A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit rating to “bbb” from “a-” of Austin Mutual Insurance Company (AM) in Maple Grove, Minn. The outlook for both ratings is negative.
The rating actions reflect AM’s recent trend of underwriting losses during its recent five-year period, which were driven by increased frequency and severity of weather-related losses, as well as losses relating to its private passenger automobile liability business, while maintaining a concentration of exposures in a single geographic area.
Although management has begun to execute several aggressive strategic initiatives to improve the company’s underwriting performance, successful execution of these business plans has yet to materialize into profitable results. As a result, A.M. Best remains concerned with the company’s volatile underwriting performance and potential for further erosion of capital, as AM’s business continues to face ongoing exposure to weather-related events and challenging competitive market conditions.
Before the negative outlook could be removed, AM will have to successfully execute its current strategies and improve its operating performance and capitalization. Further negative rating actions may occur if AM’s significant operating losses persist in 2012, causing a further deterioration of its capitalization.
Source: A.M. Best