Outlook Revised to Negative for Badger Mutual Insurance; A- Rating Affirmed

May 9, 2014

A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Badger Mutual Insurance Company (Badger Mutual), of Milwaukee, Wis.

The revised outlook reflects Badger Mutual’s failure to meet its 2013 projections, which resulted in operating losses and overall declines in its policyholders’ surplus and risk-adjusted capitalization.

Underwriting losses were primarily attributable to loss reserve strengthening for a prior accident year in its commercial multi-peril line of business and severe losses throughout the company’s geographic footprint.

Despite the decline in policyholders’ surplus, Badger Mutual continues to maintain adequate risk-adjusted capitalization that supports its ratings. The ratings also consider management’s initiatives designed to reduce underwriting expenses.

Negative rating actions could occur if Badger Mutual does not substantially meet its operating projections and/or there is continued deterioration in policyholders’ surplus and its risk adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR).

Positive rating actions and/or another revision of the outlook could occur if the company reaches profitable operating performance in the near term and sustains it over several periods with increasing capital strength as measured by its BCAR.

Source: A.M. Best

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