Auto-Owners Insurance: The Story Behind Their A++ AM Best Rating

Auto-Owners Insurance is a highly rated insurance company that has received the prestigious A++ (Superior) rating from AM Best. This rating reflects the company’s exceptional financial strength and stability. But how did Auto-Owners earn such a high rating?

A Brief History of Auto-Owners Insurance

Auto-Owners Insurance Group was founded in 1916 and is headquartered in Lansing, Michigan. It started out as a small mutual insurance company but has grown over the past century into one of the largest property and casualty insurers in America.

Some key facts about Auto-Owners:

• It provides insurance products to nearly 3 million policyholders across 26 states.

• The company is represented by over 48,000 independent agents.

• Auto-Owners wrote over $8 billion in premiums in 2021.

• It has over $27 billion in assets as of 2021.

• The company employs over 11,000 associates.

Auto-Owners has a unique mutual company structure. As a mutual company, Auto-Owners is owned by its policyholders rather than shareholders. This allows the company to focus on providing excellent service rather than maximizing profits.

What is AM Best?

AM Best is a global credit rating agency focused on the insurance industry. It analyzes the financial strength of insurance companies and rates them on a scale from A++ to F.

The AM Best rating is a trusted benchmark that insurance agents and consumers use to evaluate an insurer’s ability to pay claims. Companies rated A++ by AM Best are considered to have a superior ability to meet their ongoing policy and contract obligations.

The Meaning of Auto-Owners’ A++ Rating

Auto-Owners has consistently maintained an A++ (Superior) rating from AM Best since 1955. This is the highest rating available and indicates that AM Best has determined Auto-Owners has an exceptional ability to meet its financial obligations to policyholders even under severe stress scenarios.

Specifically, the A++ rating reflects AM Best’s opinion on:

• Balance Sheet Strength: Auto-Owners has the strongest level of risk-adjusted capital, meaning it has sufficient financial resources to withstand virtually any adverse economic scenario.

• Operating Performance: Auto-Owners has generated consistently positive operating returns while maintaining disciplined underwriting standards. This demonstrates profitable underwriting results over the long term.

• Business Profile: Auto-Owners has a strong market presence across its operating territory, providing a wide variety of commercial and personal insurance products through independent agents.

• Enterprise Risk Management: Auto-Owners utilizes very strong risk management practices, ensuring risks are appropriately identified and mitigated across the organization.

Essentially, the A++ rating provides assurance that Auto-Owners has exceptional financial strength and is well-prepared to handle its obligations even in periods of significant economic stress or catastrophic losses.

How Auto-Owners Achieved an A++ Rating

An A++ rating from AM Best is difficult to achieve and maintain over many decades. Here are some of the key factors that have allowed Auto-Owners to earn consistent A++ ratings:

1. Consistently Profitable Underwriting

Auto-Owners has achieved an average 10-year combined ratio of 92.6% and 20-year combined ratio of 96.7% through 2021. These very profitable results demonstrate disciplined underwriting and pricing over the long run. Auto-Owners avoids unprofitable market segments and maintains rate adequacy even during soft markets.

2. Very Strong Capital Position

As a mutual company without pressure from Wall Street, Auto-Owners focuses on building capital for long-term security. The company has built up an exceptionally strong level of policyholder surplus and risk-based capital. At year-end 2021, Auto-Owners had $9.4 billion in total policyholder surplus.

3. High-Quality Investment Portfolio

Auto-Owners maintains a conservative, high-quality investment portfolio. The company invests heavily in bonds, limiting its exposure to higher-risk assets. This ensures Auto-Owners can meet its obligations even during periods of significant investment losses.

4. Diversified Revenue By Line of Business and State

Auto-Owners writes a diverse mix of personal and commercial lines across its 26-state operating region. This diversification lessens the impact of adversity in any single product line or geographic area. No state accounts for more than 11% of direct premiums written.

5. Mutual Company Structure

As a mutual company, Auto-Owners can make decisions focused on long-term strength rather than short-term profits. It is not pressured by quarterly earnings expectations. This aligns perfectly with maintaining the financial stability required for an A++ rating.

6. Strong Enterprise Risk Management

Auto-Owners utilizes robust enterprise risk management practices coordinated by its Corporate Actuary and Enterprise Risk Management departments. This ensures the company identifies, measures, and prepares for key risks that could impact its financial strength.

The Significance of the A++ Rating for Policyholders

The AM Best A++ rating provides key benefits and assurances to Auto-Owners policyholders:

• Exceptional financial strength – Policyholders can feel confident Auto-Owners will be there to pay claims even in the worst circumstances.

• Reassurance during uncertain times – The rating provides peace of mind that Auto-Owners has plenty of capital reserves to weather major storms, economic crises, or other scenarios.

• Acceptance by banks/mortgage lenders – Many banks require customers to maintain insurance with highly-rated carriers like Auto-Owners to approve mortgages.

• Potential premium discounts – The financial stability reflected in the A++ rating may allow Auto-Owners to file lower rates with state regulators.

• Agent stability – The rating confirms agents make a wise choice in recommending Auto-Owners to protect customers’ valued assets.

While cost and coverage are key insurance purchase drivers, the AM Best rating provides customers an additional level of confidence that Auto-Owners will deliver on its promises when the unexpected occurs.

Auto-Owners: 100+ Years of Exceptional Financial Strength

Very few insurance carriers can claim an A++ rating from AM Best for over six decades straight. This long track record of success confirms that Auto-Owners runs its business based on discipline, integrity, and protecting policyholders’ interests.

Policyholders today can have peace of mind knowing Auto-Owners will be there to provide insurance protection and prompt claims payments for generations to come. The A++ rating signals that Auto-Owners policyholders are in excellent hands.