AM Best downgrades Shelter Mutual’s credit rating

AM Best downgraded the long-term issuer credit rating (long-term ICR) to ‘a’ (excellent) from ‘a+’ (excellent) and affirmed the company’s financial strength rating (FSR) of A (excellent) Shelter Mutual Insurance Company (Shelter Mutual) (Columbia, MO) and its property/casualty (P/C) subsidiaries (collectively Shelter).

At the same time, AM Best downgraded Long-Term ICR to ‘a’ (Excellent) from ‘a+’ (Excellent) and affirmed Shelter Life Insurance Company’s (Shelter Life) (Columbia, MO) FSR of A (Excellent) , which is a wholly owned subsidiary of Shelter Mutual. The long-term ICR outlook has been revised to stable from negative, while the ICR outlook is stable. (Please see below for a detailed list of P/C companies and ratings.)

Shelter’s credit ratings (ratings) reflect the strength of its balance sheet, which AM Best rates as the strongest, as well as marginal operating performance, neutral business profile and adequate enterprise risk management (ERM).

Long-term ICR discounts for Shelter reflect underwriting performance that has fallen below that of peers. These underwriting losses resulted from several weather-related events, particularly in states where Shelter has a high geographic concentration.

Weather-related losses from hurricanes and winter storms have put pressure on the group’s operating performance rating, with five consecutive years of underwriting losses and three consecutive years of operating losses. Offsetting these losses is the group’s reinsurance book of business, which has recently become more profitable.

The company continues to execute on strategic plans to return to profitability, which includes significant rate increases that have already begun to materialize. While underwriting rates are expected to improve, this is unlikely to result in a return to underwriting profitability in the near term. Despite underwriting losses, the strength of the group’s balance sheet continues to be rated at its strongest level, supported by its strongest risk-adjusted capital position as measured by Best’s capital adequacy ratio (BCAR).

Long-term ICRs downgraded to ‘a’ (Excellent) from ‘a+’ (Excellent) and FSR A (Excellent) affirmed, long-term ICRs outlook revised to stable from negative and the RSF Outlook is stable for the following P/C subsidiaries of Shelter Mutual Insurance Company:

• Haulers Insurance Company, Inc.
• Shelter General Insurance Company
• Shelter Reinsurance Company
• AmShield Insurance Company

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