AM Best Revises Issuer Credit Rating Outlook to Positive for First Mutual Insurance Company

OLDWICK, N.J.–(BUSINESS WIRE)–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 the Long-Term ICR of
“bbb” of First Mutual Insurance Company (First Mutual)
(Smithfield, NC). The outlook of the FSR remains stable.

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

The Long-Term ICR outlook revision to positive reflects management’s
plans for continued enhancements in formalizing corporate governance and
risk management procedures within its ERM program. Over time, the
expectation is for the ERM program to be used strategically for exposure
management and reinsurance decision making. The Long-Term ICR outlook
further reflects the expectation of maintaining adequate balance sheet
strength and strong operating performance despite moderate volatility
due to weather-related events, fire losses and competitive market

The balance sheet strength is supported by the strongest level of
risk-adjusted capitalization as measured by BCAR at the 99.6 % VaR
confidence level, low underwriting leverage and strong liquidity as
reflected by the company’s highly liquid investment portfolio. The
balance sheet is further supported by the strengthened reinsurance
program in 2018 and consistently favorably loss reserve trends,
partially offset by its elevated reinsurance dependence and limited
financial flexibility as a mutual insurer.

The company’s strong operating performance benefits from consistently
profitable underwriting results based on management’s strict
underwriting and pricing discipline. The business profile is limited
based on the company’s product line and geographic concentration with
business written mostly in North Carolina. First Mutual offers products
primarily for homeowners, inland marine (small commercial risks such as
hog and poultry farm) and farmowners. Growth initiatives in 2018
included new agency appointments in the middle and western parts of
North Carolina, Tennessee and South Carolina. While AM Best considers
the ERM framework to be marginal for the company’s size and scope of
operations, risk management capabilities have improved in 2018, as
reflected by the enhanced reinsurance program that is better aligned
with the risk profile of the company. Additionally, formalization of the
ERM program continues to evolve.

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
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best’s Credit Ratings
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Maurice Thomas
Senior Financial Analyst
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+1 908 439 2200, ext. 5314


Manager, Public Relations
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2200, ext. 5159


Director, Public Relations
+1 908 439
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