AM Best Places Credit Ratings of Southern Mutual Church Insurance Company Under Review With Negative Implications

AM Best has placed under review with negative implications the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Southern Mutual Church Insurance Company (SMCIC) (South Carolina).

These Credit Ratings (ratings) have been placed under review with negative implications due to SMCIC’s declining levels of risk-adjusted capitalization, as well as the company’s deteriorating underwriting and overall performance trends. There was a considerable decline in the company’s surplus levels through year-end 2023, primarily driven by an increase in frequency and severity of losses from weather-related events, particularly severe convective storms. This has resulted in a notable decrease in SMCIC’s overall level of risk-adjusted capitalization.

Management is implementing capital management strategies to address the decline in risk-adjusted capitalization while concurrently attempting to rebuild surplus through improved operating results. Although underwriting actions to restore profitability are being implemented and management’s projections reflect as much, the company’s five-year average performance ratios through 2023 are well short of its strong assessment when compared with its peers and/or the industry.

The ratings will remain under review until management’s capital initiatives have been resolved. The negative implications point to the fact that, should management fail to secure additional capital, the ratings could be downgraded. The negative implications also considered SMCIC’s weaker than expected underwriting and operating profitability in recent years, as well as the strong potential of a rating downgrade once the company’s capital issues have been resolved.

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