AM Best Revises Issuer Credit Rating Outlook to Positive for Northwest G.F. Mutual Insurance Company

AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and Long-Term ICR of “bbb” of Northwest G.F. Mutual Insurance Company (NWGF) (Eureka, SD). The outlook of the FSR remains stable.

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

The revised Long-Term ICR outlook reflects the company’s strengthened balance sheet, inferred by contrasting key metrics of financial strength over the past five years with those over the longer term. Improved operating performance has powered robust policyholders’ surplus growth over the past five years, which in turn pushes important quantitative metrics such as underwriting and reserve leverages in the favorable direction. AM Best attributes these trends to the efforts of company management to implement quality underwriting standards in order to broadly improve operating performance, the result of which has been a favorable influence on overall balance sheet strength. NWGF has maintained the strongest level of risk-adjusted capitalization over the past five years, which further corroborates the tangible impact of the company’s improved operating performance on its balance sheet strength.

The adequate operating performance assessment reflects NWGF’s solid operating return measures over the past five years, including pre-tax return on revenue, return on surplus and operating ratio. The limited business profile assessment is driven largely by NWGF’s geographic concentration in North and South Dakota, which exposes results to frequent and severe weather-related events, as well as potential judicial, economic or regulatory challenges. The appropriate ERM assessment is driven by an evolving risk management framework, and risk management capabilities that remain appropriately commensurate with the complexity of the business.

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