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A.M. Best Downgrades Michigan Commercial Insurance Mutual.

OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit rating to "bbb" from "a-" of Michigan Commercial Insurance Mutual (MCIM) (Lansing, MI). The outlook for both ratings has been revised to stable from negative.

The rating actions reflect the significant deterioration in MCIM's operating performance, which was driven by an increase in its underwriting losses (attributable to diversification initiatives beyond Michigan), an increase in claim frequency and large loss activity and the continued execution risk associated with its geographical expansion plans. Despite MCIM management's initiatives to diversify into lower hazard classes of business, underwriting performance remains weak due to poor agent and individual account performance, diversification initiatives at a time when competitive market conditions have reduced rates, as well as the costs associated with these expansion initiatives, which have increased the underwriting expense ratio to a level well in excess of MICM's peer composite. While MCIM's management has identified initiatives intended to improve results, the company will be challenged over the near term to meet projections given the competitive market conditions and the economic impact on its core business segments.

Irrespective of these challenges, the outlook recognizes MCIM's continued solid capitalization that should support projections for an ongoing weak performance and the risks associated with the company's changing book of business.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "The Treatment of Terrorism Risk in the Rating Evaluation." Methodologies can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

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Publication:Business Wire
Geographic Code:1U3MI
Date:Dec 7, 2010
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