A.M. Best Downgrades Ratings of American Community Mutual Insurance Company

A.M. Best Co. has downgraded the financial strength rating to D (Poor) from C+ (Marginal) and issuer credit rating to "c" from "b-" of American Community Mutual Insurance Company (American Community) (Livonia, MI). The outlook for both ratings is negative.

The downgrades reflect American Community's sizeable net operating loss and corresponding significant deterioration in surplus incurred in fourth quarter 2009 due primarily to unfavorable underwriting results, the write-off of non-admitted assets, establishment of a premium deficiency reserve and reserve strengthening. At year-end 2009, the combined value of American Community's two outstanding surplus notes exceeded total surplus, and its risk-adjusted surplus level was below company action level.

Historically, American Community has focused on marketing major medical products to individuals and employer groups in a limited number of states. The company currently is rationalizing its business plan by eliminating unprofitable segments in certain states and reducing administrative expenses. A.M. Best believes its future operating results will continue to be unprofitable for at least the near term.

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The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.