|[February 07, 2013]
A.M. Best Revises Outlook to Negative and Affirms Ratings of PEMCO Mutual Insurance Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit rating of "a-" of PEMCO Mutual
Insurance Company (PEMCO) (Seattle, WA). The outlook for both
ratings has been revised to negative from stable.
The revised outlook reflects PEMCO's recent weakened operating
performance accompanied by its continued weak underwriting performance
that together has begun to minimally erode capital at the company.
Additionally, A.M. Best considered PEMCO's elevated, however markedly
improved, expense ratio; elevated loss severities and frequencies in the
most recent underwriting years; slightly above average underwriting
leverage ratio; and a business concentration in the state of Washington,
which subjects the company to judicial, regulatory and competitive risks.
The positive rating attributes are derived from PEMCO's historical
operating gains and surplus growth, which have historically generated
improved total returns on equity, as ell as the operational
improvements management has made in the past five years to refocus
PEMCO's efforts wholly on its property/casualty insurance base. These
include the sale of PEMCO Technology Services Inc. and PEMCO Life
Insurance Company, as well as the merger of PEMCO's subsidiary, PEMCO
Insurance Company, back into PEMCO. PEMCO also has made a commitment to
diversify its geographical footprint by augmenting its strong market
presence in Washington with its entrance into the Oregon market,
effective July 2011. PEMCO maintains a somewhat conservative investment
philosophy, which is reflected in its moderate common stock leverage.
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";
"Understanding BCAR for Property/Casualty Insurers"; and "Catastrophe
Analysis in A.M. Best Ratings." 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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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