A.M. Best Revises Outlook to Negative for Germania Mutual Group and Its Members

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Germania Mutual Group (Germania) and its property/casualty members. (See below for a detailed listing of the companies.)

Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb” of Texas Heritage Insurance Company, an affiliate of Germania. The outlook for these ratings is stable.

The affirmation of the ratings reflects Germania’s adequate risk-adjusted capitalization, its longtime experience and expertise in the Texas marketplace and its conservative investment portfolio with consistent investment income.

These positive factors are somewhat offset by the group’s unprofitable underwriting performance for the past two years, which is due to frequent and severe weather events, given the group’s geographic concentration of risk in Texas. As a result, a downward trend in risk-adjusted capitalization has occurred, in conjunction with elevated underwriting leverage ratios. In addition, the negative outlook recognizes these downward trends in underwriting performance and risk-adjusted capital position, along with the uncertainty with respect to near term improvement. In response to these trends, the group continues to explore strategies and implement changes in underwriting guidelines and reinsurance coverage designed to reduce exposure and improve its risk-adjusted capital position.

A.M. Best also has affirmed the FSR of B++ (Good) and ICR of “bbb+” of Germania Life Insurance Company (Germania Life). The outlook for these ratings is stable. All companies are domiciled in Brenham, TX.

The ratings of Germania Life acknowledge its continuing initiatives to expand its market profile through its affiliation with Germania and its continued strong level of risk-adjusted capital. Offsetting these strengths are Germania Life’s narrow business profile, overall modest size relative to its affiliates and weak statutory operating results due to new business strain.

The FSR of A (Excellent) and ICRs of “a” have been affirmed for the Germania Mutual Group and its following property/casualty members:

• Germania Farm Mutual Insurance Association
• Germania Insurance Company
• Germania Select Insurance Company
• Germania Fire & Casualty Company

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.