Rating Evaluation on MTM
About eight years ago, MTM management thought that getting an outside rating agency valuation of MTM would be helpful to the Board of Directors and MTM members. At that time, management felt confident about our results and financial integrity, however, having an outside agency conduct their own independent evaluation would be a proof source of what management was telling the Board of Directors and members. We chose an outside rating agency called Demotech. Demotech had over 30 years of small and mid-size insurance company rating evaluations, and was a known standard for insurance company evaluations. We proceeded down that path and received an “A, Exceptional” rating from Demotech. About three years later, we received an upgrade from Demotech one step higher to “A Prime Unsurpassed.”
Even with our Demotech rating, occasionally questions arose because the rating agency used by large insurance companies is a company called AM Best. AM Best is actually an individual’s name, Alfred M. Best, who started insurance company ratings over 100 years ago. AM Best specializes in large companies, but because of its history it remains the world gold standard for insurance company ratings.
A few months ago, MTM management decided it would be wise to investigate the AM Best rating and knew going into the process that AM Best was much more accustomed to rating national and international insurance companies versus a member owned specialty company in Michigan. Still, we knew our financial rating from Demotech, as well as our numbers inside and out in every operating function. We started that process, and now I can report that on Monday, April 11th the AM Best Rating Committee came out with their evaluation of MTM. Here’s what they said: “Manufacturing Technology Mutual Insurance Company receives a rating of A-. Its rating outlook is stable.”
Often AM Best takes a very conservative view on their initial rating, and likes to get to know the companies over time. An A- (Excellent) stable outlook is a great place to start. Their Committee went on to further report regarding the balance sheet. They say, “Very strong. Manufacturing Technology Mutual Insurance Company’s risk adjusted capitalization as measured by Best Capital Adequacy Ratio is categorized as being at the strongest level.” They made a comment regarding our loss control that we have an experienced loss control team that visits each of its insureds.” Under Board comments they state, “The Board of Directors is made up of 11 independent directors that are responsible for setting the company strategy and provide key oversight for the company.”
The rating and the comments are things that all of us at MTM know, but getting it recognized by the premier rating agency in the United States and the world of insurance companies, is still a feather in our cap. More important than that though is that it will state to our Board of Directors and members that MTM manages the numbers, returns profits to its members, and is in an excellent and stable condition. In today’s business world, those are hard goals to meet.
If anyone has any questions about this or would like the additional details of the report, I would be happy to share those with you. In the meantime, know that MTM manages its member’s funds with superior controls, and looks for outstanding outcomes for its member owner.
— John
