OLDWICK, NJ–(BUSINESS WIRE)–AM Best revised the outlook from positive to stable and affirmed the financial strength rating of A- (Excellent) and the issuer’s long-term credit rating of “a-” (Excellent) from Northern Mutual Insurance Company (NMIC) ( Hancock, MI).
The credit ratings (ratings) reflect the strength of NMIC’s balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate management of business risks.
The revised outlook reflects the significant variability in NMIC’s operating results over the past five-year period and the significant decline in operating results in 2022 due to high losses from weather events and market pressures in the automotive branches. While the company’s five- and 10-year average operating metrics compare favorably to the standard composite of cars and private passenger owners, the variability in results over the past five years, coupled with the unfavorable results in 2022, brought NMIC closer to companies with an adequate assessment of operational performance, resulting in a change in outlook from stable to positive. As management’s corrective action on pricing begins to bear fruit, earnings are expected to begin to return to near-term historical norms with moderate volatility due to its inherent catastrophe exposure.
The ratings also reflect NMIC’s highest level of risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), strong liquidity measures driven by a high quality investment portfolio and a comprehensive reinsurance program that helps mitigate the severity of losses. The company has a limited business profile as it operates only in Michigan, particularly in the Upper Peninsula. Despite local market expertise in its territory, the company remains exposed to a highly competitive market and to potential changes in regulatory, legislative and judicial environments. NMIC’s risk management capabilities are considered appropriate given the complexity of its business and its overall risk profile.
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