KBRA Assigns Rating to Providence Mutual Fire Insurance Company

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 nation’s fifth oldest insurance company in the United States and writes business in New England, New Jersey, and New York.

The rating of PMFIC reflects the company’ 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 deep local market knowledge. PMFIC’s surplus increased $11.1 million, or 11.1%, to $111.1 million at year-end 2021 and has grown 19.9% since 2016.

Management continues to prioritize the long-term financial strength of the enterprise, with catastrophe reinsurance covering close to a 250-year event. Including reinsurance and surplus, PMFIC could withstand an event in excess of a 500-year return period.

Tempering these strengths are PMFIC’s underwriting losses over the last five years, driven by poor automobile results, variable weather events, and an elevated expense ratio. In addition, the company maintains elevated equity leverage in its investment portfolio. At year-end 2021, approximately 32% of total investments were common stock and the ratio of equities to PHS was 52.3%. Further, the declining premium base has negatively affected the combined and expense ratios in recent years.

The Stable Outlook reflects KBRA’s expectation that PFMIC will maintain sound capitalization and preserve conservative underwriting leverage metrics, maintain an effective reinsurance program, and avoid significant coastal exposure growth. KBRA further expects PMFIC to maintain the fixed income investment portfolio’s high credit quality and not increase its allocation to equities.

Click here to view the report. To access ratings and relevant documents, click here.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization 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.

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