AM Best Affirms Credit Ratings of Pie Insurance and Pie Casualty
AM Best has officially removed Pie Insurance Group from its previous under-review status, which carried negative implications, and has reaffirmed the Financial Strength Rating (FSR) of A- (Excellent) along with the Long-Term Issuer Credit Rating (ICR) of “a-” (Excellent). This decision applies to The Pie Insurance Company, based in Columbus, Ohio, as well as its pooled affiliate, Pie Casualty Insurance Company, headquartered in Chicago, Illinois. Together, these entities are collectively referred to as Pie Insurance Group (Pie). The credit ratings (ratings) now have a stable outlook, indicating confidence in Pie’s current financial stability and operational strategies moving forward.
The ratings assigned by AM Best take into account Pie’s financial standing, which is assessed as very strong. Additionally, AM Best recognizes the company’s adequate operating performance, limited business profile, and appropriate enterprise risk management (ERM) framework. These factors collectively contribute to Pie’s ability to maintain its rating at an excellent level.
Background on the Ratings Review and Removal of Negative Implications
The ratings were initially placed under review with negative implications on March 8, 2024. This decision stemmed from Pie’s financial performance in 2023, during which the company experienced substantial underwriting losses. These losses were primarily attributed to adverse reserve development within its New York book of business. Such losses raised concerns regarding the company’s overall financial health and its ability to manage long-term risk exposure effectively.
However, since the third quarter of 2023, Pie has taken significant steps to stabilize its reserves. Management implemented strategic measures to mitigate risk and strengthen the company’s financial position. One of the most impactful steps was the commutation of reserves, which substantially reduced Pie’s exposure to lingering underwriting losses. By commutating these reserves, Pie has significantly de-risked its balance sheet, allowing for a more stable and predictable financial outlook.
Following a thorough review, AM Best has determined that the impact of these corrective measures has been positive, leading to the removal of the negative implications status. The agency has now completed its assessment of Pie’s risk-adjusted capitalization in light of the commutation, ultimately concluding that the company’s financial standing is sound. As a result, Pie’s ratings have been reaffirmed with a stable outlook.
Key Factors Influencing AM Best’s Decision
One of the key considerations in AM Best’s decision was the improvement in Pie’s risk-adjusted capitalization. According to AM Best’s Best Capital Adequacy Ratio (BCAR), Pie’s capitalization at the end of 2024 was at the strongest level. Furthermore, AM Best expects this capitalization level to remain robust over the next several years. This assessment provides a strong foundation for Pie’s financial strength and enhances its ability to meet ongoing obligations.
Another critical factor is Pie’s liquidity position. The company has maintained sufficient levels of liquidity at the consolidated level, ensuring it has the necessary financial resources to manage claims, operational costs, and strategic investments effectively. AM Best expects that Pie will continue to demonstrate solid liquidity management in the near and midterm, further strengthening its financial foundation.
Additionally, Pie has successfully returned to profitability in the 2024 fiscal year. Achieving profitability marks a significant milestone for the company, as it underscores the effectiveness of its strategic initiatives and operational adjustments. Looking ahead, Pie anticipates sustained profitability in the coming years, which will further reinforce its financial stability and ability to grow in a competitive insurance market.
Considerations for the Future
While Pie has made considerable progress, AM Best acknowledges that execution risks remain, particularly for startup organizations in the insurance sector. As a relatively young company, Pie faces the challenge of consistently executing its business plan while navigating evolving market conditions. Effective risk management and continued operational discipline will be essential to sustaining its current momentum.
AM Best will continue to monitor Pie’s financial performance closely, evaluating its actual results relative to its strategic projections. This ongoing oversight will help ensure that Pie remains on track with its long-term objectives while maintaining the financial strength necessary to support its policyholders.
Stable Outlook and Final Considerations
The stable outlook assigned to Pie Insurance Group reflects AM Best’s confidence that the company will maintain its strong balance sheet strength assessment. This confidence is supported by the expectation that Pie will uphold its strongest level of risk-adjusted capitalization, continue to demonstrate sufficient capitalization and liquidity, and achieve its operating performance targets.
The reaffirmation of Pie’s ratings serves as a testament to the company’s resilience and ability to address financial challenges effectively. By implementing strategic measures to derisk its balance sheet and enhance its financial stability, Pie has positioned itself for sustained success in the insurance industry. As it moves forward, maintaining disciplined risk management and executing its business plan with precision will be critical to reinforcing its market position and financial health.
Overall, the removal of Pie’s negative implications status marks a positive development, signaling that the company has successfully navigated past financial difficulties and is now on a more stable trajectory. With a solid balance sheet, strong capitalization levels, and a clear path to continued profitability, Pie Insurance Group is well-positioned to capitalize on future growth opportunities in the insurance market.
