AM Best Revises the Outlooks to Negative for Pharmacists Mutual Insurance Group’s Members

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) of Pharmacists Mutual Insurance Company (PMIC) and its wholly owned reinsured subsidiary, Chiron Insurance Company (Chiron). At the same time AM Best has revised the outlook to negative from stable for the Long-Term Issue Credit Rating of “bbb+” (Good) on the $25 million, 7.375% surplus notes, due 2039, issued by PMIC. These companies are domiciled in Algona, IA and collectively called Pharmacists Mutual Insurance Group (PMIG or the group).

The Credit Ratings (ratings) reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The revision in the outlook to negative from stable reflects the group’s volatile operating results over a three-year period and the recent decline in its policyholder surplus. The volatility in operating performance resulted mainly from underwriting losses, particularly in 2020 and 2022. Over the past few years, these losses were due, in part, to several catastrophe events, namely the largest loss event in the group’s history from civil unrest claims that occurred in several major cities. In addition, Hurricanes Ida and Ian as well as the Texas winter freeze in 2021, also impacted results. Further, in 2022, the unexpected surge in overall economic inflation and three large million-dollar property losses contributed to the underwriting losses through Sept. 30, 2022. During this recent period, the group increased its per risk and catastrophe retentions, which contributed to net underwriting losses. Unrealized investment losses also contributed to the policyholder surplus decline in 2022. These factors, combined with challenging reinsurance market conditions, have led to the decline in PMIG’s outlooks compared to other adequately assessed companies and consequently the operating performance assessment faces pressure of a future downgrade to marginal.

To mitigate further operating losses, management has taken several pricing actions in all lines of business to achieve adequate rates and is strategically considering actions on its personal lines business.

Despite the negative outlook, PMIG maintains the strongest level of risk-adjusted capitalization, as measured by its Best’s Capital Adequacy Ratio (BCAR), and a favorable net underwriting leverage measure. PMIG’s neutral business profile reflects its effective and efficient direct marketing strategy and leadership position as the largest independent insurer of pharmacists in the United States. The group’s ERM remains at the appropriate level with a framework in place to address and overcome the recent operating declines.

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