A.M. Best Co. has downgraded the financial strength rating to B+ (Good) from B++ (Good) and issuer credit rating to “bbb-” from “bbb” of Upland Mutual Insurance Inc. (Upland) (Junction City, KS). The outlook for both ratings is stable.
Best reported that the rating actions reflect Upland’s trend of declining risk-adjusted capitalization driven by significant underwriting losses and negative operating income over the last few years. The operating losses experienced exemplify Upland’s geographic concentration of risk as a single state property writer in Kansas, which exposes the company to tornado and wind and hail storm losses.
Currently, the modeled 100 year net after-tax probable maximum loss estimate represents a significant percentage of the company’s policyholders’ surplus. As a result of the storm frequency in 2008, 2009 and 2010 in Kansas, Upland’s surplus declined approximately 20 percent.
Offsetting the above rating factors is Upland’s conservative investment portfolio and reserving practices, favorable overall liquidity, management’s extensive market knowledge and long-standing presence in Kansas.
Further, management has undertaken actions to improve its operating income and strength its capitalization through the implementation of various operational and underwriting strategies while maintaining a comprehensive reinsurance program.
Source: A.M. Best
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