AM Best Revises Outlook to Negative for Iowa-Based Grinnell Mutual Group’s Credit Ratings

AM Best has revised the outlooks to negative from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) for the members of Grinnell Mutual Group. The outlook of the FSR is stable.

Grinnell Mutual is based in Grinnell, Iowa and is the largest primary reinsurer of farm mutual companies in North America.

The Credit Ratings reflect Grinnell’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The revised outlooks to negative from stable of the Long-Term ICRs consider a deviation in Grinnell’s operating results in more recent years primarily resulting from an abnormal level of catastrophe losses in core operating states along with increased severity of loss due to inflation, AM Best said.

AM Best pointed to results in 2022, including an increase in both frequency and severity of losses specifically in Grinnell’s assumed reinsurance book. The commercial profit center saw relative stable frequency; however, severity of claims nearly doubled.

Through the first half of 2023, the results continue to be driven by the assumed reinsurance book of business, which has deviated significantly from projections due to an increase in weather events and a significant increase in Grinnell’s reinsurance retention with minimal loss recoveries. Direct lines of business are moderately above plan and continue to pressure the group’s operating performance.

Consequently, Grinnell has seen a combined ratio above break even in each of the past four years, with the combined ratio climbing higher year over year, AM Best said.

Grinnell’s management team has implemented initiatives to help mitigate volatility, which includes significant rate action and inflation guard adjustments. Grinnell will continue to refine underwriting standards and plans to reevaluate all policies and exposures. AM Best expects these actions to help Grinnell improve upon its current level of operating performance, however, given the absence of sustained improvements, the ratings are likely to be downgraded.

Source: AM Best

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