Ratings Roundup: Midwest Family Insurance Group

Outlooks for Iowa’s Midwest Family Insurance Group Revised to Positive

AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Iowa-based Midwest Family Mutual Insurance Co. and its wholly owned subsidiary, Midwest Family Advantage Insurance Co., in West Des Moines, Iowa.

Collectively, the companies are referred to as Midwest Family Insurance Group and operate under an inter-company quota share reinsurance agreement.

The ratings reflect the group’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The outlook revisions to positive reflect improvement in the group’s underwriting performance in recent years driven by strategic initiatives to diversify and expand its footprint in non-Midwestern states and commercial lines. These actions have led to consistent underwriting performance that outperforms the composite, as measured by the group’s five- and 10-year average combined ratios.

AM Best’s expectation is for sustained improvement in operating performance metrics with low to moderate volatility while maintaining very strong balance sheet strength.

The group’s balance sheet strength reflects the strongest level of risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), and a high quality, well-diversified investment portfolio with solid liquidity, partially offset by above-average common stock leverage relative to the composite. The balance sheet further benefits from historically favorable reserve development and a comprehensive reinsurance program with high quality reinsurers.

Surplus growth reported in each of the past five years has been driven by sustained underwriting profitability supplemented by an unaffiliated surplus note that impacted underwriting leverage ratios favorably.

The group’s neutral business profile reflects diversification across commercial and personal product lines and geographies. Strong agency relationships are maintained with active controls and monitoring. In recent years, agency management and premium growth initiatives have resulted in a larger average-agency book size.

AM Best considers the ERM program to be appropriate for the risk profile of the organization. Improved capabilities have been observed in management’s ability to assess risk tolerance levels as evidenced by quantifiable risk appetite and tolerance metrics with stress testing performed on top risks. In addition, the ERM process includes a strong risk-awareness culture and corporate governance that is supported by the board of directors and senior management.

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Topics AM Best Iowa