A.M. Best Co. has upgraded the financial strength rating (FSR) to “A” (Excellent) from “B++” (Good) and assigned an issuer credit rating (ICR) of “a” to Wisconsin-based Sheboygan Falls Mutual Insurance Company. Best also removed the FSR from under review and assigned a stable outlook: the ICR is also stable.
Best said it had taken the rating actions following the announcement of the “completed affiliation between Donegal Mutual Insurance Company,” a member of the Penn.-based Donegal Insurance Group, which currently has the same ratings, and Sheboygan Falls, “whereby Donegal purchased a $3.5 million contribution note from Sheboygan Falls.”
Donegal has also entered into “a services agreement with Sheboygan Falls for the purpose of reducing costs through economies of scale,” Best noted. “In addition certain designees of Donegal have joined the board of directors of Sheboygan Falls.”
Best’s ratings now “reflect the implementation of a reinsurance and retrocession agreement between Donegal and Sheboygan Falls,” the bulletin continued. It also indicated that in Best’s opinion “Sheboygan Falls is now part of a financially stronger organization, which is anticipated to yield considerable benefits going forward.”
Donegal is expected to provide financial assistance as well as “technical support to Sheboygan Falls to facilitate premium growth and to increase operational efficiency,” said Best.
The rating agency also noted that the “affiliation represents a step forward in Donegal Insurance Group’s expansion into the Midwest region of the country.”
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