A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating to “bbb+” from “a-” of McMillan-Warner Mutual Insurance Co. (MWM) of Marshfield, Wis. The outlook for both ratings has been revised to stable from negative.
A.M. Best said the rating actions reflect MWM’s trend of increasing underwriting and operating losses over the past five years, negative cash flow, declining risk-adjusted capitalization and policyholders’ surplus.
The ratings also reflect the competitive market conditions in MWM’s operating territory, its dependence on reinsurance, primarily from one reinsurer, and its concentrated business profile, which has exposed the company to significant weather-related losses over the past five years.
Somewhat tempering these negative rating factors are MWM management’s actions to improve underwriting results through enhanced loss control property re-inspections, tightened underwriting standards for new business, agency reviews and surcharges on policies with multiple claims.
The stable outlook and rating downgrades also acknowledge MWM’s strong risk-adjusted capitalization for its rating level, history of adequate loss reserving practices, long-standing agency relationships and historic presence writing property business in underserved rural areas of Wisconsin.
The ratings and outlook of MWM may have future negative rating actions if the initiatives undertaken by management to return to underwriting and operating profitability do not materialize over the intermediate term and result in future operating losses and declines in policyholders’ surplus and risk-adjusted capitalization as represented by Best’s Capital Adequacy Ratio (BCAR).
Conversely, future positive rating actions and/or a revised outlook may occur if MWM returns to and sustains its underwriting and operating profitability, leading to strengthened policyholders’ surplus and risk-adjusted capitalization.
Source: A.M. Best