Insurance company

KBRA assigns rating to Providence Mutual Fire Insurance Company

NEW YORK–(BUSINESS WIRE)–KBRA assigns an A- insurance financial strength rating (IFSR) to Providence Mutual Fire Insurance Company (PMFIC). The outlook for the rating is stable.

PMFIC is a property and casualty insurance company domiciled in Rhode Island. PMFIC is the country’s fifth oldest insurance company in the United States and underwrites policies in New England, New Jersey and New York.

PMFIC’s rating reflects the company’s strong risk-adjusted capitalization, driven by low underwriting leverage, consistent investment income and a strong catastrophe reinsurance program. In addition, the company benefits from long-standing agency relationships and a management team with in-depth knowledge of the local market. The PMFIC surplus increased by $11.1 million, or 11.1%, to reach $111.1 million at the end of 2021 and increased by 19.9% ​​since 2016.

Management continues to prioritize the company’s long-term financial strength, with catastrophe reinsurance covering nearly 250 years. Including reinsurance and surplus, the PMFIC could withstand an event beyond a 500-year return period.

These strengths are mitigated by PMFIC’s underwriting losses over the past five years, driven by poor automotive results, variable weather events and a high expense ratio. Additionally, the company maintains high financial leverage in its investment portfolio. At the end of 2021, approximately 32% of total investments were in common stocks and the equity/PHS ratio was 52.3%. In addition, the decline in the premium base has negatively impacted the combined and expense ratios in recent years.

The stable outlook reflects KBRA’s expectation that PFMIC will maintain strong capitalization and preserve conservative underwriting leverage parameters, maintain an effective reinsurance program and avoid significant growth in coastal exposure. KBRA further expects PMFIC to maintain the high credit quality of the fixed income investment portfolio and not increase its equity allocation.

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Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the United States Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a rating agency with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a rating agency with the UK Financial Conduct Authority under the temporary registration scheme. In addition, KBRA is designated as the Designated Rating Agency by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider.