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FOR IMMEDIATE RELEASE
OLDWICK - JUNE 20, 2018 12:22 PM (EDT)
A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” of the property/casualty members of Erie Insurance Group (Erie). Additionally, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Erie Family Life Insurance Company (EFL). Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Rating of “bbb+” on EFL’s $20 million, 6.26% surplus notes, due Dec. 31, 2025, to Erie Insurance Exchange (EIE). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Erie, PA, unless otherwise specified.
The lead company in Erie is EIE. The rest of the property/casualty group comprises inter-company pooling members, Erie Insurance Company and Erie Insurance Company of New York (Rochester, NY), and reinsured subsidiaries Erie Insurance Property & Casualty Company and Flagship City Insurance Company.
The ratings reflect Erie’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.
Additionally, the ratings of Erie reflect its well-established regional market presence and solid agency penetration and persistency, which complement its ability to sustain long-term agency partnerships. Erie’s profitable operating results stem from management’s adherence to underwriting and pricing discipline and solid investment income. These positive attributes are partially offset by the group’s geographic concentration in the
mid-Atlantic region, which exposes its operating performance to weather-related losses, regulatory changes and competitive market pressures. However, Erie continues to maintain a comprehensive reinsurance program in an effort to mitigate the impact of weather-related losses on its profitability and capitalization.
The ratings of EFL reflect its balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also consider lift from Erie, based on its strategic importance in supporting the overall strategy of selling life and annuity products to the group’s property/casualty client base.
In addition, the ratings of EFL reflect favorable premium trends due to higher ordinary life insurance sales, and strongest risk-adjusted capitalization supported by organic earnings, manageable financial leverage and relatively low use of reinsurance. EFL regards EIE’s independent agent distribution network as a competitive advantage, due to their local industry knowledge and loyalty to EIE. Offsetting rating factors include its relatively modest contribution to the enterprise; impact of spread compression on interest-sensitive liabilities; some concentration risk, as approximately two-fifths of direct written premiums are generated from Pennsylvania; and the challenges associated with growing its ordinary life book of business.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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