[January 17, 2013]

A.M. Best Withdraws Ratings of Community Mutual Insurance Company

A.M. Best Co. has downgraded the financial strength rating to C (Weak) from C+ (Marginal) and the issuer credit rating to "ccc" from "b-" of Community Mutual Insurance Company (Community Mutual) (Castleton, NY). Concurrently, A.M. Best has withdrawn the ratings in response to management's request to be removed from A.M. Best's interactive rating process.

The downgrades follow Community Mutual's continued unprofitable underwriting performance and diminished levels of surplus. In particular, in 2011, statutory surplus declined by 26.6%, and in 2012, it declined by an additional 18%. Community Mutual has experienced significant losses attributable to major fires and weather-related events in recent years. The company's unfavorable operating performance is evidenced by its negative five-year average pre-tax returns on revenue and surplus. Although th company's pure loss ratio compared favorably to the personal property composite average on a five-year average basis, elevated loss adjustment expenses and other underwriting expenses contributed to net underwriting losses in each of the past five years. Additionally, Community Murtual's single-state concentration of risk exposes it to weather-related events as well as to market, regulatory and judicial issues.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; and "Catastrophe Analysis in A.M. Best Ratings." Best's Credit Rating Methodology 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.

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