AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to SFM Mutual Insurance Co. and its affiliates, SFM Safe Insurance Co. and SFM Select Insurance Co., collectively known as SFM Companies (SFM) and headquartered in Minneapolis, Minnesota.
The outlook for the ratings is stable.
SFM is a workers’ compensation insurer providing coverage primarily in Minnesota, Wisconsin, Iowa, Nebraska and South Dakota. A customer-owned mutual insurance company, the carrier was created as a result of legislation passed by the Minnesota Legislature in 1983 in response to dire conditions in the state’s workers’ compensation market during the 1970s and 1980s. First named Minnesota State Workers’ Compensation Mutual Insurance Co., the insurer wrote its first policy on April 1, 1984.
Although initially funded by a loan from the state of $5.7 million, the carrier was established to compete with the private workers’ comp market. SFM is now the largest workers’ comp carrier in Minnesota and insures 22,000 policyholders in the Midwest, according to information posted on the company’s website.
AM Best’s Analysis
AM Best said its ratings reflect SFM’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
SFM’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is categorized as strongest, and AM Best expects it to remain at a similar level in future years. The balance sheet strength assessment also considers the company’s low reinsurance dependence, improving liquidity and elevated underwriting leverage ratios.
SFM has generated an adequate level of operating performance, predominantly supported by moderate underwriting gains and a consistent stream of investment income. SFM’s limited business profile is due to the group being monoline workers’ compensation insurers with modest geographic concentration.
According to AM Best, SFM’s limited geographic profile leaves it susceptible to potential legislative, regulatory or judicial changes in the workers’ compensation market. However, risk-management capabilities are considered appropriate for the risk profile of the group, AM Best said.
Other SFM Subsidiaries and Affiliates
- SFM Risk Solutions, a subsidiary that provides claims administration to self-insured employers
- CompRehab Inc., a subsidiary that specializes in returning injured employees to work and providing access to rehabilitation specialists
- Lynn, Scharfenberg & Hollick (LSH), an in-house law firm that represents SFM policyholders in litigation
- Barrier Free Access, a company that specializes in the sale, servicing, design and installation of high quality safe patient handling products and equipment
- A servicing carrier for the Minnesota Workers’ Compensation Assigned Risk Plan, providing policy, claims and other services for employers insured through the plan
- SFM Foundation, a nonprofit that awards higher education scholarships to students whose parents were killed or seriously injured at work.
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