A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of The Motorists Insurance Pool (Motorists Property/Casualty) and its members.
Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Motorists Life Insurance Company (Motorists Life) with a rating outlook of stable. All companies are headquartered in Columbus, Ohio.
The negative outlook is based on the deterioration in Motorists Property/Casualty’s operating earnings in recent years, driven by unfavorable underwriting results.
Motorists Property/Casualty’s ratings reflect its strong risk-adjusted capitalization, modest five-year operating performance and established market presence in its operating territories.
These positive rating attributes are derived from management’s focused operating strategy, extensive product knowledge, diversified product offerings and long-standing regional market presence. Motorists Property/Casualty’s capital position is driven by its moderate underwriting leverage, favorable loss reserve development and modest exposure to catastrophic events from a severity perspective.
Furthermore, as market conditions change, Motorists Property/Casualty continues to sustain its competitive advantage through its strong agency partnerships built on outstanding field support, customer-responsive claims service and a rapidly developing technology platform.
Motorists Property/Casualty’s negative rating attributes include its ongoing susceptibility to an increased frequency of catastrophe and weather-related losses, which have resulted in a significant deterioration in operating results in recent years.
These exposures historically had been mitigated through comprehensive reinsurance programs and underwriting initiatives aimed at reducing catastrophe exposures.
However, the increased frequency of storm losses from 2008 through 2010 resulted in significant underwriting losses and unfavorable operating earnings. Additionally, soft market conditions for commercial lines and adverse loss reserve development for workers’ compensation adversely impacted underwriting results.
American Hardware Mutual Insurance Company (AHMIC) has produced poor operating results in recent years. Motorists Property/Casualty’s above-average expense position has tempered underwriting profitability over this time period.
Motorists Property/Casualty has undertaken numerous strategic initiatives to improve underwriting profitability, including homeowners rate increases in numerous states, an increased emphasis on insurance to value, applying current inflationary trend factors, re-underwriting unprofitable books of business, more effective use of credit reports and providing agents with access to applicable reports for effective field underwriting and evaluation.
Additionally, Motorists Property/Casualty has implemented rate increases in numerous states for its private passenger automobile and commercial lines business.
Approximately two-thirds of AHMIC’s book of business was sold to Federated Mutual Insurance Company of Owatonna, Minn., in January 2011. The transaction effectively removed a historically unprofitable segment of its operation, significantly reduced staff levels and generated a capital infusion for Motorists Property/Casualty to be realized in 2011.
Motorists Life provides a complementary role to its parent, Motorists Mutual Insurance Company by offering life insurance and annuity products in addition to the parent company’s property and casualty offerings. Motorists Life also benefits from the strong agency relationships and agency distribution, which allows for cross- selling opportunities.
Motorists Life’s risk-adjusted capitalization is more than sufficient to support its insurance and investment risks. Partially offsetting these factors are the impact of new business strain and Triple X reserving, and the variability of statutory earnings in recent years.
The FSR of A (Excellent) and ICR of “a” have been affirmed for the The Motorists Insurance Pool and its following members:
- Motorists Mutual Insurance Company
- American Hardware Mutual Insurance Company
- Iowa Mutual Insurance Company
- Phenix Mutual Fire Insurance Company
- Wilson Mutual Insurance Company
- Iowa American Insurance Company
- MICO Insurance Company
Source: A.M. Best
Topics Trends Carriers Underwriting Property Property Casualty Casualty
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