OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” from “a” of Bear River Mutual Insurance Company (Bear River) (Murray, UT). The outlook of these Credit Ratings (ratings) remains negative.
The rating actions reflect the company’s significant underwriting losses reported in 2015 and 2016. In addition, the rating actions also reflect the declining trend in risk-adjusted capitalization in recent years as growth in top-line premium outpaced surplus advances. The rating actions further reflect the challenges faced by management to return underwriting results back to historical profitable levels amid competitive market conditions. A.M. Best remains concerned regarding the successful execution and timeliness of the company’s operational and financial actions that are designed to improve its long-term profitability.
While Bear River’s current risk-adjusted capitalization is adequate, the recent trend in underwriting leverage measures has weakened its capital position. In response to the company’s below average operating performance in recent years, Bear River has implemented an aggressive multi-year profit improvement plan that focuses on tightened underwriting guidelines and rate level adequacy relative to current and projected loss experience. This more sophisticated rate level process is being developed through the company’s new rating model that provides the pricing precision needed to more accurately assess its risk exposure and characteristics.
According to management, Bear River’s enhanced enterprise risk management framework is expected to help return the company’s operating results to historical levels. These positive rating factors are partially offset by the company’s geographic concentration in Utah, which exposes its operating performance and capitalization to potential losses from earthquakes, weather-related events, competitive market conditions and changes in the legislative and regulatory environments. Despite the rebound of its equity portfolio in 2016, the company maintains elevated common stock leverage relative to the composite. As a result, the capital position is exposed to volatility in the equity markets.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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