AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Mennonite Mutual Insurance Company (MMIC) (Orville, OH).
The Credit Ratings (ratings) reflect MMIC’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The negative outlooks reflect AM Best’s concern over MMIC’s unfavorable operating performance in recent years, which was driven by a deterioration in underwriting results. This deterioration was attributable to an increased frequency and severity of weather-related loss events. The company also has a geographic concentration of risk, which leaves it susceptible to adverse weather conditions and has contributed greatly to the volatile operating performance in recent years. The operating performance assessment benefits from MMIC’s historical profitability metrics that outperformed its industry composite on a five-year and 10-year average basis.
The recent underwriting losses have begun to put pressure on the current balance sheet assessment as well. The underwriting losses and significant unrealized losses that were reported in 2022 due to market volatility, generated a surplus decline of 9%.
MMIC’s management has implemented profitability initiatives to help mitigate volatility, which includes increasing inflation guard charges, rate increases, and instituting new underwriting guidelines across its product portfolio.
AM Best expects that these actions will help MMIC improve upon its current level of performance; however, given the absence of improvement, the ratings are likely to be downgraded.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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