Additional negative rating factors include the company’s five-years of poor accident-year development and a geographic concentration in Illinois that represents 95% of total direct premiums writings, consisting primarily of private passenger automobile and homeowners products.

The negative outlook reflects the potential for continued operating losses and the uncertainty that management’s initiatives will return the company to operating profitability over the intermediate term. However, A.M. Best acknowledges the company’s improved results through the first quarter of 2015. MMIC’s management attributes the favorable turnaround across all lines to agency management actions, improved rate levels stemming from prior-year rate increases, reserving enhancements and other underwriting actions.

There is potential for further negative rating action if the company’s operating performance fails to improve or a decline in policyholders’ surplus and risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, were to occur.

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
• 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.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Company, Inc.
Maurice Thomas, 908-439-2200, ext. 5794
Senior Financial Analyst
[email protected]
or
Rick Decker, 908-439-2200, ext. 5423
Assistant Vice President
[email protected]
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.

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