AM Best Revises Outlooks to Negative for The Harford Mutual Insurance Company and Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of The Harford Mutual Insurance Company and its wholly owned subsidiaries: Firstline Insurance Company; 1842 Insurance Company; and Clearpath Insurance Company. All companies are domiciled in Bel Air, MD, and collectively referred to as Harford Mutual Insurance Group (HMIG) or the group.

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

The negative outlooks on the group’s ratings reflect pressure on HMIG’s operating performance assessment, primarily due to increased volatility in underwriting profitability, including adverse reserve development in recent years, which has led to a decline in operating performance metrics. In addition, the negative outlooks reflect pressure on the group’s balance sheet strength assessment, largely driven by adverse reserve development, particularly within the group's liability lines of business. These segments continue to be affected by social inflation and increased litigation activity, which have put pressure on the group's overall risk-adjusted capitalization and led to a decline in the group’s surplus, consequently contributing to a weakening in overall balance sheet strength metrics. Management has implemented various corrective actions to address the deterioration in profitability that involve de-risking, re-underwriting and exposure reduction measures. There are favorable indications from these actions as the group has reported a 4% increase in policyholder surplus (PHS) through the first half of 2025 and improved reserve development on a year-over-year basis.

The group’s overall balance sheet strength assessment of very strong remains unchanged and is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, the group maintains a robust liquidity position, comprehensive reinsurance program, low reserves in relation to both PHS and net premiums earned and although increasing, adequate underwriting leverage measures. However, balance sheet metrics have been impacted by adverse reserve development, and continue to remain exposed to stock market volatility due to the group’s elevated common stock leverage.

HMIG’s neutral business profile reflects its position in a moderately diverse geographical market. Meanwhile, the group’s appropriate ERM assessment is supported by a formalized ERM framework that focuses on risk profile, tolerances, identification, capital management, and clearly defined roles and responsibilities.

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