September 5, 2025 Reinsurance

AM Best Downgrades Credit Ratings of Erie Insurance Group’s Members; Affirms Credit Ratings of Erie Family Life Insurance Company

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has downgraded the Financial Strength Rating (FSR) to A (Excellent) from A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” (Excellent) from “aa-” (Superior) of the property/casualty (P/C) members of Erie Insurance Group (Erie). The outlook of these Credit Ratings (ratings) has been revised to stable from negative. Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Erie Family Life Insurance Company (EFL). The outlook of these ratings is stable. All companies are domiciled in Erie, PA, unless otherwise specified.

Erie Insurance Exchange is the lead company of Erie; the remainder of the P/C group is composed of 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 of Erie reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). The rating downgrades reflect the deterioration in Erie’s overall balance sheet strength, driven by multi-year surplus declines over the recent five-year period.

The group’s surplus position has been significantly impacted by large underwriting losses, driven by elevated weather-related events and increased severity in both the auto and homeowners’ segments. Consequently, the group’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has been on a downward trend. This deterioration has been accompanied by rising underwriting leverage, mixed reserve development and gradually declining liquidity metrics.

Despite these pressures, Erie has taken proactive steps to stabilize its financial position. These include implementing a series of rate and non-rate actions, restructuring its catastrophe reinsurance program with significantly higher limits and focusing on surplus stabilization strategies. While these corrective measures are beginning to yield results, AM Best notes the impact has been slower when compared with Erie’s peers. This lag is partly due to Erie’s use of 12-month auto policies and its “rate lock” feature, which delays the recognition of premium rate increases and, in turn, prolongs the beneficial impact on the balance sheet. Moreover, while underlying improvements in the book of business are emerging, their visibility has been masked by continued elevated weather activity through the first half of 2025.

The ratings of EFL reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. These ratings also consider the lift from Erie, based on its strategic importance in supporting the overall strategy of EFL in selling life and annuity products to the group’s P/C client base. EFL’s ratings and stable outlooks are further supported by the strongest level of risk-adjusted capitalization, as measured by BCAR, a conservative investment approach, and improved operating results. However, EFL reported an overall net loss of $9.0 million in 2024 stemming from the write-off of a policy administration system. Nonetheless, the company has reported two consecutive years of pre-tax operating gains. Additionally, AM Best notes strong earnings through 2025 thus far.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.