A.M. Best announced this week that it had upgraded the issuer credit ratings (ICR) of the Safety Insurance Group from an “A” to and “A+”. The upgrade and affirmation includes all of the subsidiaries under The Safety Group including the Safety Insurance Group, Inc., Safety Insurance Company, Safety Indemnity Insurance Company and Safety Property and Casualty Insurance Company. A. M. Best also affirmed the Massachusetts insurer’s financial strength rating of “A” (Excellent).
In addition, Best also upgraded the ICR rating of Safety’s publicly traded holding company, Safety Insurance Group, Inc. The upgrade saw Safety’s rating go from “bbb” from “bbb+” and the outlook revised to stable from positive. In explaining its action, A.M. Best highlighted Safety’s “…solid risk-adjusted capitalization, historically strong operating performance and its market positions as a leading personal automobile writer in Massachusetts.” The change in ratings also reflected the company’s favorable loss reserve development and low investment leverage.
On a note of caution, the insurance rating company noted that while Safety’s strength stems from being a leader in the Mass. auto insurance marketplace, the same strength might also weaken the company under certain conditions.
Partially offsetting these positive rating factors is Safety’s concentration of business in Massachusetts, which primarily is in the private passenger automobile line. The group’s homeowners’ writings have provided some product diversification; however, this does create greater property catastrophe risk. Nevertheless, Safety does continue to maintain an effective reinsurance program to help mitigate the effects of severe weather-related events.
Safety’s ratings could experience positive rating movement by producing consistently favorable earnings while maintaining strong risk-adjusted capitalization. However, the ratings and outlook may come under negative pressure if an unfavorable earnings trend develops causing its capital to erode.
