AM Best Revises Issuer Credit Rating Outlook to Negative for Members of NJM Insurance Group

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Ratings (Long-Term ICRs) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of “aa” (Superior) of New Jersey Manufacturers Insurance Company, New Jersey Re-Insurance Company, New Jersey Indemnity Insurance Company and New Jersey Casualty Insurance Company, collectively referred to as NJM Insurance Group (NJM). The outlook of the FSR is stable. All companies are domiciled in West Trenton, NJ.

The Credit Ratings (ratings) reflect NJM’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The revised Long-Term ICR outlook to negative reflects the continued volatility in the group’s pre and post dividend operating performance. In an effort to diversify risk, both geographically and by product, beginning in 2022, the group made significant investments in advertising and commission structure. These efforts have fueled strong direct premium growth and a decrease in the company’s underwriting expense ratio with economies of scale. However, over the last several years, these investments have also combined with an industrywide rise in loss costs from an increase in the frequency of weather events and economic inflation to produce consecutive years of underwriting losses, with the largest loss occurring in 2024. In 2024, uninsured/underinsured motorists further pressured results, as more drivers either dropped coverage or carried inadequate insurance due to affordability—adding 9 points to the loss ratio. NJM’s continuation of annual dividend payments to its policyholders through this period has dampened overall policyholder surplus appreciation and added an average of 9.2 points to the combined ratio in the last five years. However, management views dividends as a key retention strategy. In response to economic and loss costs volatility, NJM has implemented rate increases and tightened underwriting standards. In the absence of improvement in both pre- and post-dividend operating performance, a downgrade of the Long-Term ICR is likely.

NJM’s balance sheet remains in the strongest assessment as it continues to generate surplus through investments, despite underwriting losses and dividend payments. A favorable business profile reflects its strong foothold in the New Jersey auto and workers’ compensation marketplace. An appropriate ERM program is maintained through strong risk appetite and tolerance statements reviewed by senior management and the board of directors. NJM also follows ORSA compliance and adopts ORSA policies as part of its ERM program.

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