A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of B+ (Good) and issuer credit rating of bbb- of Ellington Mutual Insurance Co. (EMIC) of Hortonville, Wis.
Best said the rating actions reflect the trend in EMIC’s increasing underwriting and operating losses over the past five years, negative cash flow, declining risk-adjusted capitalization and policyholders’ surplus.
Furthermore, the ratings reflect the competitive market conditions in EMIC’s operating territory, its dependence on reinsurance (primarily from one reinsurer), increased common stock investment leverage and its concentrated business profile, which has exposed the company to significant weather-related losses over the past five years.
Somewhat tempering these negative rating factors are EMIC management’s actions to improve underwriting results through enhanced loss control property re-inspections, tightened underwriting standards for new business, agency reviews and rate increases.
Additionally, the ratings acknowledge EMIC’s strong risk-adjusted capitalization for its rating level, its history of adequate loss reserving practices, long-standing agency relationships and historic presence writing property business in underserved rural areas of Wisconsin.
Source: A.M. Best
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