AM Best Revises Issuer Credit Rating Outlook to Stable for Members of Church Mutual Insurance Group

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has revised the outlook to stable from positive for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a” of Church Mutual Insurance Company (Merrill, WI) and its wholly owned subsidiaries, collectively referred to as Church Mutual Insurance Group (the group). The outlook of the FSR remains stable. (See below for a listing of companies.)

The ratings of the group reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The revision of the Long-Term ICR outlook to stable from positive reflects significant deterioration in underwriting performance in 2018 driven by catastrophe losses and adverse loss reserve development. These events combined with unrealized capital losses from the equity portfolio caused a significant decline in surplus. Although the group’s equity portfolio has rebounded in 2019, the capital position remains susceptible to catastrophic events related to its property exposures. The stable outlooks are based on the expectation of improved underwriting results that remain comparable with the composite while maintaining very strong balance sheet strength.

The group’s very strong balance sheet strength is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as its conservative fixed income investment portfolio with solid liquidity levels. The balance sheet further benefits from a comprehensive reinsurance program with highly rated reinsurers. These strengths are partially offset by recent adverse reserve development in most lines of business and moderately elevated common stock leverage relative to the composite average.

The group’s adequate operating performance is reflective of historically profitable operating performance driven by underwriting income and increasing net investment income. However, the group’s operating results in 2018 were negatively impacted by higher catastrophe losses, increased large losses, freeze claims, wildfires and adverse loss reserve development. Despite the downturn faced by the group in 2018, its five-year average combined ratio remains in line with the composite.

The group’s neutral business profile reflects its position as a market leader providing insurance services for religious institutions and related ministries. Over the past several years, the group has increased its focus on strong brand awareness and expanded its business into new markets and niches. The group also benefits from its proactive use of sophisticated pricing tools and data management. The group’s ERM framework and risk management capabilities are considered appropriate for the risk profile of the organization. The ERM process includes a strong risk-awareness culture and corporate governance that is supported by the board of directors. In addition, stress testing is performed and capital modeling account for tail risk and market corrections.

The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed, with the Long-Term ICR outlook revised to stable from positive and the FSR outlook maintained at stable for the following subsidiaries of Church Mutual Insurance Company:

CM Vantage Specialty Insurance Company
CM Select Insurance Company
CM Regent Insurance Company

On Sept. 14, 2018, Church Mutual Insurance Company purchased 100% of American Sterling Insurance Company, a stock-based insurance company domiciled in California as a shell company. To date, the company has not commenced operations.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.