3. Rating Effective Date: February 15, 2018
Best's Financial Strength Rating: A+ Outlook: Stable Action:
Affirmed
Best's Issuer Credit Rating: aa- Outlook: Stable Action:
Affirmed
Five Year Credit Rating History:
Best's Financial Strength Ratings Best's Issuer Credit Ratings
Date Rating Outlook Action Rating Outlook Action
02/15/2018 A+ Stable Affirmed aa- Stable Affirmed
01/31/2017 A+ Stable Affirmed aa- Stable Affirmed
01/28/2016 A+ Stable Affirmed aa- Stable Affirmed
01/23/2015 A+ Stable Affirmed aa- Stable Affirmed
01/16/2014 A+ Stable Affirmed aa- Stable Affirmed
Corporate Overview:
Federated Mutual Group includes three property/casualty
insurers, Federated Mutual Insurance Company and its wholly
owned subsidiaries, Federated Service Insurance Company and
Federated Reserve Insurance Company. Also under the direct
control of the parent are Federated Life Insurance Company,
Granite Re, Inc. and an internal agency, Primary Source
Insurance Agency, Inc. In addition, the company maintains its
investment real estate properties in Federated Development
Corporation, also a 100% wholly owned subsidiary.
Corporate Structure
4. AMB# Company Name
Domicile
Percentage Own
(%)
000384 Federated Mutual Ins Co MN
006381 Federated Life Ins Co MN 100
020557 Federated Reserve Insurance Co MN 100
004273 Federated Service Ins Co MN 100
011379 Granite Re, Inc OK 100
Rating Rationale:
The company's rating reflects its pooling arrangement with
other pool members of the Federated Mutual Group (AMB#
004284).
For more detail regarding the Rating Rationale and Best's Credit
Report for the Rating Unit, view Federated Mutual Group
(AMB# 004284).
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Financial Data Notes:
5. Time Period: Annual - 2016 Status: A.M. Best Quality Cross
Checked Data as of: 12/14/2017
Key Financial Indicators:
Key Financial Indicators (000)
Year End - December 31
2016 2015 2014 2013 2012
Premiums Written
Direct 1,453,849 1,296,647 1,147,522 1,042,477 926,460
Net 1,460,582 1,301,021 1,183,916 1,083,515 942,273
Pre-tax Operating Income ($000) 258,933 250,395 263,086
143,010 97,977
Net Income 185,374 189,075 187,552 127,901 106,109
Total Admitted Assets 5,456,754 5,076,210 4,783,738 4,523,517
4,233,760
Policyholders' Surplus 3,091,101 2,862,425 2,657,097
2,518,256 2,365,441
Source: Bestlink - Best's Statement File - P/C, US
Key Financial Indicators - A.M. Best Ratios (%)
Year End - December 31
2016 2015 2014 2013 2012
Profitability
6. Combined Ratio 93.1 92.6 90.1 98.9 104.5
Investment Yield 3.7 3.7 3.9 3.8 4.0
Pre-Tax Return on Revenue 18.3 19.7 23.0 14.0 10.8
Leverage
Non-Affiliated Investment Leverage 19.6 13.8 13.3 11.2 10.1
Net Premiums Written to Policyholders' Surplus 0.5 0.5 0.4 0.4
0.4
Net Leverage 1.2 1.2 1.2 1.2 1.2
Liquidity
Overall Liquidity 230.7 229.4 225.0 225.6 226.7
Operating Cash-Flow 118.8 119.1 113.8 117.4 103.8
Source: Bestlink - Best's Statement File - P/C, US
(*) Within several financial tables of this report, this company
is compared against the Commercial Casualty Composite.
(*) Data reflected within all tables of this report has been
compiled from the company-filed statutory statement.
Credit Analysis:
Balance Sheet Strength
Capitalization:
Capital Generation Analysis
Year End - December 31
7. 2016 2015 2014 2013 2012
Pre-tax Operating Income ($000) 258,933 250,395 263,086
143,010 97,977
Realized Capital Gains ($000) 5,111 944 2,469 21,702 12,260
Income Taxes ($000) 78,670 62,263 78,004 36,811 4,128
Unrealized Capital Gains ($000) 50,517 33,062 30,133 33,874
24,447
Other Changes ($000) -7,216 -16,810 -78,844 -8,959 -2,329
Change in Policyholders' Surplus
($000)
228,676 205,328 138,841 152,815 128,226
Change in Policyholders' Surplus (%) 8.0 7.7 5.5 6.5 5.7
Source: Bestlink - Best's Statement File - P/C, US
Liquidity Analysis (%)
Company Industry Composite
Year End - December 31 Year End - December 31
2016 2015 2014 2013 2012 2016 2015 2014 2013 2012
Quick Liquidity 34.8 25.4 25.1 28.5 22.8 21.0 21.6 24.0 24.0
22.6
Current Liquidity 165.8 170.3 168.9 170.7 171.6 103.7 104.4
108.2 109.0 106.1
8. Overall Liquidity 230.7 229.4 225.0 225.6 226.7 145.5 146.2
148.1 148.2 147.0
Source: Bestlink - Best's Statement File - P/C, US
Industry Composite: Commercial Casualty Composite - Bestlink
- Best's Statement File - P/C, US
Asset Liability Management – Investments:
Bond Portfolio - 2016 Bonds Distribution by Maturity (%)
Years Years Average
0-1 1-5 5-10 10-20 20+ Maturity
Government 7.1 1.2 1.5 0.8 ... 2.8
Government Agencies and Municipal Bonds 3.4 16.7 26.4 4.7
0.1 6.3
Industrial and Misc. 2.9 11.3 11.3 11.6 1.0 8.4
Total 13.4 29.2 39.2 17.1 1.1 6.7
Source: Bestlink - Best's Statement File - P/C, US
Asset Liability Management – Investments:
Bond Distribution by Issuer Type
Year End - December 31
2016 2015 2014 2013 2012
Bonds ($000) 3,250,253 3,317,760 3,161,212 2,989,937
2,851,798
US Government (%) 3.6 3.7 4.0 4.7 4.6
9. Foreign Government (%) 0.4 0.3 0.3 0.2 0.4
Foreign-All Other (%) 6.2 2.7 2.8 2.0 2.0
State/Special Revenue-US (%) 55.1 59.6 62.3 63.3 65.1
Industrial and Misc-US (%) 34.6 33.6 30.5 29.8 27.9
Credit Tenant Lns-US (%) ... ... ... ... ...
Source: Bestlink - Best's Statement File - P/C, US
2016 Bond Distribution By Issuer Type
3.6%
0.4%
6.2%
55.1%
34.6%
US Government (%)
Foreign Government (%)
Foreign-All Other (%)
State/Special Revenue-US (%)
Industrial and Misc-US (%)
Source: Bestlink - Best's Statement File - P/C, US
Reserve Adequacy:
10. Loss and Allocated Loss Adjustment Expense Reserve
Development
Year End - December 31
Calendar Year: 2016 2015 2014 2013 2012
Original Loss Reserves ($000) 1,389,525 1,316,401 1,276,340
1,291,005 1,236,233
Developed Reserves Thru Latest Year End ($000) 1,389,525
1,204,474 1,073,021 1,000,549 926,253
Development to Original (%) ... -8.5 -15.9 -22.5 -25.1
Development to Policyholder Surplus (%) ... -3.9 -7.7 -11.5 -
13.1
Developed Reserves to Net Premiums Earned (%) 98.5 94.6 93.8
98.3 102.4
Unpaid Reserves @ Latest Year End ($000) 1,389,525 884,915
624,056 482,833 398,541
Unpaid Reserves to Developed Reserves (%) 100.0 73.5 58.2
48.3 43.0
Year End - December 31
Accident Year: 2016 2015 2014 2013 2012
Original Loss Reserves ($000) 504,610 457,287 429,097
419,741 364,356
Developed Reserves Thru Latest Year End ($000) 504,610
418,291 353,246 317,514 252,987
Development to Original (%) ... -8.5 -17.7 -24.4 -30.6
11. Unpaid Reserves @ Latest Year End ($000) 504,610 260,859
141,223 84,292 44,513
Accident Year Loss Ratio (%) 76.7 74.2 70.9 71.2 72.8
Accident Year Combined Ratio (%) 101.0 100.0 97.8 100.5
102.7
Source: Bestlink - Schedule P (Loss Reserves) - P/C, US
Operating Performance
Financial Performance Summary (000)
Year End - December 31
2016 2015 2014 2013 2012
Pre-tax Operating Income 258,933 250,395 263,086 143,010
97,977
Net Income 185,374 189,075 187,552 127,901 106,109
Source: Bestlink - Best's Statement File - P/C, US
A.M. Best Ratios (%)
Company Industry Composite
Year End - December 31 Year End - December 31
2016 2015 2014 2013 2012 2016 2015 2014 2013 2012
Operating Ratio 81.0 79.9 76.2 84.3 88.0 88.1 85.2 84.4 81.6
13. 2012 2013 2014 2015 2016
74.6
69.6
63.2
66.8 68.8
29.7 29.0 26.6 25.4 23.9
104.5
98.9
90.1 92.6 93.1
- Combined Ratio - Loss & LAE Ratio - Expense Ratio
2016 Pure Loss Ratio by Product Line (%)
-25
0
25
50
75
100
Gr
ou
17. er
89.0
44.5
77.4
51.3
58.9
42.0 44.7 39.1
25.3 21.0
9.7
-10.9
Source: Bestlink - Best's Statement File - P/C, US
Business Profile
The following text is derived from Best's Credit Report on
Federated Mutual Group (AMB# 004284):
The group provides a range of commercial and personal
property/casualty coverages as well as life insurance (written
through
a wholly owned subsidiary, Federated Life Insurance Company)
and disability lines throughout most of the continental United
States. Federated exited the Group Health line on December 31,
2017. While a large portion of business is generated in the
Midwest, the group has increased its expansion efforts in the
New England states while increasing market share in the
southeastern and western states. The mix of business is
approximately 64% general commercial lines, with the
18. remainder
comprised almost exclusively of group accident and health and
a small amount of personal lines business. Personal lines
production is currently focused exclusively in the state of
Minnesota.
Federated Mutual benefits from a comprehensive marketing and
operational structure developed for both the property/casualty
and life/health operations. Components of its business plan
include the following: specialized multi-line products, niche
marketing achieved through increased penetration of affinity
groups, disciplined underwriting and claims, and a direct
distribution system focused on integrated implementation plans.
The group continues its commitment to assisting clients in
controlling workers' compensation and automotive losses by
providing employer-directed risk management plans. In
addition,
loss control services specifically tailored to help address the
insured's other inherent property and casualty exposures are
also
offered. Business is retained through a considerable emphasis
on disciplined client service standards, inclusive of multiple
client interactions throughout the year.
The group's business plan, which combines a specifically
trained and directed marketing force with extensive affinity
group
recommendations, gives it an advantageous market position.
The number of associations giving exclusive recommendations
to
the Federated Mutual Group has grown considerably in recent
years, expanding the group's potential market base. The
business diversity within the associations provides a natural
hedge. Management believes that the addition of a self-insured
19. retention (aggregate deductible) product is unique to the group's
niche market segments and, along with new loss-sensitive
plans, is designed to attract larger premium clients.
Management also believes that, combined with the group's loss
control
service, the SIR program may be of great interest to business
owners who are focused on controlling insurance costs. The
group offers a workers' compensation (SIR) product and
monoline worker's compensation coverage for selected risks. In
2014,
the company sponsored the formation of a member-owned
captive that is managed by Federated and used to provide
expanded alternative risk transfer services to qualifying
customers.
Underwriters support a distribution network consisting of a
direct sales force of roughly 550 highly trained employees and
over
35 selected independent agents. In most geographic areas,
Federated Mutual continues to focus on eight major markets:
petroleum marketers (e.g., convenience stores), equipment
dealers, automobile dealers, trade contractors, selected retailers
and wholesalers, other automobile-related businesses (e.g., tire
and parts dealers and repair garages), machine and print
shops and a variety of miscellaneous operations. The group also
writes funeral directors, retail jewelers, cabinet makers and
petroleum truckers.
Working with a select network of attorneys, the group's
distribution system facilitates business succession and estate
planning
programs for business owners. This strategic initiative enhances
the group's risk management offerings and more deeply
interconnects the customer with the company.
20. In 2016, Federated Reserve Insurance Company was formed. It
is a wholly owned subsidiary of Federated Mutual. The new
company is meant to complement the two existing PC
companies and will provide Federated with pricing flexibility. It
began
producing direct business as of January 1, 2017 in selected
states.
In 2017, Federated acquired Granite Re, an Oklahoma domiciled
contract surety company. This will help Federated
complement its contractor offerings with a surety product.
Federated Mutual Insurance Company and Federated Service
Insurance Company have historically operated through an
intercompany pooling arrangement. In 2017, Federated Reserve
was added to the arrangement.
The group also operates through an assumed reinsurance
agreement with Sompo (formerly Edurance Re), currently
assuming
8.5% of Endurance Re's property only business. On January 1,
2013, the group entered into an assumed reinsurance
transaction with Hiscox Re at a participation of 5%, which
increased to 9.25% in 2017. In 2015, Federated entered into an
assumed reinsurance agreement with Chubb Re (formerly ACE)
at a participation of 1.5%. In 2016, Federated entered into an
assumed reinsurance agreement with Endurance Global
Specialties at a participation of 5% which increased to 10% in
2017.
Leverage Analysis
Company Industry Composite
Year End - December 31 Year End - December 31
A.M. Best Ratios (%) 2016 2015 2014 2013 2012 2016 2015
21. 2014 2013 2012
Business Retention 95.3 95.2 96.0 95.9 95.9 76.2 77.8 80.2 78.8
80.4
Net Premiums Written to Policyholders'
Surplus
0.5 0.5 0.4 0.4 0.4 0.7 0.7 0.7 0.7 0.7
Source: Bestlink - Best's Statement File - P/C, US
Industry Composite: Commercial Casualty Composite - Bestlink
- Best's Statement File - P/C, US
2016 Top Product Lines of Business (Net Premiums Written)
30.0%
16.7%
13.0%
12.5%
5.4%
4.7%
4.0%
3.5% 3.2%
2.1%
22. 2.1%
2.8%
Group A & H
Workers' Comp
Comm'l Auto Liab
Oth Liab Occur
Auto Physical
Com'l MultiPeril
Allied Lines
Fire
Reins-Property
Oth Liab CM
Prod Liab Occur
All Other
Source: Bestlink - Best's Statement File - P/C, US
2016 By-Line Business
Product Line
Direct
Premiums
Written
Reinsurance
Premiums
Assumed
Reinsurance
Premiums
Ceded
Net
25. Financial Statements:
Balance Sheet:
Balance Sheet:
Admitted Assets Year End - December 31
2016 ($000) 2015 ($000) 2016 (%) 2015 (%)
Bonds 3,250,253 3,317,760 59.6 65.4
Preferred Stock ... ... ... ...
Common Stock 418,738 311,748 7.7 6.1
Cash and Short-term Invest 213,328 100,379 3.9 2.0
Real estate, investment ... ... ... ...
Derivatives ... ... ... ...
Other Non-Affil Inv Asset 149,731 69,861 2.7 1.4
Investments in Affiliates 739,792 647,078 13.6 12.7
Real Estate, Offices 56,012 56,086 1.0 1.1
Total Invested Assets 4,827,854 4,502,913 88.5 88.7
Premium Balances 441,230 404,059 8.1 8.0
Accrued Interest 40,025 39,385 0.7 0.8
All Other Assets 147,646 129,853 2.7 2.6
26. Total Assets 5,456,754 5,076,210 100.0 100.0
Liabilities & Surplus Year End - December 31
2016 ($000) 2015 ($000) 2016 (%) 2015 (%)
Loss and LAE Reserves 1,451,896 1,376,353 26.6 27.1
Unearned Premiums 494,528 445,998 9.1 8.8
Derivatives ... ... ... ...
Conditional Reserve Funds 791 1,142 ... ...
All Other Liabilities 418,439 390,292 7.7 7.7
Total Liabilities 2,365,654 2,213,785 43.4 43.6
Surplus notes ... ... ... ...
Capital and Assigned Surplus 1,500 8,160 ... 0.2
Unassigned Surplus 3,089,601 2,854,265 56.6 56.2
Total Policyholders' Surplus 3,091,101 2,862,425 56.6 56.4
Total Liabilities and Surplus 5,456,754 5,076,210 100.0 100.0
Source: Bestlink - Best's Statement File - P/C, US
Summary of Operations and Operating Cash Flow:
Summary of Operations (000)
27. Year End - December 31
Statement of Income 2016 Net Operating Cash Flow 2016
Premiums earned 1,411,313 Premiums collected 1,417,830
Losses incurred 851,044 Benefit & loss-related pmts 782,587
LAE incurred 120,133
Undwr expenses incurred 351,487 LAE & undwr expenses paid
462,876
Other expenses incurred -1,800 Other income / expense ...
Dividends to policyholders 4,511 Dividends to policyholders
4,331
Net underwriting income 85,938 Underwriting cash flow
168,036
Net transfer ...
Net investment income 170,330 Investment income 179,613
Other income/expense 2,665 Other income/expense 2,665
Pre-tax operating income 258,933 Pre-tax cash operations
350,314
Realized capital gains 5,111
Income taxes incurred 78,670 Income taxes pd (recov) 96,684
Net income 185,374 Net oper cash flow 253,629
28. Source: Bestlink - Best's Statement File - P/C, US
Company Information
000384 - Federated Mutual Insurance Company
Federated Mutual Insurance Company
Report Revision Date:
September 12, 2018
Company Attributes:
Industry: Insurance
Business Type: Property/Casualty
Entity Type: Operating Company
Organization Type: Mutual
Business Status: In Business - Actively Underwriting
Marketing Type: Exclusive/Captive Agent
Financial Size: XV ($2 Billion or greater)
Company History:
Date Incorporated: 08/01/1904 Date Commenced: 08/01/1904
Domicile: United States: Minnesota
This company, incorporated under the laws of Minnesota, began
business in August 1904 under the title Retail Implement
Dealers Mutual Fire Insurance Company. The name was
changed in 1913 to the Minnesota Implement Mutual Fire
Insurance
Company; in 1942 to Mutual Implement and Hardware
Insurance Company; in 1950 to Federated Mutual Implement
and
Hardware Insurance Company; and on April 21, 1970, to its
present form.
29. Company Operations:
Licensed Territory: (Current since 12/20/2011).The company is
licensed in the District of Columbia, AL, AK, AZ, AR, CA,
CO, CT, DE, FL, GA, ID, IL, IN, IA, KS, KY, LA, ME, MD,
MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC,
ND, OH, OK,
OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI and
WY.
2017
Rank Top 5 Lines of Business by NPW
1 Group A & H 26.5%
2 Workers' Comp 16.8%
3 Comm'l Auto Liab 14.1%
4 Oth Liab Occur 13.1%
5 Auto Physical 6.2%
2017
Rank Top 5 Geographic Distribution by DPW
1 United States: TX 8.2%
2 United States: MN 7.9%
3 United States: CA 6.1%
4 United States: MI 6.0%
5 United States: MO 5.3%
Source: Bestlink - Best's Statement File - P/C, US
Company Management:
Last significant update on 02/21/2018
Company Information
000384 - Federated Mutual Insurance Company
30. Page 14 of 16 Print Date: September 12, 2018
Company Management:
Operations are directed by prominent insurance underwriters.
Under the same general management are three wholly owned
domestic subsidiaries: Federated Service Insurance Company
(licensed in 1972), Federated Life Insurance Company (formed
in late 1958) and Federated Reserve Insurance Company
(formed in 2016). In addition, the company completed a stock
purchase acquisition of Granite Re Insurance Company (closed
1/3/2017).The carriers maintain joint administrative offices.
Jeffrey E. Fetters serves as chairman of the board of all carriers.
Jeffrey Fetters has served as chief executive officer since
January 2009 and Chairman of the Board since November 2012.
He has been with the company since 1980. Michael G. Kerr
was named President of all companies in December 2017. He
has been COO since September 2016. He has been with the
company since 1981.
Officers
Chairman of the Board and CEO: Jeffrey E. Fetters
President and COO: Michael G. Kerr
EVP, Secretary, Treasurer and CFO: Paul F. Dröher
EVP: Patric K. Cooper
EVP: Mark D. Heyne
EVP: Michael N. Keller
EVP: Sean G. Pick
EVP: Mark D. Scharmer
EVP: James A. Thon
SVP: Rebecca J. Dawley
SVP: Jonathan R. Hanson
SVP: Elizabeth A. Hyland
31. SVP: Nicholas R. Lower
Directors
David M. Adcox
Paul F. Dröher
Jeffrey E. Fetters (Chairman)
David P. Frame
James R. Giesler
Lester H. Killebrew
James H. Lipscomb III
John P. McEleney
Sarah B. Person
Regulatory:
Auditor: PricewaterhouseCoopers, LLP
An examination of the financial condition is being made as of
December 31, 2017, by the insurance department of Minnesota.
The 2017 annual independent audit of the company was
conducted by PricewaterhouseCoopers, LLP. The annual
statement
of actuarial opinion is provided by William J. Fogarty, FCAS,
MAAA, Managing Actuary.
Additional Resources:
Related News
Company Information
000384 - Federated Mutual Insurance Company
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Additional Resources:
Rating Activity and Announcements
Company Overview
Archived Best's Credit Report
Corporate Changes & Retirements
Recent M&A transactions
Recent Best’s State Rate Filings (P/C Only)
BestAlert Service
Best's Credit Ratings Mobile Application
A Best's Financial Strength Rating opinion addresses the
relative ability of an insurer to meet its ongoing insurance
obligations. The ratings are not assigned to specific insurance
policies
or contracts and do not address any other risk, including, but
not limited to, an insurer's claims-payment policies or
procedures; the ability of the insurer to dispute or deny claims
payment
on grounds of misrepresentation or fraud; or any specific
liability contractually borne by the policy or contract holder. A
Financial Strength Rating is not a recommendation to purchase,
hold or terminate any insurance policy, contract or any other
financial obligation issued by an insurer, nor does it address the
suitability of any particular policy or contract for a specific
purpose or purchaser.
33. A Best's Issue/Issuer Credit Rating is an opinion regarding the
relative future credit risk of an entity, a credit commitment or a
debt or debt-like security.
Credit risk is the risk that an entity may not meet its
contractual, financial obligations as they come due. These credit
ratings do not address any other risk, including but not limited
to
liquidity risk, market value risk or price volatility of rated
securities. The rating is not a recommendation to buy, sell or
hold any securities, insurance policies, contracts or any other
financial
obligations, nor does it address the suitability of any particular
financial obligation for a specific purpose or purchaser.
In arriving at a rating decision, A.M. Best relies on third-party
audited financial data and/or other information provided to it.
While this information is believed to be reliable, A.M. Best
does
not independently verify the accuracy or reliability of the
information. Any and all ratings, opinions and information
contained herein are provided "as is," without any express or
implied
warranty.
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Company Information
000384 - Federated Mutual Insurance Company
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