AM Best Downgrades Issuer Credit Rating of PEMCO Mutual Insurance Company
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 (FSR) of B++ (Good) of PEMCO Mutual Insurance Company (PEMCO) (Seattle, WA). The outlook of the Long-Term ICR has been revised to stable from negative while the outlook of the FSR is stable.
The Credit Ratings (ratings) reflect PEMCO’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The downgrade of the Long-Term ICR is based on historical challenges that PEMCO has faced operating within its narrow footprint of writing personal lines coverage primarily in Washington state. While the company has had recent success achieving needed rate increases, prior years have proven challenging and led to a lag in rate improvement, ultimately influencing underwriting performance in an unfavorable way. Additionally, the company has been exposed to significant weather events and has elevated levels of unfavorable loss reserve development in consecutive years, reflecting the impact of macro trends within its footprint.
The balance sheet strength assessment reflects AM Best’s expectation that PEMCO will continue to maintain its very strong level of balance sheet strength, supported by very strong levels of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and its prudent investment portfolio. The company’s marginal operating performance reflects results that trail composite averages, driven by elevated loss ratios, influenced by both weather and adverse reserve development. The company’s ERM program is deemed as appropriate with PEMCO utilizing a management committee that provides a coordinated view of strategic planning and goal setting on a quarterly basis. Additionally, the company is compliant with Own Risk and Solvency Assessment (ORSA) requirements, which has further enhanced its risk management capabilities.
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.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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