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TMCNet:  A.M. Best Upgrades Ratings of Mennonite Mutual Insurance Company

[March 25, 2014]

A.M. Best Upgrades Ratings of Mennonite Mutual Insurance Company

OLDWICK, N.J. --(Business Wire)--

A.M. Best has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and issuer credit rating to "a-" from "bbb+" of Mennonite Mutual Insurance Company (Mennonite Mutual) (headquartered in Orrville, OH). The outlook for both ratings has been revised to stable from positive.

The ratings upgrades are driven by Mennonite Mutual's favorable underwriting results, solid operating earnings and consistent surplus growth over the previous five-year period.

The ratings reflect Mennonite Mutual's strong risk-adjusted capitalization, profitable operating results and long-standing local market presence. The company's capital position is driven by its modest underwriting leverage, management's conservative operating strategies and prudent catastrophe risk management. Mennonite Mutual's five-year operating income has been derived from profitable underwriting results in most years, combined with a steady stream of net investment income. Despite increased weather-related claims, severe fire losses and challenging market conditions, the company's operating results have remained positive. The ratings further consider management's initiatives to sustain its profitability trend through underwriting and pricing discipline, a reduction in property exposures and commitment to agriculture and faith-based markets. Mennonite Mutual's operating perfomance further benefits from its strong agency relationships.


These strengths are partially offset by the company's geographic risk concentration in Ohio and elevated underwriting expense ratio. As a predominantly single-state writer with a property book of business, Mennonite Mutual's underwriting results are subject to localized weather-related losses and changes in the legal and legislative climate. The company also maintains an underwriting expense ratio disadvantage relative to industry norms, mainly due to its elevated commission structure. However, Mennonite Mutual's underlying book of business continues to perform well, as reflected by its five-year pure loss ratio, which outperforms the personal property industry composite. In addition, there is some execution risk associated with the company's affiliation agreement and 100% quota share of Mennonite Mutual Aid Society (MMAS) business, which was effective Jan. 1, 2013. However, Mennonite Mutual has re-underwritten this book of business and MMAS has been fully integrated into its operations.

Mennonite Mutual is well positioned at its current rating level. Positive ratings actions could occur if the company maintains strong risk-adjusted capitalization and generates consistently above-average operating results. Key factors that could trigger negative rating actions include prolonged deterioration of underwriting and operating results, particularly if the resulting performance is below the peer group average with a significant erosion of risk-adjusted capitalization.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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