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AM Best Affirms Credit Ratings of Members of Erie Insurance Group and Erie Family Life Insurance Company

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” of the property/casualty (P/C) members of Erie Insurance Group (Erie). 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.

The lead company in Erie is Erie Insurance Exchange (EIE). The rest 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 ratings of Erie reflect the continued strength of its balance sheet, which is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), historically low underwriting leverage and consistent surplus growth. The balance sheet is further supported by consistent favorable loss reserve trends and a comprehensive reinsurance program. Erie has a consistent investment strategy which generates returns over the long-term that are above its industry peers. While Erie is a regional writer with concentration in the mid-Atlantic region, it benefits from strategic alliances established with its independent agency force leading to second and third generation agency contracts. The concentration in the mid-Atlantic region does, however expose the group to weather-related losses, regulatory changes and competitive market pressure.

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. The 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 risk-adjusted capitalization is assessed at the strongest level, and quality of surplus is good, supported by organic earnings growth, a low use of reinsurance and no financial leverage, as the company’s surplus notes were retired in December 2018. Invested assets are generally of good quality, although NAIC-2 allocations have been increasing in recent years. EFL provides a diversification of earnings and products for its parent company by marketing ordinary life and individual annuity products for the parent company’s P/C client base. Earnings have been positive but fluctuating. The individual annuities line of business is the main driver of earnings, while the ordinary life line of business has reported robust life sales growth, but also is incurring the related new business strain.

Slightly more than half of general account liabilities are in annuity liabilities, with most of the annuity liabilities lacking surrender protection and at their minimum guaranteed crediting rates. Additionally, EFL has some concentration risk, as approximately two-fifths of direct written premiums are generated within Pennsylvania.

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 Understanding 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 rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Daniel Mangano

Financial Analyst – P/C

+1 908 439 2200, ext. 5547

[email protected]

Frank Walko, CPA, FLMI

Financial Analyst – L/H

+1 908 439 2200, ext. 5072

[email protected]

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

[email protected]

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