AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of Electric Insurance Company (EIC) (Beverly, MA). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EIC’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
EIC’s balance sheet strength is supported by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), conservative reserving approach with consistent favorable calendar and accident year development, and consistent level of investment income. EIC’s adequate operating performance reflects the company’s profitable results in each year through the past decade with its underwriting volatility absorbed through the company’s investment performance, and favorable expense management via low acquisition costs. The property/casualty company provides commercial lines coverage to General Electric Company (GE), the parent company, and personal lines coverage to GE’s current and former employees, as well as to the general public. As GE’s divestiture activity caused EIC’s premium and reserve levels to decline in prior years, the downtrend in premium reversed with earned premium increasing by 13% in 2022.
Partially offsetting these positive rating factors is the limitation on EIC’s commercial lines business with having GE as its sole policyholder. However, most of the company’s commercial lines are priced retrospectively, contributing to reduced risk and steady earnings. While retrospective pricing features in commercial policies can limit the earnings potential of an insurance company, it also can protect a company from excessive loss by allowing it to charge back losses through premium adjustments. Although EIC’s largest line of business is workers’ compensation, it has limited exposure to terrorism. The company also has returned significant amounts of capital in the form of stockholder dividends to its parent. AM Best has monitored closely the dividends to the parent and declining surplus levels and has not seen any material weakening to the company’s BCAR scores as a result of this activity.
In November 2021, GE announced its plans to split into three companies focused on health care, energy and aviation. The GE Healthcare spinoff has been completed effective first quarter of 2023, with the GE Vernova (energy) spinoff expected to be completed in early 2024. In early 2023, GE disclosed that EIC was held for sale and expects the sale to be completed in first half of 2024. As the sale is pending, EIC continues to remain focused on supporting GE’s businesses for GE Vernova and GE Aerospace (aviation), while further developing its successful personal lines business.
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