Oldwick, NJ -(BusinessWire)- A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of New Mexico Mutual Casualty Company (NMMCC) and its five property/casualty subsidiaries, collectively referred to as New Mexico Mutual Group (NMMG), with each operating under a 100% quota share agreement with NMMCC. Concurrently, A.M. Best Co. has assigned an FSR of A- (Excellent) and issuer credit ratings of “a-” to New Mexico Safety Casualty Company (NMSCC) and New Mexico Security Insurance Company (NMSIC), following the recent state approval of a 100% quota share agreement between NMSCC, NMSIC and their parent, NMMCC. Both NMSCC and NMSIC were incorporated in 2013 to provide additional tiering and pricing flexibility. The outlook assigned to all ratings is stable, and all companies are domiciled in Albuquerque, NM. (See below for a detailed listing of the companies.)
The affirmations reflect NMMG’s strong risk-adjusted capitalization, trend of profitable operating performance and its established market position. As a lead writer in the New Mexico workers’ compensation market, it is able to maintain a strong policyholder retention rate, favorable spread of risk through its agency representation and achieve a greater depth of data and information, enabling the group to respond more effectively and quickly to the changing dynamics of the market. The group also benefits from its tax-exempt status.
Partially offsetting these positive rating factors are NMMG’s weakened underwriting performance beginning in 2008, driven by rising loss costs, competitive market conditions and an increased level of large losses. In addition, adverse loss reserve development was experienced on prior accident years related to the group’s voluntary business. Further offsetting the positive rating factors is NMMG’s concentration risk as a single state, mono-line workers’ compensation insurer, which exposes results to legislative, regulatory and competitive risks. Lastly, movements in Washington, D.C. that are focused on tax-exempt organizations could potentially impact the federal tax-exempt status of certain state funds such as NMMG.
While the outlook for all ratings remains stable, factors that could lead to a positive outlook include a sustained improvement in underwriting performance and a stabilization of prior year loss reserve development while maintaining strong overall risk-adjusted capitalization. Factors that could result in downward rating pressure include continued soft market conditions and underwriting deterioration that results in NMMG’s underwriting and overall profitability underperforming its peers; the erosion of surplus to an extent that causes its risk-adjusted capitalization to no longer support its ratings; and an increase in the magnitude and frequency of reporting adverse loss reserve development.
The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for New Mexico Mutual Casualty Company and its following property/casualty subsidiaries:
- New Mexico Assurance Company
- New Mexico Employer’s Assurance Company
- New Mexico Foundation Insurance Company
- New Mexico Premier Insurance Company
- New Mexico Southwest Casualty Company