A.M. Best Affirms Financial Strength Rating of Grange Mutual Casualty Company and Its Subsidiaries; Revises Issuer Credit Rating Outlook to Negative

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of Grange Mutual Casualty Companyand its pooled subsidiaries and affiliate (collectively known as the Pool). The outlook for the ICR has been revised to negative from stable, while the outlook for the FSR is stable.

Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Grange Life Insurance Company (Grange Life). Grange Life is jointly owned by Grange Mutual Casualty Company andIntegrity Mutual Insurance Company, an affiliate within the Pool. The outlook for these ratings is stable. All the above named companies are domiciled in Columbus, OH. (See below for a detailed listing of the companies.)

The revised ICR outlook for the Pool is the result of increased variability in underwriting results and operating performance over the past several years despite steady growth in surplus over the long term, primarily stemming from investment income. The organization’s operating results have been adversely impacted by limited margins in pricing and significant weather-related events in recent years, which were the major factors contributing to its financial performance. Underwriting and pricing strategies have been implemented to improve future operating performance; however, near-term improvement in the Pool’s results will be challenged due to changing market conditions and the time required for all actions to be reflected in its results.

The Pool continues to maintain solid risk-adjusted capitalization, which is derived from its conservative investment portfolio and moderate underwriting leverage. Extensive product management, solid enterprise risk management capabilities and redundant loss reserve development trends continue to be positive factors reflected in the ratings. These strengths are further supported by an experienced management team, broad product offerings and a long-standing regional market presence.

Negative rating actions could occur if the Pool’s underwriting and operating results continue to lag its peers with significant erosion of risk-adjusted capitalization.

The ratings of Grange Life recognize its favorable capitalization, premium, trends and shared resources with its parent. Offsetting rating factors include the company’s limited product and earnings diversification and geographic concentration.

The FSR of A (Excellent) and the ICRs of “a+” have been affirmed for Grange Mutual Casualty Company and its following subsidiaries:

• Trustgard Insurance Company
• Grange Indemnity Insurance Company
• Grange Insurance Company of Michigan
• Grange Property & Casualty Insurance Company
• Integrity Mutual Insurance Company
• Integrity Property & Casualty Insurance Company

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; “Understanding BCAR for Life/Health Insurers”; “Understanding BCAR for Property/Casualty Insurers”; and “Assessing Country Risk.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Maurice Thomas, 908-439-2200, ext. 5794
Senior Financial Analyst
[email protected]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Rick Decker, 908-439-2200, ext. 5423
Assistant Vice President
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Co.