A.M. Best Co. has assigned a financial strength rating (FSR) of A- (Excellent) and issuer credit rating of “a-” to Bearing Midwest Casualty Co. (Bearing) and Horizon Midwest Casualty Co. (Horizon).
The outlook assigned to these ratings is stable.
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Midwest Builders’ Casualty Mutual Co. (MWBC).
The outlook for these ratings is stable.
Both Bearing and Horizon are start-up wholly owned subsidiaries of MWBC, hence the lead/parent company of the group.
All companies are domiciled in Lenexa, Kan.
MWBC’s ratings reflect its historically strong operating performance, aggressive claims management and solid capitalization. Partially offsetting these positive rating factors are MWBC’s product concentration as a monoline workers’ compensation writer, which potentially exposes it to increased risk of regulatory or legislative changes and challenging market conditions in the workers’ compensation line of business.
MWBC currently provides only workers’ compensation insurance, focusing primarily in the commercial construction, light industry, manufacturing and construction-related service industries. However, it is a licensed property and casualty insurance company authorized to transact various lines of business, including auto physical damage, fidelity and ocean/inland marine.
MWBC was established on July 1, 2008, through the transfer of all assets and liabilities from Builders’ Association Self-Insurers’ Fund of Missouri and Builders’ Association Self-Insurers’ Fund of Kansas.
The assigned ratings reflect Bearing and Horizon’s sound business plans, supportive risk-based capitalization, A.M. Best’s expectation of a modest operating performance as the companies are start-ups and their strong reinsurance protection. Also inuring to the ratings are incorporation of favorable business plans, upon which the profitability and liquidity metrics of the ratings are based, as well as the benefits and underwriting expertise from the management.
Partially offsetting these positive ratings factors is the start-up nature of Bearing and Horizon, their limited market scope/business profile, execution risk associated with the implementation of the companies’ business plan, the potential impact of continued soft market conditions and the fierce competition on the business in which the companies plan to participate.
Reinsurance protection in the form of a 100 percent quota share agreement with the companies’ parent, MWBC, allows both Bearing and Horizon to obtain the same ratings as MWBC. The outlook is contingent upon management meeting Bearing and Horizon’s forecasted objectives, the adequacy of premium rates and loss reserves and the maintenance of supportive risk-adjusted capitalization going forward.
A.M. Best is concerned with Bearing and Horizon meeting their assumptions included in their business plans, economic volatility, as well as the possibility that the companies could be exposed to a confluence of events that will test their capital strength.
A.M. Best will closely monitor the quarterly performance of Bearing and Horizon against their stated operating plan. Any material adverse deviations with regard to management, earnings, capitalization or risk profile could potentially undermine the stability of the assigned ratings.
While the outlook is stable, positive movement on all three companies’ ratings are unlikely in the near to medium term. However, negative rating actions could occur if risk-adjusted capitalization were to deteriorate as a result of dividend payments and investment losses.
A deterioration of the companies’ market share and competitive position may also put negative pressure on the ratings.
Source: A.M. Best