An In-Depth Look at Selective Insurance’s A.M. Best Rating

Selective Insurance Company of America recently received an A.M. Best rating of A+ (Superior) with a stable outlook. This rating provides useful information for evaluating the financial strength and claims-paying ability of this insurance provider. In this comprehensive article, we will examine Selective’s A.M. Best rating in detail, including:

What is A.M. Best?

• A.M. Best Company is a global credit rating agency focused on the insurance industry. They research and evaluate the financial strength of insurance companies to provide guidance to consumers.

• A.M. Best issues independent opinions on insurers’ ability to meet policy and contract obligations. Their ratings are a trusted resource used worldwide.

• The A.M. Best rating is an important benchmark for consumers to evaluate an insurer’s financial strength and security before purchasing a policy. Higher rated companies generally have greater ability to pay claims.

Overview of Selective’s A.M. Best Rating

• Selective Insurance Company of America currently holds an A+ (Superior) rating from A.M. Best. This indicates the company has a superior ability to meet their ongoing insurance obligations.

• Selective has maintained its A+ rating continuously since 2005, demonstrating consistency in financial strength.

• The company has a stable outlook from A.M. Best, meaning the rating is unlikely to change in the near future.

What the A+ (Superior) Rating Means

• A.M. Best’s highest ratings category is Superior, ranging from A++ to A+. Selective’s A+ falls within this top tier.

• Superior rated insurers have an excellent ability to meet their financial obligations to policyholders. An A+ rating signals exceptional financial strength.

• Selective’s strong A.M. Best rating reflects prudent underwriting practices, a conservative investment strategy, and expertise in its niche commercial insurance markets.

• Companies need great financial stability to achieve an A+ rating. Selective has built sufficient capital adequacy and successfully managed risks over time.

Key Factors Behind Selective’s Rating

A.M. Best analyzes many quantitative and qualitative factors to determine ratings. Here are some of the core factors underlying Selective’s A+ assessment:

• Strong capital position: Selective maintains risk-adjusted capital well above required minimum levels, providing a cushion for absorbing potential losses.

• Steady operating performance: Selective has a track record of consistent operating earnings, despite challenging market conditions. This demonstrates stability.

• Conservative investment allocations: The company invests assets conservatively in high-quality fixed income securities. This reduces risk exposure.

• Experienced management team: Selective’s executives have extensive industry experience. Their expertise improves risk management and long-term stewardship.

• Niche market focus: Concentrating on commercial specialty insurance provides in-depth knowledge of target markets. This informs disciplined underwriting and pricing.

• Proactive claims handling: Selective works to mitigate claims through loss prevention, fraud investigation, and settlement negotiation. This controls costs.

Understanding the “Stable” Outlook

• Along with the rating, A.M. Best designates a rating outlook or implication as positive, negative, or stable.

• Selective’s stable outlook means A.M. Best feels the A+ rating is unlikely to change over the mid-term. Selective’s key rating factors are expected to remain steady.

• A stable outlook provides added assurance that Selective has the resources to maintain its strong financial footing in the future.

• If conditions improved, Selective could earn a positive outlook, signaling a potential upgrade. A negative outlook would mean a downgrade is possible. The stable outlook indicates continued A+ performance is anticipated.

Rating History and Recent Developments

• Selective Insurance has maintained its A+ rating continuously since 2005, underscoring its long-term financial stability.

• In November 2023, A.M. Best affirmed Selective’s rating and outlook, indicating no change in its positive assessment.

• Over the years, Selective’s strong risk management enabled it to navigate challenges like catastrophe claims, investment market volatility, and the COVID-19 pandemic without deterioration of its A+ rating.

• Key developments that supported the recent affirmation include strong operating earnings, maintenance of capital adequacy, and effective expense management.

Importance for Policyholders

Selective Insurance’s A.M. Best rating provides meaningful information for consumers:

• It indicates Selective has substantial financial resources to fulfill future claims obligations. Policyholders can have confidence in the company’s ability to pay out benefits.

• The consistent A+ rating over many years demonstrates staying power and reliability through varied economic conditions.

• An insurer’s financial strength is a crucial consideration when selecting coverage. Selective’s rating signals it has the long-term viability to deliver on promises made to customers.

• All insurance companies carry some risk. An A+ rating signifies Selective is among the most financially secure choices available.

• While not a guarantee, Selective’s positive A.M. Best assessment provides reasonable assurance of superior future financial performance.

Ratings From Other Agencies

In addition to A.M. Best, other major insurance rating agencies also assess Selective Insurance:

• Standard & Poor’s: AA- (Very Strong) with a stable outlook

• Moody’s: A1 (Good) with a stable outlook

• These corroborate Selective’s A.M. Best A+ rating, supporting the view it is a financially sturdy insurer. Multiple agency affirmation adds credibility.

• The variation across agencies reflects differences in rating methodologies. But the positive overall consensus bolsters the case for Selective’s strength.

Selective’s Financial Reports and Prospectus

Further insight into Selective’s financial position can be gained by examining primary sources:

• Annual and quarterly financial results shed light on profitability, reserves, investments, and other details. These filings are public as a stock insurer.

• The insurance prospectus outlines product offerings, pricing, underwriting guidelines, and risk factors. It provides another window into operations.

• While A.M. Best comprehensively analyzes insurers, reviewing financial filings can supplement understanding. The high A+ rating aligns with Selective’s published performance data.

• Strong A.M. Best ratings correlate with above-average policyowner satisfaction. Selective’s robust financials and customer service reinforce its positive reputation.

Comparison to Other Insurers

• Selective’s A+ rating is near the top of the industry, surpassed only by a small number of insurers rated A++. Most competitors have ratings in the A or B range.

• For consumers, it is helpful to compare A.M. Best ratings when evaluating insurance options. Selective generally ranks above competitors in financial strength assessments.

• Key peers like The Hartford and Travelers also maintain strong A+ ratings. Chubb and American Family have higher A++ ratings. But Selective matches or exceeds most insurers.

• Selective offers a positive mix of financial security, customer service, coverage options, and competitive pricing. Its A+ rating is a significant mark of quality.

The Bottom Line

Selective Insurance’s A+ (Superior) A.M. Best rating indicates it has substantial financial strength and claims-paying resources. Backed by factors like steady operating performance, conservative investments, and experienced management, Selective seems well-positioned to maintain its A+ rating into the future. This positive rating provides assurance to consumers that Selective has the staying power and financial stability to fulfill promises made to policyholders. When shopping for insurance coverage, Selective’s A+ assessment is a meaningful indicator that it is one of the most financially secure choices available in the industry.