AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating of B++ (Good) of Mt. Morris Mutual Insurance Company (Mt. Morris) (Coloma, WI). Concurrently, AM Best has maintained the under review status for these Credit Ratings (ratings) and revised the implication status to negative from developing.

The ratings reflect Mt. Morris’ balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.

The downgrade of the Long-Term ICR considers the volatility in Mt. Morris’ key operating performance metrics throughout the past several years, driven by weather-related loss activity along with the impact of inflation on rising loss costs. Consequently, the company’s combined and operating ratios have been increasing gradually over the most recent three-year period, which has impacted its five-year average metrics adversely. Additionally, Mt. Morris’ results have shifted out of alignment with its adequate-assessed peer group and more in alignment with the marginal assessment level. Management has been and continues to address this volatility through various actions, including but not limited to rate increases, refined underwriting guidelines, and reducing its risk exposures in certain lines of business to support growth in historically profitable lines of business, all of which are expected to promote stabilization in results.

The ratings were initially placed under review with developing implications in December of 2023, pending AM Best’s ability to thoroughly assess the financial and operational impacts of several mergers and acquisitions transactions on Mt. Morris’ rating fundamentals. Effective Jan. 1, 2024, Mt. Morris successfully executed five merger agreements and four affiliation agreements with town mutual insurers in its domiciled state of Wisconsin, thus expanding its spread of risk and overall exposure base within the state. The under review status has been maintained, yet the implication status has been revised to negative from developing, due to concerns about the overall effectiveness of the company’s risk management framework in light of its broadened risk profile. The amount of effort required to roll the new policies onto Mt. Morris’ book of business has strained the company’s operational capabilities and on-time reporting of its annual and quarterly statement filings. The ratings will remain under review until statutory filings are completed, although in the event that risk management capabilities still fail to conform with Mt. Morris’ risk profile, then the ratings could be downgraded further.

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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