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Best’s News & Research Service - February 04, 2016 11:06 AM (EST)

A.M. Best Downgrades Ratings of New Jersey Manufacturers Insurance Company

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Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating (FSR) to A+ (Superior) from A++ (Superior) and the issuer credit ratings (ICR) to “aa” from “aa+” for New Jersey Manufacturers Insurance Company (NJM). The outlook for the FSR has been revised to stable from negative, while the outlook for the ICR remains negative.

Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the ICR of “aa-” of NJM’s wholly owned subsidiary, New Jersey Re-Insurance Company (NJRe). In addition, A.M. Best has affirmed the FSR of A (Excellent) and the ICRs of “a” of NJM’s two other subsidiary companies, New Jersey Casualty Insurance Company (NJC) and New Jersey Indemnity Insurance Company (NJI). The outlook for these ratings is stable. All companies are domiciled in West Trenton, NJ.

The rating actions on NJM reflect the group’s overall underwriting and operating performance, which has not been commensurate with A.M. Best’s expectations for its highest rating level. Following adverse results from weather-related events in 2011 and 2012, underwriting and operating results have developed more favorably in recent years as a result of several initiatives and benign weather. However, local competitive market pressures and ongoing susceptibility to severe weather-related events due to its significant geographic presence in New Jersey make it unlikely that prospective results will return to levels consistent with A.M. Best’s expectations for its highest rating level.

NJM’s current ratings are derived from its strong risk-adjusted capitalization and generally favorable operating performance over an extended period of time. These positive rating factors are derived from management’s conservative operating philosophy, exceptional customer service and strong local market presence and expertise. NJM’s direct marketing approach and efficient cost structure have consistently produced low underwriting expense ratios. This expense advantage has enabled NJM to provide significant policyholder dividends while maintaining solid risk-adjusted capitalization. In addition, these policyholder dividend payments have considerably enhanced customer loyalty, resulting in superior business persistency. NJM’s statewide market position is augmented by its extensive workers’ compensation managed-care capabilities, its own preferred provider network and reputation for providing quality service.

The ratings for NJRe, NJC and NJI recognize their strong capitalization and positions as residual writers for the workers’ compensation, auto and homeowners markets of NJM. The ratings also acknowledge the common management and infrastructure shared with NJM.

Factors that may lead to further negative rating action include a material decline in NJM’s operating results, capitalization levels that fall below A.M. Best’s expectations for the current rating level or planned strategic initiatives that fail to produce measurable improvement in performance.

Negative rating action could potentially occur on NJM’s subsidiaries if there is a rating change on the parent company or a change in the level of implicit and explicit support these entities receive from NJM.

This press release relates to rating(s) 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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.

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