Insurance rating firm AM Best has revised the outlooks to negative from stable and affirmed the superior credit ratings of Amica Mutual Insurance Co. and its subsidiary, Amica Property and Casualty Insurance Co.

The companies’ Financial Strength Rating (FSR) of “A+” (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” (Superior) have been affirmed.

At the same time, AM Best has revised the outlooks to negative from stable and affirmed the FSR of “A+” (Superior) and the Long-Term ICR of “aa-” (Superior) of Amica Life Insurance Co., a wholly owned subsidiary of Amica Mutual.

All companies are domiciled in Lincoln, R.I.

According to AM Best, the credit ratings reflect Amica Mutual Group’s 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).

The ratings of Amica Life reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM.

AM Best said the negative outlooks for Amica Mutual Group reflect the decline in its balance sheet strength, specifically a deterioration in risk-adjusted capitalization in recent years. Increased loss costs in both the auto and homeowners line of business have driven substantial underwriting losses in 2022 and 2023, which has significantly impacted the group’s surplus position and overall liquidity. Nonetheless, the group’s liquidity profile remains supported by Federal Home Loan Bank borrowing capacity, reinsurance and portfolio cash flow.

Additionally, AM Best notes, Amica Mutual Group’s results rely heavily on net investment income and realized capital gains, which have contributed collectively to positive net earnings in most years. However, this benefit was muted in 2022 and 2023 due to the turbulent investment markets and rapid increases in interest rates, which caused underwriting losses to outpace investment earnings.

AM Best notes that Amica has implemented multiple strategic initiatives, which are expected to correct performance gradually. These include substantial rate increases in both the auto and homeowners line of business, as well as a renewed focus on profitable geographic areas and reducing dividends. “While this is expected to improve the group’s operating performance in the more near term, it is not expected to replenish its loss of surplus within that same time frame,” AM Best commented.

The negative outlooks further reflect the potential for continued capital erosion as management’s strategic action plan comes to fruition, AM Best said..

The negative outlooks for Amica Life follow that of Amica Mutual and reflect the potential removal of rating enhancement provided by the property/casualty parent. “Given the strong parental support that includes continuous capital contributions, ample liquidity access and the sharing of brand names and consumer base, Amica Life benefits from its relationship with its parent,” the ratings firm stated.

Source: AM Best