AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” (Excellent) of IMT Insurance Company and its affiliate, Wadena Insurance Company. These companies are domiciled in West Des Moines, IA, and collectively are referred to as IMT Insurance Companies (IMT).

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

The revision of the outlooks to negative from stable reflects the impact of IMT’s sizable decline in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The deterioration in the group’s BCAR is driven mainly by a substantial decline in policyholder surplus resulting from deteriorating underwriting results. While capitalization remains sufficient to support the group’s diversification efforts, large operating losses have eroded available capital in the most recent years.

The negative outlooks also reflect volatility in the group’s underwriting and operating performance in recent years related to severe weather events, as well as an uptick in large non-storm losses from higher loss severity in auto, homeowners and business owners. IMT’s business is concentrated in the Midwest, and the group has an inherent geographical exposure to weather-related events. This exposure is expected to cause a moderate degree of underwriting volatility; however, the magnitude of recent volatility relative to industry norms is elevated.

The group’s management has been addressing the volatility through implementation of various corrective actions since early 2022. This has continued through 2023 with significant rate increases, restrictions on new business, aggressive re-underwriting initiatives, in-depth loss control inspections and the non-renewal of unprofitable accounts or accounts that do not meet underwriting guidelines. The overall effectiveness of these corrective actions in managing the group’s high level of concentration remains uncertain. While these actions may result in stabilization of recent trends, failure to execute on these strategic plans successfully is likely to result in a downward revision of the group’s very strong balance sheet strength assessment and/or its adequate operating performance assessment. Additionally, continued underwriting volatility could put pressure on the neutral business profile assessment and the appropriate enterprise risk assessment.

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.

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