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AM Best upgrades Selective’s FSR rating to A+

Selective logo with Marchioni.jpg

AM Best has upgraded the financial strength rating (FSR) to A+ from A and the long-term issuer credit ratings (ICR) to aa- from a+ of a pool of Selective subsidiaries.

The ratings agency has also improved the long-term ICR of parent company Selective Insurance Group to a- from bbb+.

AM Best cited Selective’s strong balance sheet and operating performance as well as its adequate risk management as the reasons for the upgrade of the insurer’s ratings.

The agency revised all credit ratings outlook to "stable" from "positive".

Commenting on the decision, AM Best said Selective’s risk-adjusted capitalization is assessed at the strongest level and is offset partially by exposure to catastrophe losses and terrorism, while the upgrade reflects strong levels of profitability over the past five years.

“The group’s underwriting results have benefited from a low- to medium-hazard business mix, conservative underwriting philosophy and catastrophe risk mitigation initiatives,” AM Best said.

“The group has improved underwriting results in its more challenged commercial auto and excess and surplus books of business through various underwriting initiatives and targeted rate increases,” the ratings agency added.

In a statement to this publication provided by a spokesperson, Selective president and CEO John Marchioni hailed the upgrade, calling it "a testament to our strong strategic and financial position and ability to generate superior operating performance over time".

"We have built a truly unique franchise and culture that has helped us achieve this important milestone and is a testament to our employees and best-in-class distribution partners," he added.

During the third quarter of the year, Selective halved its underwriting income as a slowdown in favorable development and weaker underlying results outweighed a drop in cat claims.

The carrier’s Q3 underwriting profits decreased to $10.9mn from $21mn a year earlier, as weaker results in commercial lines outweighed underwriting improvements in personal lines and excess and surplus lines segments. The company has averaged a little more than a 94% combined ratio the last four years.

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