Among the ratings announcements from AM Best this week were those reacting to a mutual company affiliation, a reserve charge and the results of an E&S writer.

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Badger Rating Benefits from Rural Affiliation

After successfully executing an affiliation agreement that closed on Jan. 1, 2025, Rural Mutual Insurance Company and Badger Mutual Insurance Company both saw AM Best remove the “under review” status of their ratings.

AM Best pushed Badger’s rating all the way up to the A+ (Superior) level of Rural. Badger’s previous financial strength rating was C++ (Marginal).

The outlook on the ratings of the now-affiliated Wisconsin mutuals— collectively called Rural Mutual Insurance Group—is negative.

The ratings reflect Rural Mutual Insurance Group’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

AM Best explained that the affiliation transaction is secured via a 100 percent reinsurance quota-share agreement, in which Rural is assuming 100 percent of Badger’s net liability for premiums, losses and expenses, and maintaining control of Badger’s board of directors.

Related article: Rural Mutual, Badger Mutual Agree to Affiliate

A management agreement calls for various services to be shared among both entities, such as underwriting, claims management, actuarial analysis, human resources services, marketing and strategic planning.

Each company, however, continues to operate separately, allowing for continuity in operations and brand recognition with long-standing roots in Wisconsin.

AM Best said that the affiliation improves Rural’s geographic spread of risk by providing access to additional operating territories in which Badger is licensed. Rural also benefits from diversification in its distribution channels through the utilization of Badger’s independent agency force.

For Badger, a key benefit is expected to be its accessibility to an organization of a larger scale that maintains a sound level of underwriting expertise in one of its key states.

The negative outlooks consider execution risk associated with the newly formed group’s ability to perform in alignment with Rural’s historical norms, AM Best said, noting that Badger’s operating results exhibited severe volatility between 2022 and 2023 as a result of weather-related losses.

Badger fared better in 2024, when weather returned to more typical patterns, AM Best said, also noting underwriting and pricing adjustments the company took. Still, the rating agency noted that the group’s combined operating results could deteriorate going forward—to a point where AM Best’s strong assessment level no longer applies. If that were to happen, the ratings could be downgraded.

Everest Group, Ltd. Rating Unchanged

AM Best commented that its ratings on the operating subsidiaries of Everest Group, Ltd.—the financial strength rating of A+ (Superior) and the long-term issuer credit ratings (Long-Term ICR) of “aa-” (Superior) were unchanged following the recent earnings release and associated $1.7 billion loss reserve boost.

AM Best said that it assess Everest’s balance sheet strength at the strongest level, and that the group’s adequate operating performance, very favorable business profile and appropriate level of enterprise risk management (for the group’s risk profile) support the rating.

“AM Best has analyzed the impact of the reserve strengthening on risk-adjusted capitalization and does not expect a material impact,” the rating agency said, also noting that operating performance trends are in line with other companies assessed as adequate on a five-year basis “inclusive of the reserve strengthening actions.”

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The statement from AM Best on the ratings also referred to the fact that Everest management has implemented initiatives to improve underwriting and reserving trends going forward.

“If Everest is required to take additional, material reserve strengthening in the near to medium term, it could cause AM Best to revisit the potential impact to the company’s ratings.”

Prime Insurance Company Outlook Stable

AM Best has revised the outlook of the long-term issuer credit rating of “a” (Excellent) of Prime Insurance Company to stable from positive.

The outlook on the financial strength rating of A is also stable.

Prime’s balance sheet and operating performance are strong, ERM is appropriate and the business profile is neutral in AM Best’s assessment.

The balance sheet strength was negatively impacted by material adverse loss development during the third quarter of 2024, and the group has projected an overall pre-tax operating loss for 2024. Still, AM Best expects Prime’s operating results and capital generation to revert to its historical level in 2025.

According to AM Best, the balance sheet is supported further by a quota-share arrangement led by strong reinsurance partners, including RLI Insurance Company, which not only acts as a reinsurer, but as an equity partner-owner as well.

AM Best noted that Prime’s largest line of business is commercial auto liability, which has been challenged in recent years by increased loss trends. Prime, an excess and surplus writer, “has been successful in generating significant growth and profits from this dislocated market,” and Prime’s operating performance is favorable when compared with its peers, even considering the reserve charge.

Source: AM Best