A.M. Best Downgrades Ratings of Mutual Assurance Society of Virginia

A.M. Best has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and the issuer credit rating to “a+” from “aa-” of Mutual Assurance Society of Virginia (Mutual Assurance) (Richmond, VA).The outlook for all ratings have been revised to stable from negative.

The rating actions reflect Mutual Assurance’s elevated common stock investment leverage, which exposes the balance sheet to volatile equity market conditions, as evidenced recently, as well as overall inconsistent operating performance in recent years, which is not commensurate with the previous rating level. In addition, the company’s unfavorable experience in the property lines of business over the past five years, driven mainly by weather-related losses, has negatively impacted results. These results reflect Mutual Assurance’s geographic risk concentration in the Virginia region.

Partially offsetting these negative rating factors are Mutual Assurance’s adequate risk-adjusted capitalization despite the elevated equity leverage, well-established regional market presence and several strategies implemented in the past few years that are designed to improve overall performance. The actions undertaken are in the areas of exposure management, technology and risk assessments levels. Furthermore, management is planning on growing in areas west of Richmond, VA, in order to gradually reduce its coastal exposures. Mutual Assurance is also supported by a network of longstanding, strong agency relationships.

Negative rating action could occur if there were a sudden, unexpected and material decline in risk-adjusted capitalization, a sustained deterioration in operating performance or if liquidity measures were to suddenly diminish.

This press release relates to rating(s) 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.

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