AM Best has assigned and placed under review with negative implications a Long-Term Issue Credit Rating of bbb+ (Good) to the $40 million, 9.5% surplus notes due 2044 issued by Church Mutual Insurance Company, S.I. Additionally, AM Best has maintained the under review with negative implications status on the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Church Mutual Insurance Company, S.I. and its wholly owned subsidiaries, CM Regent Insurance Company and CM Vantage Specialty Insurance Company. All companies are domiciled in Merrill, WI, and collectively referred to as Church Mutual Insurance Group (Church Mutual).

The Credit Ratings (ratings) of Church Mutual were initially placed under review with negative implications in March 2024 following material erosion in surplus and risk-adjusted capitalization. Through the first half of 2024, the company has implemented several strategies to partially replenish capital. As a result, surplus increased by $95 million through the reorganization of its corporate structure for efficiency, shifting approximately $60 million under the operating unit, as well as down-streaming $30 million from the holding company, which also benefited the treatment of nonadmitted assets. As noted, the issuance of the $40 million surplus note in the third quarter of 2024 further increased surplus. Additional capital management strategies are being contemplated along with various de-risking efforts. The company is targeting unfavorable risks in its portfolio by tightening underwriting guidelines, including non-renewals, particularly on wind exposures, large accounts and long-tail lines. The company continues to push rate increases upon renewals across its property, auto and liability lines of business. Nevertheless, adverse reserve development on the group’s long-tail lines remains a rating concern as it is contributing to underwriting volatility. Should anticipated improvement and execution in communicated plans not materialize, the ratings likely will be downgraded.

The ratings will remain under review with negative implications in the near term while the group completes its action plans and AM Best further evaluates the prospective impact of the corrective actions.

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