A.M. Best Revises Outlook for Southern Mutual Church Insurance Co.

A.M. Best has revised the outlook to stable from negative for the financial strength rating (FSR) and the issuer credit rating (ICR) of Southern Mutual Church Insurance Co. (SMCIC) of Columbia, S.C., while affirming the FSR of A- (Excellent) and the ICR of “a-“.

The revised outlook reflects SMCIC’s more favorable operating trends, its improved capitalization and its enhanced reinsurance protection against storm losses. Earning results over the past three years are an indication that management’s initiatives to reduce the volatility in earnings have gained traction. As such, A.M. Best’s expectation is SMCIC’s operating measures and capitalization will continue to support the rating.

SMCIC’s ratings reflect its improved operating results since 2012, strong risk-adjusted capitalization and the company’s established presence in its niche market of providing coverages to churches and religious organizations. Underwriting results have improved in recent years on reduced storm losses and more favorable market conditions that have led to better rate adequacy, as well as increased premium volume.

Beginning in 2012, management tightened underwriting standards, enhanced loss prevention measures, achieved better rate adequacy and refined the company’s reinsurance programs to better insulate it from catastrophe losses. These actions were undertaken to stabilize the volatility in underwriting results experienced in the years immediately prior to 2012. To date, management has met or exceeded the outcomes it believed these initiatives would achieve.

The positive rating factors are offset by SMCIC’s weak operating results in the years immediately prior to 2012, the competitive nature of its market niche and its geographic concentration of risk that exposes SMCIC to weather-related events.

The company’s business profile is somewhat geographically concentrated as more than 85% of its writings are derived from South Carolina, Georgia and North Carolina, leaving it exposed to regulatory, competitive and weather pressures.

SMCIC maintains large exposure to catastrophic losses. Nonetheless, prudent utilization of reinsurance reduces this exposure to manageable levels. Regardless, A.M. Best expects operating results to continue to be negatively impacted in years that have increased weather losses. The ratings could be negatively impacted by a material decline in either SMCIC’s operating results or risk-adjusted capitalization.

Topics Trends AM Best Church