A.M. Best Downgrades Ratings of Germania Mutual Group and Its Members

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit ratings to “a-” from “a” of Germania Mutual Group (Germania) and its property/casualty member companies. The outlook for these ratings has been revised to stable from negative. All companies are domiciled in Brenham, TX.

Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb” of Texas Heritage Insurance Company, an affiliate of Germania. The outlook for these ratings is stable. (See below for a detailed listing of the companies.)

The rating actions follow Germania’s variable underwriting performance in recent years, which has resulted in a declining trend in the group’s risk-adjusted capital position, although it remains favorable relative to its current rating level. The group has experienced significant losses attributable to weather-related events in recent years in Texas and an increased frequency and severity of fire related losses, particularly from the Bastrop County wildfire in September 2011. However, the group maintains a solid business profile, and management continues to focus on Germania’s competitive position through rate increases, deeper pricing segmentation and enhanced underwriting efficiencies including reviews of geographic concentrations. The stable outlook indicates A.M. Best’s expectation that Germania will continue to maintain a favorable level of risk-adjusted capital while improving underwriting performance, as a result of its underwriting initiatives and assuming more “normalized” weather patterns into 2012. However, if severe weather patterns continue to impact the Texas marketplace and/or other market disruptions occur and have a material negative effect on underwriting performance (leading to a further decline in risk-adjusted capitalization), pressure on the outlook or ratings could potentially result.

A.M. Best also has affirmed the FSR of B++ (Good) and ICR of “bbb+” of Germania Life Insurance Company (Germania Life). The outlook for these ratings is stable.

The ratings of Germania Life acknowledge its favorable levels of risk-adjusted capitalization due in large part to the ongoing support from Germania and the benefit from its multi-line agency system. Offsetting these strengths are Germania Life’s narrow business profile, overall modest size relative to its affiliates and weak statutory operating results due to continued new business strain.

The FSR has been downgraded to A- (Excellent) from A (Excellent) and ICRs have been downgraded to “a-” from “a” for Germania Mutual Group and its following property/casualty members:

• Germania Farm Mutual Insurance Association
• Germania Insurance Company
• Germania Select Insurance Company
• Germania Fire & Casualty Company

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Methodologies 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 © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Raymond Thomson, ARM, 908-439-2200, ext. 5621
Senior Financial Analyst
[email protected]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Jeffrey Mango, CPA, 908-439-2200, ext. 5204
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.