OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B- (Fair) from B++ (Good) and the Long-Term Issuer Credit Rating to “bb-” (Fair) from “bbb” (Good) of Wolverine Mutual Insurance Company (Wolverine) (Dowagiac, MI). The outlook of these Credit Ratings (ratings) is negative.
These ratings reflect Wolverine’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).
The ratings downgrade reflects considerable deterioration in the company’s capitalization through the first half of 2023 as reflected in a nearly 20% decline in policyholder surplus. This has been driven by increased weather-related losses and ongoing inflationary pressures. The most recent policyholder surplus decline is in addition to double-digit percentage decreases in each of the past two year-end reporting periods. As a result, Wolverine’s risk-adjusted capitalization has deteriorated significantly with corresponding increases in the company’s underwriting leverage metrics.
Additionally, the company’s ERM assessment has been revised to marginal reflecting the ongoing challenges in the company’s management of its concentrated risk profile. Given recent increases in the company’s reinsurance retention and level of co-participation, weather-related losses have had an increased affect on operating results.
While the company has implemented a number of corrective actions including rate increases, expense management initiatives and tightened underwriting guidelines, the ultimate impact of these efforts is uncertain. Accordingly, the negative outlooks highlight that continuation of these adverse results where further reductions in capitalization could lead to additional negative rating action.
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