Wisconsin-based mutual insurers, Rural Mutual Insurance Company and Badger Mutual Insurance Company, have announced an affiliation.

The affiliation is subject to regulatory approval with an anticipated effective date in January 2025.

Together, Rural Mutual and Badger Mutual have provided farm, commercial and personal policies for 227 years.

In a statement, the companies said that each will bring value to the affiliation, including an extensive breadth of industry knowledge, exceptional customer service, and deep community involvement. They believe this affiliation will generate long-term growth and stability for employees, agents, and policyholders.

With financial strength and an A+ AM Best rating, Rural Mutual brings seasoned staff, local agents, and operational excellence.

Badger Mutual contributes an experienced management team and independent agents with an expanded sales footprint in six states outside of Wisconsin.

Both companies share a similar vision and culture that will support collaboration, but they will each retain their distinct brand identities.

Both companies will also continue to maintain their existing Wisconsin headquarters with Rural Mutual in Madison and Badger Mutual in Milwaukee.

“The opportunity to affiliate these two reputable brands for mutual growth is exciting, and we look forward to working together to increase the value of both organizations even more,” said Dan Merk, Rural Mutual Executive Vice President and CEO, in a media statement. “Even beyond our shared Wisconsin roots, Badger Mutual’s consistent commitment to their employees and communities make them a perfect cultural fit for us.”

Dan Nigro, President and CEO of Badger Mutual described Rural Mutual as “a top-tier insurance brand with a strong reputation, whose values and principles are closely aligned with ours.”

“This strategic alliance will be a significant milestone, marking a new chapter in Badger Mutual’s history,” Nigro said. “From the outset, we felt a great synergy with the Rural Mutual team, and our entire organization is eager to embrace the growth and scale this affiliation will foster,” he added.

Rural Mutual Insurance Company has been protecting Wisconsin for 90 years and is the state’s No. 1 writer of farm insurance and No. 4 writer of commercial insurance in the state, with over 150 local agents.

Badger Mutual Insurance Company has been providing a range of property and casualty insurance products since 1887, and is currently represented by over 320 local agencies across seven states: Wisconsin, Illinois, Minnesota, Iowa, Michigan, Arizona, and Nevada.

In two separate announcements, AM Best indicated that it views the affiliation favorably for Badger, which has a C++, and negatively for Rural Mutual.

AM Best has placed Rural Mutual’s A+ financial strength rating under review with negative implications, while placing Badger’s C++ under review with positive implications.

The rating agency noted that the affiliation will be secured formally via an affiliation agreement and a management agreement, as well as a reinsurance quota share agreement, whereby Rural will 100 percent reinsure Badger and maintain control of Badger’s board of directors. There is also an accompanying cost sharing agreement, further enhancing efficiencies.

These arrangements should mean improvement in Rural’s geographic spread of risk and diversification in its distribution force through the utilization of Badger’s independent agency force. On the downside, however, Badger’s book of business has exhibited a lot of volatility in recent years. The “execution risk in driving improvement relative to Rural’s current operating performance assessment of strong is likely to result in negative pressure on the rating outlook,” AM Best said.

AM Best said volatile operating performance at Badger in 2022 and 2023, driven mainly by elevated weather losses, contributed to significant erosion in the company’s surplus position. Badger pursued several corrective actions including double-digit rate increases, mandatory wind and hail deductibles and implementing roof actual cash value schedules, as well as curtailing unfavorable risks, and saw results improve in first-half 202.

The new relationship with Rural is “expected to improve Badger’s position as Rural has a much larger capital base and provides a level of expertise in a key state that Badger already writes business in,” AM Best said.

Badger’s ratings will remain under review with positive implications until the transaction closes, including customary regulatory approvals, and until AM Best completes its evaluation of the new relationship post transaction.

Source: Rural Mutual and Badger Mutual; AM Best