OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Wisconsin Municipal Mutual Insurance Company (WMMIC) (Madison, WI).
The revised outlooks reflect the decline in policyholders’ surplus and risk-adjusted capitalization due to recent unfavorable trends in underwriting and operating results. The decline was attributed to several losses from civil rights claims settled within the federal court system that were not subject to state caps on liability losses which generated high severity losses. However, prudent reinsurance programs and an emphasis on loss control initiatives have mitigated the severity of these losses.
While the company has successfully attracted and retained insureds through profit sharing via policyholder dividends, such annual dividends have also contributed to the recent decline in policyholders’ surplus and risk-adjusted capitalization, and led to overall variable return measures and elevated combined ratios.
Nevertheless, the excellent Credit Ratings (ratings) and stable outlooks reflect WMMIC’s very strong risk-adjusted capitalization and strong market niche insuring local city and county municipalities in Wisconsin. WMMIC’s overall risk-adjusted capitalization is very strong as its underwriting leverage is significantly below the commercial casualty composite.
Additionally, the ratings reflect WMMIC’s solid relationships with its insureds, commitment to loss control initiatives and conservative operating and investment strategy. WMMIC’s operating results, in the earlier years of the recent five-year period, benefited from tort caps that limit indemnity losses at the state level. Furthermore, management carefully monitors and adjusts its policyholder’s self-insured retentions, which helps WMMIC achieve desired operating results. The ratings also acknowledge the company’s tax-exempt status and the benefit of tort caps in Wisconsin, which limit indemnity losses for general and auto liability.
Partially offsetting these strengths are the company’s somewhat limited business profile with respect to additional product offerings and the growth potential of its customer base.
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