AM Best Revises Outlooks to Positive for Wisconsin Municipal Mutual Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Wisconsin Municipal Mutual Insurance Company (WMMIC) (Madison, WI).

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 positive outlooks reflect WMMIC’s improved operating results in recent years, primarily driven by management’s initiatives that include rate increases, as well as robust loss control and claims management programs. In recent years, management has placed more emphasis on loss control funding for jails and law enforcement, managing members/policyholders’ retentions on losses and implementing conservative case reserves for civil rights cases. These cases include law enforcement and jails, aggressive litigation management and communication with attorneys, as well as partnering with WMMIC’s reinsurer to provide coverage and bringing programs allowing municipal police departments to gather and provide up to date statistics. As a result of these measures, the company has not reported any large losses in recent years.

WMMIC’s policyholders’ dividends are used as a retention tool that are segmented into two categories. The first is based on the insured’s capital contributions in the company and on the performance of the investment portfolio. This portion is only paid when income is generated from the company’s portfolio. The second one is based on the loss experience of each member and on results over a rolling eight-year period. New members are not eligible for this portion of the dividends until after eight-years. WMMIC’s combined ratios and net underwriting results prior to policyholders’ dividends over the last four years and first-quarter 2023 have shown significant improvement and this favorable trend is expected to continue in the future, which could potentially result in further positive rating action.

WMMIC’s very strong balance sheet strength assessment is based on its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), modest surplus growth over a five-year period, relatively conservative investment portfolio, which mostly consists of fixed-income securities and stable loss reserving trends in recent years. Partially offsetting these positive factors is the company’s policyholders’ dividend obligations, limited financial flexibility and scale of operations.

WMMIC’s business profile is assessed as limited due to its narrow geographic concentration solely in Wisconsin, which exposes it to judicial, economic and regulatory challenges.

WMMIC’s overall ERM is viewed 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. In addition, ERM programs are overseen by the executive director/chief executive officer with assistance from the officers and subcommittees of the board of directors.

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