A.M. Best Downgrades Ratings of Hastings Mutual Insurance Company

A.M. Best Co. has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and issuer credit rating to "a+" from "aa-" of Hastings Mutual Insurance Company (Hastings Mutual) (headquartered in Hastings, MI).

The outlook for both ratings has been revised to stable from negative.

The rating downgrades are based on Hastings Mutual's deterioration in underwriting results and operating earnings over the previous five-year period, which was driven by significant storm losses in its operating territories.

Hastings Mutual's current ratings are based on its strong risk- adjusted capitalization, reflective of its modest underwriting leverage, conservative investment risk profile and favorable loss reserve development. The company's modest five-year pre-tax operating earnings were driven by solid investment income and other income, partially offset by underwriting losses. These positive rating factors are derived from the company's long-standing agency relationships and management's adherence to sound operating fundamentals. Hastings Mutual has implemented a comprehensive review of its operations, which includes rate adjustments where indicated, more sophisticated rating plans, insurance-to-value initiatives, agency training and performance reviews, investments in underwriting and claims systems technology, as well as the utilization of outside consultants to review medical bills for bodily injury claims.

Partially offsetting these positive rating factors are Hastings Mutual's geographic concentration and corresponding exposure to severe weather-related losses, which has driven the deterioration in its underwriting results and operating earnings over the previous five-year period. In addition, private passenger auto loss experience deteriorated due to increased bodily injury and personal injury protection loss severities, which were driven by medical inflation.

Hastings Mutual reported improved underwriting results and operating earnings in 2011, driven by lower large non-storm losses, increased favorable loss reserve development on its personal auto liability and workers' compensation lines of business as well as the earning of rate increases in numerous states and lines of business. However, in recent years, underwriting results and operating earnings once again deteriorated due to increased frequency and severity of storm losses, which adversely impacted its homeowners and auto physical damage lines of business. Underwriting results were adversely impacted in recent years by the June 2012 Derecho storm and the November 2013 Midwest windstorm.

Hastings Mutual is well positioned at its current rating level. However, a continuation of adverse underwriting results could potentially lead to further rating pressure.

More information:

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