A.M. Best Downgrades Madison Mutual Insurance Co.

A.M. Best Co. announced it has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit rating to “bbb+” from “a-” of Madison Mutual Insurance Co. (Madison Mutual), in Edwardsville, Ill. The outlook for both ratings has been revised to stable from negative.

The rating downgrades for Madison Mutual reflect its trend of poor underwriting performance over the past five years, which reduced its risk-adjusted capitalization.

Underwriting losses were primarily attributable to significant increased claims activity due to the company’s concentration of business in Illinois and its limited product offerings. The company writes auto, home, farm and personal umbrella lines of insurance, according to information posted on its website.

In addition, Madison Mutual maintains elevated investment leverage, which exposes surplus to equity market volatility.

Despite its recent decline, Madison Mutual continues to maintain risk-adjusted capitalization that supports its ratings. The company’s capitalization reflects its conservative underwriting leverage.

Furthermore, Madison Mutual maintains excellent liquidity measures, a favorable expense structure and a long-standing local market presence. The ratings also consider management’s ongoing initiatives designed to improve underwriting profitability.

Negative rating actions could follow if Madison Mutual continues its underwriting losses and/or a substantial decline occurs in its risk-adjusted capitalization. Positive rating actions could follow if the company sustains improvement in its underwriting performance while maintaining strong risk-adjusted capitalization.

Source: A.M. Best

Topics Underwriting AM Best