New Jersey Manufacturers Insurance Company’s stellar financial strength rating has been downgraded a notch by A.M. Best, based on concerns about its underwriting and operating performance.

The workers compensation and commercial auto insurer now has a financial strength rating of A+. That is “Superior” in A.M. Best’s book, but the rating had been A++. As well, NJM’s issuer credit ratings are now “aa,” down from aa+.

At the same time, A.M. Best revised its outlook for the financial strength rating to stable from negative, though the outlook for its issuer credit ratings remains negative.

Why the change? A.M. Best essentially said that the insurer has not been meeting expectations that come with the ratings entity’s top ranking.

The downgrade, A.M. Best said, reflects “the group’s overall underwriting and operating performance, which has not been commensurate with A.M. Best’s expectations for its highest rating level.”

A.M. Best acknowledged that the insurer has seen operating results develop more favorably due to “several initiatives and benign weather,” following “adverse results” stemming from weather-related events in 2011 and 2012. But that isn’t enough, A.M. Best added, because “local competitive market pressures and ongoing susceptibility to severe weather-related events due to its significant presence in New Jersey make it unlikely that prospective results will return to levels” that warrant the highest rating level.

Alongside the ratings downgrade, A.M. Best affirmed the financial strength rating of A+ and the issuer credit rating of “aa-” of NJM’s wholly owned subsidiary, New Jersey Re-Insurance Company. As well, A.M. Best affirmed the financial strength rating of A (Excellent), and the issuer credit ratings of “a” for NJM’s other subsidiary companies – New Jersey Casualty Insurance Company and New Jersey Indemnity Insurance Company.

For those ratings, the outlook is stable.

New Jersey Manufacturers Insurance Company has been around since 1913. NJM operates in New Jersey and Pennsylvania.

Source: A.M. Best