AM Best Downgrades Credit Ratings of Cities and Villages Mutual Insurance Company

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings to “a-” (Excellent) from “a” (Excellent) of Cities and Villages Mutual Insurance Company (Cities and Villages) (Wauwatosa, WI). The outlook of these Credit Ratings (ratings) has been revised to negative from stable.

These ratings reflect Cities and Villages’ balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The rating downgrades reflect the company’s geographic concentration as a single-state writer in Wisconsin with product concentration, which has led to a deterioration in results. AM Best has revised its assessment of Cities and Villages’ business profile to limited from neutral. As a mutual insurer of public services in Wisconsin since 1987, the company’s business profile is subject to changes in the state’s legislation, economic conditions and weather-related losses. However, the company still benefits from high member retention, exceptional safety training programs for its members, strong reputation in its operating territory and an experienced management team.

The revision of the outlooks to negative from stable reflects the company’s volatile operating performance over the past five years, driven by underwriting losses in recent years as well as the company’s policyholder dividend payment structure, which has had a suppressive effect on policyholders’ surplus growth over the long term. In addition, the deterioration in profitability and deviation from the company’s historically adequate pre-dividend operating performance lagged the workers’ compensation composite in the most-recent five-year period. Volatility in the company’s results, which continued through year-end 2024, is fueled by a substantial increase in pure losses, driven primarily by auto physical damage claims. Loss adjustment expenses remained elevated due to the long-tailed nature of workers’ compensation coverage with prospective results subject to ongoing uncertainty. A prolonged continuation of adverse underwriting results may result in further negative rating actions.

AM Best views Cities and Villages’ ERM program as appropriate. Cities and Villages’ ERM program is designed specifically for over 50 of its member communities. Cities and Villages’ management continues to respond appropriately to regulatory, judicial and legislative challenges in Wisconsin.

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.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.