Ratings agency AM Best has revised the outlook to negative from stable for the members of the NJM Insurance Group (NJM) for the Long-Term Issuer Credit Ratings and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of “aa” (Superior). The outlook of the FSR is stable.
AM Best cited concerns over NJM’s rising loss costs coupled with the mutual insurer’s continued dividend payments.
The members of NJM include New Jersey Manufacturers Insurance Co., New Jersey Re-Insurance Co., New Jersey Indemnity Insurance Co. and New Jersey Casualty Insurance Co. All companies are domiciled in West Trenton.
AM Best explained that 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, AM Best said 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, AM Best added, 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 nine 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. But AM Best warned that in the absence of improvement in both pre- and post-dividend operating performance, a downgrade of the Long-Term ICR is likely.
The Credit 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).
AM Best said 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.
NJM writes personal lines direct and partners with independent agents on commercial lines.
In March NJM announced that President and Chief Executive Officer Mitch Livingston will retire on July 31, after 19 years at the company, including the past seven as its leader. The company’s board of directors has selected Carol Voorhees, NJM’s executive vice president and chief operating officer, to succeed Livingston.
Source: AM Best
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