AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of Rockford Mutual Insurance Company (RMIC) (Rockford, IL). The outlook of the FSR has been revised to stable from negative. The outlook of the Long-Term ICR is negative.

The Credit Ratings (ratings) reflect RMIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The downgrade reflects erosion in the company’s capital position over multiple periods as well as a decline in its correlating risk-adjusted capitalization over that time, as measured by Best’s Capital Adequacy Ratio (BCAR), elevated leverage metrics and adverse loss reserve trends. Surplus declines reported in each of the last three years and continuing through third quarter 2025 reflect volatility in RMIC’s underwriting results, stemming from increased loss severity impacted by the inflationary environment and heightened weather and fire activity. Net and gross underwriting leverage metrics have been further influenced by growth in premium and reserves, the former driven by rate increases. While management has been focused on maintaining a more conservate reserve position, it will need to prove sustainable given deficiencies reported in recent calendar and accident years.

The negative outlook on the company’s Long-Term ICR reflects pressure on the operating performance assessment given elevated volatility in recent years and continuing through third quarter 2025. Recent emphasis has been placed on de-risking the book of business evidenced by exiting the commercial habitational market, while enhancing pricing sophistication and data analytics for ongoing lines of business to match premium to risk selection more effectively. The limited business profile reflects RMIC’s geographic concentration in Illinois and property predominant book of business that exposes results to weather-related events and competitive market pressures. The appropriate ERM assessment reflects established risk appetites and tolerances with corresponding mitigation strategies, aided by a comprehensive reinsurance program to limit the catastrophe exposure of the property-concentrated book of business.

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