A.M. Best Co. has revised the outlook to negative from stable of Piqua, Ohio-based Buckeye State Mutual Insurance Co. and its insurance affiliates. The ratings firm also affirmed the financial strength rating of B+ (Good) and issuer credit ratings of “bbb-” off Buckeye and its affiliates.
Buckeye’s affiliates are: Middle Georgia Mutual Insurance Co. in Griffin, Ga.; and Home and Farm Insurance Co. in Fort Wayne, Indiana.
“The negative outlook is based on Buckeye’s significant operating losses in recent years, which led to sizable declines in its policyholders’ surplus, stemming from catastrophe weather-related losses, and unfavorable loss experience in the automobile line of business and competitive market pressures in its operating territory,” A.M. Best stated.
The affirmation of the ratings is based on Buckeye’s adequate risk-adjusted capitalization, an established local market presence and A.M. Best’s expectation that recent initiatives to address these issues will reduce future volatility and improve the long-term operating performance of the organization.
Buckeye’s significant underwriting losses over the past five years were largely driven by widespread storm losses in the Midwest. The losses were partially offset by net investment income, however at a declining level.
To counter the trends, in addition to reducing its property exposures, Buckeye has undertaken a new rating platform for automobile, bi-peril rating of property risks, continued rate increases across all major lines and agency management actions.
Buckeye’s business concentration in the Midwest continues to expose its earnings to catastrophic wind, hail and tornado losses, according to A.M. Best, which noted that management partially mitigates this exposure through comprehensive reinsurance, and prudent risk management and geographic diversification strategies.
The net probable maximum loss (PML) from a 100-year tornado/hail event, as depicted in a PML analysis, has been reduced to a reasonable level of surplus, according to A.M. Best.
“Key rating factors that could trigger negative rating actions include continued deterioration of Buckeye’s underwriting and operating results, particularly if the resulting performance causes further erosion of risk-adjusted capitalization,” A.M. Best stated.
Topics Trends Profit Loss Ohio AM Best
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