NJM Insurance Gets Highest A.M. Best Ratings

NU Online News Service, April 6, 3:11 p.m.EDT?

The outlook for these newly upgraded ratings is "stable," theOldwick, N.J.-based ratings agency stated.

This decision by A.M. Best is significant because only a smallnumber of insurers are assigned these highest ratings: Only 6.7percent of Best-rated p-c insurers had this "A-double-plus" ratingas of July 2003, according to a Best spokesperson.

A.M. Best listed a number of reasons for upgrading NJMInsurance's already high ratings?superior capitalization, strongoperating performance and dominant local-market presence?all ofwhich partially compensated for the company's regionalconcentration and thus vulnerability to local volatilities in theNew Jersey area.

"We are happy?it's a recognition on the part of A.M. Best ofprinciples that have been the guiding forces of this company sinceits founding in 1913," said Eric Stenson, spokesman for NJMInsurance.

Best said NJM Insurance's management team displayed soundoperating fundamentals?and that these are reflected in thecompany's moderate underwriting leverage, conservative investmentrisk and prudent loss-reserving practices. Furthermore, theinsurers' direct-marketing approach and efficient cost structurehave been producing one of the lowest underwriting expense ratiosin the industry.

NJM Insurance's commanding market position in New Jersey, Bestalso commented, is enhanced by the company's extensive workers'compensation managed-care capabilities, its own preferred providernetwork, strong business persistency and reputation for providingquality service.

However, Best also noted a few areas that could potentiallyconcern the ratings agency. A.M. Best said NJM Insurance, aregional carrier, is exposed to risks from market volatility,legislative changes and judicial decisions in New Jersey.

The ratings agency said the company has been facing a difficultoperating environment in New Jersey, although the state lawmakershave recently passed legislation to help boost capacity in thestate's personal auto market, promote competition, reduce fraud andlower the number of uninsured motorists.

Another area A.M. Best commented on is the company'sdividend-payment practice. The ratings agency said the company'sunderwriting results have been tempered by large discretionarypolicyholder dividend payments, which over the last five years haveadded some 20 points annually to the combined ratio. However, Bestsaid these policyholder's dividend payments have also helpedenhance customer loyalty, creating superior business persistencyand strong overall operating performance.