Best’s News & Research Service - February 01, 2024 03:41 PM (EST)
AM Best Revises Outlooks to Negative for Amica Mutual Insurance Company and Subsidiaries
- February 01, 2024 03:41 PM (EST)
//BestWire// - AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” (Superior) of Amica Mutual Insurance Company (Amica Mutual) and its wholly owned subsidiary, Amica Property and Casualty Insurance Company (together known as Amica Mutual Group). At the same time, AM Best has revised the outlooks to negative from stable and affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” (Superior) of Amica Life Insurance Company (Amica Life), a wholly owned subsidiary of Amica Mutual. All companies are domiciled in Lincoln, RI.
The Credit Ratings (ratings) reflect Amica Mutual Group’s 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 ratings of Amica Life reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM.
The negative outlooks for Amica Mutual Group reflect the decline in its balance sheet strength, specifically a deterioration in risk-adjusted capitalization in recent years. Increased loss costs in both the auto and homeowner’s line of business have driven substantial underwriting losses in 2022 and 2023, which has significantly impacted the group’s surplus position and overall liquidity. Nonetheless, the group’s liquidity profile remains supported by Federal Home Loan Bank borrowing capacity, reinsurance and portfolio cash flow. Additionally, Amica Mutual Group’s results rely heavily on net investment income and realized capital gains, which have contributed collectively to positive net earnings in most years. However, this benefit was muted in 2022 and 2023 due to the turbulent investment markets and rapid increases in interest rates, which caused underwriting losses to outpace investment earnings.
AM Best notes that Amica has implemented multiple strategic initiatives, which are expected to correct performance gradually. These include substantial rate increases in both the auto and homeowners’ line of business, as well as a renewed focus on profitable geographic areas and reducing dividends. While this is expected to improve the group’s operating performance in the more near term, it is not expected to replenish its loss of surplus within that same time frame. Additionally, the negative outlooks further reflect the potential for continued capital erosion as management’s strategic action plan comes to fruition.
The negative outlooks for Amica Life follow that of Amica Mutual and reflect the potential removal of rating enhancement provided by the property/casualty parent. Given the strong parental support that includes continuous capital contributions, ample liquidity access and the sharing of brand names and consumer base, Amica Life benefits from its relationship with its parent.
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.