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AM Best Revises Outlooks to Negative for Vermont Mutual Insurance Company and Its Subsidiaries

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings of “aa-” (Superior) of Vermont Mutual Insurance Company and its fully reinsured subsidiary, Northern Security Insurance Company, Inc. and its fully reinsured affiliate, Granite Security Insurance Company (formerly Granite Mutual Insurance Company). These companies are domiciled in Montpelier, VT and are members of Vermont Mutual Group (Vermont Mutual).

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

The negative outlooks are based on the declining trend in Vermont Mutual’s risk-adjusted capitalization in recent years, which has placed pressure on its overall balance sheet assessment. This was partially driven by increased modeled losses from inflationary trends and management’s increased insurance-to-value efforts. Additionally, the organization’s capital growth in recent years has been subdued by volatility in its operating performance, deviating from historically favorable results, influenced by material property exposure within the group’s footprint. However, near-term capital management plans are expected to materially improve the company’s capital position.

Vermont Mutual’s maintains a balance sheet strength that is assessed as very strong, supported by risk-adjusted capitalization at the strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). Balance sheet strength is further reinforced by strong liquidity, favorable loss reserve development in all calendar years (and nearly all accident years), as well as modest underwriting leverage. Furthermore, a comprehensive reinsurance program provides substantial protection from severe events without excessively increasing reinsurance dependence.

Vermont Mutual’s operating performance is assessed as strong, based on five- and 10-year operating performance metrics, which compare favorably to its industry composite average. Significantly better-than-average loss ratios reflect strict adherence to underwriting guidelines and price adequacy initiatives. This is partially offset by an elevated underwriting expense ratio, driven by higher commission costs typical of New England writers. Strong operating earnings have been driven by a steady stream of investment income and material underwriting earnings in most years. However, patterns have deviated in recent periods with underwriting earnings being challenged by weather-related losses and inflationary trends.

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.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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