Press Release|Insurance
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KBRA Affirms Ratings and Outlooks for Brotherhood Mutual

31 Jul 2025   |   New York

Contacts

KBRA affirms the A- insurance financial strength rating (IFSR) for Brotherhood Mutual Insurance Company (BMIC) and the BBB long term credit rating (LTCR) for the Surplus Notes. The outlook for all ratings remain Negative.

The rating reflects BMIC’s focused market strategy, geographic diversification with limited exposure concentrations, high customer retention rates, and a sound ERM framework. While the company reported surplus declines in 2022 and 2023, reversing a track record of consistent growth in surplus over the long-term, there was surplus growth in 2024 and year-to-date 2025. Brotherhood Mutual’s management team is highly experienced. KBRA believes BMIC has fundamentally sound underwriting and financial analytics with advanced technology for risk selection that the organization continues to evolve.

Balancing these strengths is BMIC’s above average investment risk, as characterized by a high level of equities to surplus, although the company has reduced its equity exposure in recent years. In 2022 and 2023, the company saw its underwriting leverage deteriorate, and its risk-adjusted capitalization declined, although these trends reversed in 2024 and year-to-date 2025. Surplus notes accounted for approximately 25% of year-end 2024 surplus but was improved from year-end 2023’s 31%. Pressure on underwriting leverage is somewhat offset by premium increases related to rising TIV and rate increases, while policy count remains flat. In addition, increased frequency from losses due to weather events and fire in recent years have negatively impacted net earnings and reversed the historical trend of favorable combined ratios with the last five-year underwriting results being unprofitable. However, recent results have been improving. KBRA views negatively the company’s increased retention in its property catastrophe reinsurance cover. KBRA notes that while BMIC no longer purchases an aggregate catastrophe treaty, management believes that its concentration management, quota share reinsurance, and a parametric severe convective storm (SCS) cover new for 2025 helps mitigate its exposure to more frequent and less severe weather events. KBRA also recognizes BMIC’s continued enhanced reserving practices by which it books reserves closer to the high end of the actuary’s range. However, prior year adverse development has been recorded in four of the last five years, including 2024.

Factors that could positively impact the rating include sustained growth in earnings, favorable risk adjusted capital and balance sheet leverage trends, and improved financial flexibility and liquidity. Factors that could negatively impact the rating include declining risk adjusted capitalization and material deterioration in balance sheet leverage unrelated to rate increases, unfavorable earnings trends, inability to obtain sufficiently robust reinsurance protection on an economic basis, material adverse reserve development, and loss of key members of the management team without suitable replacements.

To access ratings and relevant documents, click here.

Click here to view the report.

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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