AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of Safety Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company and Safety Northeast Insurance Company. Collectively, these companies are referred to as Safety Group (Safety). The outlook of the FSR is stable. At the same time, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb+” (Good) of Safety Insurance Group, Inc. (Delaware) [NASDAQ/GS: SAFT], the publicly traded parent of Safety. All companies are domiciled in Boston, MA, except where specified.

The Credit Ratings (ratings) reflect Safety’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The revision of the Long-Term ICR outlook to negative from stable reflects a material decline in Safety’s risk-adjusted capitalization trends, as measured by Best’s Capital Adequacy Ratio (BCAR), over the past two years. The erosion in policyholder surplus has been driven by an operating loss in 2023 following a decline in 2022 resulting from unrealized losses and dividend activity, including the holding company purchase of Safety Northeast Insurance Agency, Inc. Risk-adjusted capital also has been weakened by dividend payments, which have tempered surplus growth historically. The operating loss in 2023 was driven by severe weather in the first and fourth quarters compounded by inflationary pressures. Management continues to review rates and implement increases as needed to offset higher loss costs as well as continued refinement of risk selection near coastal areas to improve Safety’s weather resilience.

Going forward, Safety is expected to maintain capital levels sufficient to support its current ratings. However, negative rating action could occur if capitalization trends continue to weaken, and surplus levels are not supportive of the current balance sheet strength assessment.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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