|[December 20, 2012]
A.M. Best Affirms Ratings and Revises Outlook to Negative for Indiana Lumbermens Mutual Insurance Company and Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of B+
(Good) and issuer credit rating of "bbb-" of Indiana Lumbermens
Mutual Insurance Company and its reinsured subsidiaries, Lone
Star National Insurance Company and National Building Material
Assurance Company. All companies are domiciled in Indianapolis, IN.
The outlook for all ratings has been revised to negative from stable.
The negative outlook reflects ILM's poor underwriting results over the
recent five-year period and A.M. Best's expectations for continued
losses over the near term. The outlook also reflects further capital
erosion through 2012 as ILM continues to face competitive market
conditions, a still challenging macroeconomic environment impacting
businesses within its niche and ongoing exposure to property and
weather-related losses. While ILM's risk-adjusted capitalization
supports its current ratings, continuing expense ratio pressures have
adversely impacted the group's operating performance in recent years.
Other factors contributing to underwriting losses include an
accumulation of weather-related losses and areas of adverse loss reserve
development in select accidnt years. Although management has
implemented several strategic initiatives to improve the group's
underwriting performance in recent years, the execution of ILM's
business plan has yet to materialize into profitable results.
The affirmation of the ratings reflects ILM's supportive capitalization
and strong niche market presence as a provider of insurance coverages to
the building materials and manufacturing industries. The ratings also
recognize management's initiatives to improve the group's underwriting
performance in recent years, specifically exiting the workers'
compensation line of business, a long troublesome line, and aggressively
non-renewing unprofitable property business. Finally, the ratings
recognize the added balance sheet protection provided by various
aggregate stop-loss reinsurance agreements, which helps lessen the
impact from severe underwriting losses in a given year.
Should ILM's operating losses exceed A.M. Best's expectations and/or if
capitalization deteriorates further, negative rating actions would
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. Key criteria utilized include: "Risk
Management and the Rating Process for Insurance Companies" and
"Understanding BCAR for Property/Casualty Insurers." Best's Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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