AM Best Revises Issuer Credit Rating Outlook to Negative of Nazareth Mutual Insurance Company

AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Nazareth Mutual Insurance Company (Nazareth) (Nazareth, PA). The outlook of the FSR is stable.

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

The revised outlook of the Long-Term ICR to negative from stable reflects increased volatility in Nazareth’s operating results in recent years and continuing through third-quarter 2025. Operating performance has deviated from historical norms influenced by fire losses, weather-related events and inflationary pressures. While management continues to execute corrective actions including underwriting and pricing strategies, volatility of key performance metrics remains elevated. The outlook further considers the potential impacts regarding the shifting enterprise risk mitigation strategies, via changes in the reinsurance structures that have materially weakened risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) at 99.8% VaR.

The strong balance sheet assessment reflects Nazareth’s very strong risk-adjusted capitalization as measured by BCAR, although weakened from prior periods, mainly due to changes in the reinsurance structure in 2025, which followed modest surplus erosion and material growth in net written premium reported as of year-end 2024. The limited business profile reflects Nazareth's geographic concentration in rural Pennsylvania, which exposes earnings and surplus to weather-related events, regulatory risk and competitive market pressures. While ERM is viewed as appropriate for the company’s risk profile, which includes active monitoring of key risks and prudent reinsurance protection, concerns have been raised regarding the effectiveness of the program given the increased volatility in underwriting results in recent years and growing tail risk.

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.

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