NJM Insurance Gets Highest A.M. Best Ratings

NJM Insurance Gets Highest A.M. Best Ratings

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

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

A.M. Best listed a number of reasons for upgrading NJM Insurance's already high ratings?superior capitalization, strong operating performance and dominant local-market presence?all of which partially compensated for the company's regional concentration and thus vulnerability to local volatilities in the New Jersey area.

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

Best said NJM Insurance's management team displayed sound operating fundamentals?and that these are reflected in the company's moderate underwriting leverage, conservative investment risk and prudent loss-reserving practices. Furthermore, the insurers' direct-marketing approach and efficient cost structure have been producing one of the lowest underwriting expense ratios in the industry.

NJM Insurance's commanding market position in New Jersey, Best also commented, is enhanced by the company's extensive workers' compensation managed-care capabilities, its own preferred provider network, strong business persistency and reputation for providing quality service.

However, Best also noted a few areas that could potentially concern the ratings agency. A.M. Best said NJM Insurance, a regional 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 difficult operating environment in New Jersey, although the state lawmakers have recently passed legislation to help boost capacity in the state's personal auto market, promote competition, reduce fraud and lower the number of uninsured motorists.

Another area A.M. Best commented on is the company's dividend-payment practice. The ratings agency said the company's underwriting results have been tempered by large discretionary policyholder dividend payments, which over the last five years have added some 20 points annually to the combined ratio. However, Best said these policyholder's dividend payments have also helped enhance customer loyalty, creating superior business persistency and strong overall operating performance.