AM Best Revises Issuer Credit Rating Outlooks to Negative for Members of Erie Insurance Group; Affirms Credit Ratings of Erie Family Life Insurance Company

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

Erie Insurance Exchange is the lead company in the Erie group; the remainder of the P/C 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 AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The balance sheet strength assessment considers Erie’s risk-adjusted capitalization, strong liquidity, low underwriting leverage, consistent surplus growth and historically favorable loss reserve development. Erie’s consistent net income is supported by its investment strategy, which generates returns over the long-term that are above its industry peers. While Erie does have a geographic concentration issue in the mid-Atlantic region, which exposes the group to weather-related losses, regulatory changes and competitive market pressure, this issue is offset by the relationships that it maintains with its independent agency force, many of which are second and third generation contracts.

The revision of Erie’s Long-Term ICR outlook to negative reflects the decline in the company’s operating performance, which trails its peers due primarily to weather-related losses. While Erie’s investment performance remains strong, underwriting results have deteriorated and lag similarly related peers due in part to an increase in its loss ratio. If these trends continue, there could be a downward revision in Erie’s operating performance building-block assessment.

The ratings of EFL reflect its balance sheet strength, which AM Best categorizes 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 selling life and annuity products to the group’s property/casualty client base.

EFL’s rating affirmations represent its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as the company’s good quality of surplus and low reliance on reinsurance. Invested assets are primarily allocated to investment grade bonds that are diversified across industries and sectors. The company continues to execute on its strategy to provide additional value to its consumers through ordinary life and individual annuity products, and more recently Medicare supplement. AM Best notes that statutory strain continues to impact overall statutory profitability despite favorable sales growth.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Dan Mangano
Financial Analyst

+1 908 439 2200, ext. 5547

daniel.mangano@ambest.com



Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com



Kate Steffanelli

Senior Financial Analyst

+1 908 439 2200, ext. 5063

kate.steffanelli@ambest.com



Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best