AM Best Affirms Credit Ratings of Erie Insurance Group’s Members 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 Rating (Long-Term ICR) of “aa-” (Superior) 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” (Excellent) 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.

Erie Insurance Exchange is the lead company of Erie; the remainder of the P/C group is composed of 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 of Erie reflect its 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). Erie’s operating performance has faced considerable volatility over the recent five-year period, driven by adverse underwriting performance. While Erie’s performance predominately reflects increased weather-related activity over the recent five-year period, AM Best also notes that the company’s 2022 underwriting results were pressured by inflation-driven severity increases combined with a continued return of auto claim frequency to more typical levels following the pandemic. Additionally, the group’s underwriting performance continues to be impacted by elevated catastrophe activity thus far in 2023.

However, AM Best notes that Erie has implemented numerous remediation efforts to correct performance, which include substantial rate increases, enhancing its underwriting discipline, reviewing agency placements and focusing on long-term expense savings. Given that Erie utilizes 12-month auto policies, there is a timing lag to fully earn the rate changes that are being introduced. As a result, there is potential for interim capital erosion until the benefit of these actions is realized. Nonetheless, AM Best expects Erie’s risk-adjusted capitalization and large surplus base will be able to support the group as management continues to implement its strategic plan. Additionally, AM Best will continue to monitor elevated catastrophe losses occurring throughout Erie’s footprint to ensure rating fundamentals remain within the proper guidelines.

The ratings of EFL reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. These ratings also consider the lift from Erie, based on its strategic importance in supporting the overall strategy of EFL in selling life and annuity products to the group’s P/C client base. EFL’s ratings are also supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as its conservative investment portfolio. The company’s investment portfolio primarily consists of investment grade bonds that are diversified across industries and sectors. AM Best notes, however, that EFL’s earnings have deteriorated in recent periods driven by statutory strain related to growing its book of business.

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. For more information, visit www.ambest.com.

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