AM Best Downgrades Credit Ratings of Germantown Mutual Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “a” (Excellent) of Germantown Mutual Insurance Company (GMIC) (Germantown, WI). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.

The ratings reflect GMIC’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The rating downgrades are based on volatility in GMIC’s key operating performance metrics in recent years and continuing through June 30, 2024. As a result of inflationary pressures driving loss costs upward on its core lines of business, in conjunction with heightened levels of weather-related loss activity, the company has reported underwriting losses in each of the past three years and pre-tax operating losses in each of the past two years. GMIC’s combined and operating ratios also have risen over this time frame. Ultimately, these trends have caused the company’s key operating performance metrics to fall out of line with the strong assessment level and more in line with the adequate assessment level. Management continues to focus on enhancing profitability by making pricing adjustments in its core lines of business and tightening its underwriting guidelines to promote more favorable risk selection.

The ratings also reflect GMIC’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), solid liquidity measures driven by a high-quality investment portfolio, and highly conservative reserving practices that are proven through consistently favorable development on a calendar- and accident-year basis over the past 10 years. The company has a limited business profile as it operates within a dual-state territory of Wisconsin and Utah, which leaves results vulnerable to the impact of potentially severe weather, as well as any changes in the regulatory, legislative or judicial environments. However, a comprehensive reinsurance program helps to mitigate these risks partially. GMIC’s risk management capabilities are considered to be appropriate for the complexity of its business and overall risk profile.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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