KBRA Affirms Rating for Mutual Assurance Society of Virginia

KBRA affirms the A+ Insurance Financial Strength Rating (IFSR) for Mutual Assurance Society of Virginia. The Outlook for the rating is Stable. Mutual Assurance Society of Virginia (MAS) is a mutual assessment property and casualty insurance company that primarily writes homeowners insurance, only in the Commonwealth of Virginia. Related insurance coverages include fire and allied lines written as dwelling property insurance and personal umbrella insurance.

The ratings reflect MAS’ strong organic surplus growth over the past decade, resulting in very conservative underwriting leverage ratios that are well below the industry average. The surplus position also gives MAS the ability to withstand extreme tail events, including a 1-1,000-year hurricane. Furthermore, MAS maintains a very strong liquidity position, which adequately aligns with its short-tailed property lines. MAS’ local market knowledge, long-standing agency relationships and the use of a perpetual homeowner’ policy, has resulted in customer retention of approximately 95% for the last 10 years.

Offsetting these credit strengths are MAS’ heightened level of investment risk, with equities comprising 71% of cash and invested assets at year-end 2023. The top four holdings accounted for approximately 22% of the equity portfolio, which exposes the Society’s surplus to significant volatility, as was seen in 2020 and 2022, when MAS experienced large declines in their asset portfolio due to financial market downturns. However, equity market volatility is partially offset by MAS’ high-quality bond portfolio. Although aligned with its business model, MAS has unfavorable statutory metrics, with elevated loss and expense ratios.

Factors that could lead to an upgrade include deepened bench to guard against key person risk and improved profitability, and reduced asset risk concentrations.

Factors that could lead to a downgrade include further concentration in invested assets, unmanaged departures of key staff, further deterioration in underwriting results, exposure growth in excess of MAS’ ability to preserve surplus through reinsurance, and an inability to retain policyholders/members over the long term.

To access rating and relevant documents, click here.

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