AM Best Information Services

JANUARY 23, 2018 02:09 PM (EST)

A.M. Best Removes From Under Review, Downgrades ICRs of Amica Mutual Group Members; Affirms Credit Ratings of Amica Life Ins Co

 Jonathan Harris, CFA, FRM
Senior Financial Analyst – P/C
+1 908 439 2200, ext. 5771

Bruno Caron
Financial Analyst – L/H
+1 908 439 2200, ext. 5144

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - JANUARY 23, 2018 02:09 PM (EST)
A.M. Best has removed from under review with negative implications and downgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa-” from “aa” and affirmed the Financial Strength Rating (FSR) of A+ (Superior) of Amica Mutual Insurance Company (Amica Mutual) and its wholly owned subsidiary, Amica Property & Casualty Insurance Company (together known as Amica Mutual Group) (Amica). The outlook assigned to these Credit Ratings (ratings) is stable. A.M. Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of Amica Life Insurance Company (Amica Life), a wholly owned subsidiary of Amica Mutual. The outlook of these ratings is stable. All companies are domiciled in Lincoln, RI.

The ratings of Amica were placed under review with negative implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The ratings have been removed from under review, as A.M. Best has completed its analysis of Amica under the updated BCRM.

The ratings reflect Amica’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.

The rating actions reflect the deteriorating underwriting results in recent years, mainly driven by weather-related catastrophe events and auto losses. Amica’s net underwriting losses have been driven by an increased loss ratio, which compares unfavorably with the averages for companies in the private passenger standard auto and homeowners composite, and A.M. Best similarly rated peers. The rating actions also reflect Amica’s risk-adjusted capitalization being at the strongest level, low underwriting leverage, strong liquidity and strength in reserves. Amica also benefits from a favorable business profile, derived from its market share regionally (New England states) and nationally, its diverse product offerings, its nationally recognized reputation for outstanding customer service, its low-cost structure as a direct writer, and its experienced senior management team.

The ratings reflect Amica Life’s balance sheet strength, which A.M. Best categorizes as strongest, as the company’s risk-adjusted capitalization also is assessed as strongest, coupled with good liquidity, no debt and strong reserve adequacy, given the company does not use captive reinsurance to fund its XXX redundant reserves. Strong support from Amica Mutual also is a key rating factor, as the parent provides capital, as well as sharing brand name, consumer base and management expertise. Operating performance is adequate, as the company maintains positive earnings despite lower investment income from its high-quality and low duration investment portfolio leading to spread compression, increased expenses from growth initiatives, surplus strain relating to the growth in traditional life business and self-funding XXX reserves, without the use of captives. While the company operates in a highly competitive environment, it benefits from its parent’s strong customer base. Further, the risk profile of the product portfolio is at the low end of the product risk scale.

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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