AM Best Downgrades Lender Shares of Erie Insurance Group Members; Guarantees the Loans of Erie Family Life Insurance Company

OLDWICK, NJ–(BUSINESS WIRE)–AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “aa-” (Superior) from “aa” (Superior) and has confirmed the Financial Strength Rating (FSR) of A+ (Superior) for the asset/casualty ( P/C) members of Erie Insurance Group (Erie). The Long-Term ICR trend has also been adjusted to stabilize from negative while the FSR trend is stable. Additionally, AM Best has affirmed an FSR of A (Good) and a Long-Term ICR of “a” (Outstanding) for Erie Family Life Insurance Company (EFL). The loan format (parts) is fixed. All companies are located in Erie, PA, unless otherwise noted.

Erie Insurance Exchange is Erie’s leading insurance company; the rest of the P/C group is made up of joint venture members, Erie Insurance Company and Erie Insurance Company of New York (Rochester, NY), and subsidiaries that also established Erie Insurance Property & Casualty Company and Flagship City Insurance Company.

Erie’s ratings reflect its balance sheet strength, which AM Best considers to be very strong, as well as its operational efficiency, sound business history and good corporate governance (ERM).

The decline in Erie’s Long-Term ICR reflects the instability and deterioration of the group’s structure, which is driven primarily by weather deterioration. Although the group’s results improved in 2020, mainly from lower traffic claims and fewer weather-related incidents, Erie’s five- and 10-year operating results continue to lag behind peers. In addition, the impact of the increase in the rate of inflation and the disruption of the products starting from 2021 to 2022 has seriously affected the book of the group’s vehicles, which led to a significant loss in 2021, which has continued in the first quarter of 2022. They usually eliminate the loss of records, AM Best is concerned about the company’s financial performance in 2022, due to the volatility of the stock market.

AM Best says that Erie has implemented a detailed plan to restore record profits, which includes things like price adjustments and price increases. With Erie offering a 12-month policy for all businesses, there is less time to get updates that are being introduced. As a result, all operations will take time to realize the benefits of this.

EFL’s ratings reflect its bank’s strength, which AM Best considers very strong, as well as its overall performance, neutral business profile and appropriate ERM. The rating also takes into account the promotion of Erie, based on its importance in supporting EFL’s overall strategy of selling live products and capital goods to the customer base.

EFL’s guarantee reflects its strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and a good quality of payments. The company’s portfolio consists of bonds, which vary across industries and sectors. EFL is still using its strategy to market general life insurance and personal products for the company’s P/C clients. However, AM Best reports that earnings have declined in recent years due to legal issues related to expanding the business book.

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