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FOR IMMEDIATE RELEASE
OLDWICK - JULY 15, 2014 11:11 AM (EDT)
A.M. Best has downgraded the financial strength rating to B (Fair) from B+ (Good) and the issuer credit rating to "bb" from "bbb-" of Michigan Commercial Insurance Mutual (MCIM) (Lansing, MI). The outlook for both ratings is negative. Concurrently, A.M. Best has withdrawn the ratings due to management's request to no longer participate in A.M. Best's interactive rating process.
The rating actions resulted from the continued deterioration in MCIM's operating performance and risk-adjusted capitalization through the first quarter of 2014. Although management has taken actions to diversify its operations over the years, in more recent years, this expansion has resulted in a strain on the company's underwriting controls, has led to sizable underwriting losses and created the need for continuous reunderwriting actions. Despite significant corrective actions intended to improve financial performance, the company's operating results and capital position could continue to be strained over the mid-term, given expected restructuring expenses, challenging market conditions and the low interest rate environment. Additionally, the company remains exposed to the execution risk of recent remediation actions.
The ratings consider the company's conservative investment allocations and the equity of the residual trust managed by MCIM and MCIM's role as the legal beneficiary of the trust. The equity in the trust will revert to MCIM upon satisfaction of all remaining claims obligations of the trust.
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.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.