A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Mountain West Farm Bureau Mutual Insurance Company (Mountain West) (Laramie, WY).
The revised outlook to negative reflects Mountain West’s poor underwriting performance and continued erosion of surplus levels in 2013. Additionally, Mountain West’s operating performance and capitalization levels have fluctuated significantly over the past five years. Mountain West’s unfavorable underwriting performance in 2013, which followed underwriting losses in 2010 and 2011, is attributed to frequent and severe weather events. Those significant losses fell below the company’s catastrophe retention.
Although operating results were positive in 2009 and 2012 as a result of milder weather-related losses, the company’s overall trend in performance and capitalization remains negative as evidenced by underwriting and operating ratios that remain unfavorable over the most recent five-year period, and steadily increasing, albeit still moderate, net underwriting leverage. Furthermore, Mountain West’s business concentration in Wyoming and Montana exposes it to regulatory and legislative changes in each state.
However, Mountain West still maintains risk-adjusted capitalization that is supportive of its current rating level, which is derived from its still moderate underwriting leverage. Moreover, Mountain West has strengthened its reinsurance program, retains excellent liquidity measures and has a favorable expense structure and a long-standing local market presence. The company also benefits from the sponsorship of the Wyoming and Montana Farm Bureau Federations, which facilitate marketing efforts as well as enhance customer loyalty and affinity.
Factors that could result in further negative rating actions include a continued deterioration in Mountain West’s underwriting performance and/or a significant erosion of its capital base. Factors that could stabilize the current rating level include a sustained improvement in operating results along with maintenance of favorable risk-adjusted capitalization.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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Neil Das Gupta, 908-439-2200, ext. 5206
Senior Financial Analyst
Joseph A. Burtone, 908-439-2200, ext. 5125
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations