A.M. Best Downgrades Rating of Church Mutual Insurance

I missed this story when it originally ran on May 28, 2010, but it was pointed out to me by a former Church Mutual agent:

A.M. Best Co. has downgraded the financial strength rating to A (Excellent) from A (Superior) and issuer credit rating to “a ” from “aa-” of Church Mutual Insurance Company (Church Mutual) (Merrill, WI). The outlook for both ratings has been revised to stable from negative.

The rating actions reflect the sharp decline in Church Mutual’s reported underwriting performance in 2008, 2009 and through first-quarter 2010, driven primarily by competitive market conditions and significant catastrophe-related losses recorded in these years. As a result, Church Mutual’s underwriting results and operating performance measures have deteriorated to levels that are no longer reflective of a Superior-rated company.

Church Mutual recorded an underwriting loss of $24.2 million in 2009, following an underwriting loss of $26.9 million in 2008. In addition, the company reported an $11.1 million underwriting loss in first quarter 2010. Church Mutual’s catastrophe-related losses were driven by losses associated with the high frequency of weather-related events in 2008 and 2009 and the severity of Hurricane Ike in 2008.

The rating actions also consider A.M. Best’s concern that Church Mutual’s operating earnings will not return to historical levels, given the ongoing challenges the company faces to improve underwriting results over the near term due to the competitive environment in its specialty niche market and its continued exposure to weather-related losses. Additionally, given the magnitude of Church Mutual’s catastrophe-related losses in recent years, in addition to the high level of investment losses posted in 2008, A.M. Best remains concerned with management’s overall risk management.

From personal experience I can tell you that Church Mutual was almost paranoid about maintaining their A+ Superior rating, and agents were instructed to make that a regular selling point against the opposition (not that most customers really cared). At that time I think they'd had the rating for almost 50 years.  One year we had to practically shut down all new policy production by September because they were afraid their reserve situation and A.M. Best rating would be imperiled if we put too much business on the books.  Things must have really begun to go south if they were finally downgraded.

I guess they don't have to worry about that anymore.

I left the business in 2007.  Things started going bad in 2008 and 2009.  Just sayin'.