OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to stable from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Wisconsin Municipal Mutual Insurance Company (WMMIC) (Madison, WI). The outlook of the FSR is stable.
The Credit Ratings (ratings) reflect WMMIC’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revision of the Long-Term ICR outlook to stable is based on improved operating performance in recent years resulting in modest increases in policyholder surplus, primarily driven by a decrease in frequency and severity of large litigation claims. WMMIC has made the exposure from law enforcement a priority in recent years by implementing robust loss control and claims management programs. A prudent reinsurance program and management’s emphasis on loss control have mitigated the frequency and severity for this area of law enforcement exposure. While WMMIC has successfully attracted and retained its member/insureds through profit sharing via policyholder dividends, it has led to negative return measures and significantly elevated combined and operating ratios. In the latest five-year period, policyholder dividends accounted for approximately 29 percentage points on the company’s combined ratio.
These positive rating factors are derived from the company’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and driven by conservative underwriting leverage, strong balance sheet liquidity metrics, a conservative investment portfolio comprised of highly rated bonds and its overall operating strategy. Other positive factors supporting the ratings include the company's long-standing relationships with its municipal and county member/insureds and emphasis on loss control efforts as part of its overall ERM program.
WMMIC has a limited business profile due to its limited pool of potential policyholders, product offerings and geography. Additionally, WMMIC’s ERM is assessed as appropriate for its risk profile, as it has processes and procedures in place to underwrite and control risks through various loss prevention and litigation management programs with its membership.
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