OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the ICR of “a” of West Bend Mutual Insurance Company (West Bend) (West Bend, WI). The outlook for the FSR remains stable.
The positive ICR outlook is a reflection of the company’s solid risk-adjusted capitalization and favorable trend in operating performance over the past four years. Management maintains strict underwriting guidelines and strengthened claims handling leading to profitable underwriting income over the latest five-year period, as well as consistent and stable reserve development. West Bend has increased surplus in each of the past five years as a result of the profitable underwriting performance that has been further complemented by a steady stream of net investment income.
Partially offsetting these positive rating factors are the company’s modest volatility in results, particularly earlier in the latest 10-year period, and somewhat-limited profile. Investment yields have been declining, which is typical in the current low interest rate environment; however, average yields are lagging the commercial casualty composite. Also, common stock leverage is elevated, which exposes investments to stock market volatility. While the company writes in a number of states, geographic concentration exists in Wisconsin and Illinois, subjecting results to severity and frequency of weather-related events, as well as local market conditions.
Positive rating action may follow a continuation of favorable operating performance while maintaining solid risk-adjusted capitalization. Negative rating action could occur if there is a sudden decline in West Bend’s operating results or if there is deterioration in the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).
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