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TMCNet:  A.M. Best Revises Outlooks to Negative for California Mutual Insurance Company

[December 05, 2017]

A.M. Best Revises Outlooks to Negative for California Mutual Insurance Company

A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of California Mutual Insurance Company (California Mutual) (Hollister, CA (News - Alert)).

The negative outlooks are based on California Mutual's unfavorable five-year and ten-year underwriting results and pre-tax operating returns relative to industry norms and their deterioration in recent years, which fell short of expectations.

The Credit Rating (rating) affirmations reflect California Mutual's balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The company's very strong balance sheet is driven by low underwriting leverage, strong liquidity measures, favorable loss reserve development and a conservative investment risk profile. The company's fluctuating, but currently adequate, operating performance has been driven by consistent total investment returns, which have partially mitigated fluctuating underwriting performance.

Partially offsetting these positive rating factors are California Mutual's unfavorable five-year underwriting results and pre-tax operating performance, driven by several large fire losses, very competitive market conditions and an elevated underwriting expense ratio. California Mutual's five-year combined ratio and pe-tax return on revenue are below industry norms. In addition, the company maintains a limited business profile with a geographic concentration of risk, which exposes it to market competition, regulatory changes and judicial decisions.

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

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