To: Loudoun Mutual Agents, Employees and Directors
From: Chris Shipe, President chris.shipe@loudounmutual.com
Date: January 14, 2021
RE: Loudoun Mutual AM Best Rating
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As has been anticipated, this morning AM Best announced that Loudoun Mutual’s rating has been downgraded from “A” (Excellent) to “A-” (Excellent) with a stable outlook. Keeping this in perspective, an “A-” rating is still a very strong rating and has no impact with any financial institutions view of Loudoun Mutual’s financial strength and security.
The downgrade is a result of Loudoun Mutual’s operating results being challenged by ongoing frequent and severe weather events since 2016. Due to the ongoing weather events, the Company’s combined ratios have not stayed in line with AM Best’s “A” rated company composite. A factor in the downgrade was Loudoun Mutual’s nine month 2020 results. Through September 2020, the Company had experienced a decline in policyholder surplus and had a 106% combined ratio. Since September, both policyholder surplus and the combined ratio have shown significant improvement. It should be noted that the AM Best press release stated Loudoun Mutual remains financially strong and our balance sheet strength reflects the strongest level of risk-adjusted capitalization.
Over the past three years it became apparent that weather driven losses continue to be a significant factor on Loudoun’s Mutual’s operating results. Be confident that the Company has not stood by and hoped for results to improve. We have worked tirelessly to develop and implement a thoughtful and diligent strategic plan that strengthens the Company’s operating results and mitigates the impact of weather. Major initiatives implemented include:
- Targeted rate increases and building cost inflation factor changes in 2019, 2020, and 2021
- Further refinement of rating territories to reflect weather patterns have been put in place in 2021
- Increased use of inspections and advanced analytics, including satellite imagery
- Ongoing in-depth agency profitability reviews, which include higher qualifying insurance scores for unprofitable agents to manage concentrations
- Continuous insurance scoring of book to better target re-underwriting efforts
- Affiliating with and taking control of Community Insurance and Montour Mutual in January 2021, which will produce new business in non-correlated weather areas
While our AM Best rating is one of the measuring sticks used to judge Loudoun Mutual – it does not define who we are, how we operate, or our purpose. Although our rating has been downgraded by AM Best, Loudoun Mutual’s operations have greatly strengthened and become more resilient over the past 3 years. As AM Best noted, we remain financially strong. More importantly, we have remained committed to and have done an excellent job of taking care of our policyholders when they need us – which is why we exist. Thanks for your support and all you do to make Loudoun Mutual successful! Please contact me if you have any questions or concerns.
