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AM Best Revises Issuer Credit Rating Outlook to Negative for PEMCO Mutual Insurance Company

AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of PEMCO Mutual Insurance Company (PEMCO) (Seattle, WA). The outlook of the FSR is stable.

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

The negative outlook on the Long-Term ICR reflects the company’s limitations in its business profile, which has created capital and operating performance challenges in recent periods leading to declines in its risk-adjusted capitalization. Although risk-adjusted capitalization remains within the strongest range, as measured by Best’s Capital Adequacy Ratio (BCAR), the cushion materially eroded from prior periods and capital erosion also resulted in higher underwriting leverage metrics. Surplus declined in 2021 and 2022, as well as through the first 9 months of 2023, totaling 21% ($75 million) from the five-year high mark in 2020. Underwriting loss severity increased in consecutive periods reflecting pressure brought by the company's concentrated risk profile that focused on personal lines coverage within the state of Washington. Weather and wildfire losses also impacted results in recent periods. Furthermore, material unfavorable loss reserve development was reported in third-quarter 2023, reflecting pressures brought on by the escalation in PEMCO ‘s loss costs amid inflation and supply chain pressures. Management is addressing volatility with material rate increases, more stringent new business qualifications and targeted de-risking; however, these actions have yet to gain material traction.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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