AMICA Mutual Gets AA+ Rating by S&P

Standard & Poor's this week assigned its double-'A'-plus financial strength ratings to Amica Mutual Insurance Co. (AMICA) and Amica Life Insurance Co. (ALIC). The ratings are based on the company's superior capital position, solid niche focus, and very strong profitability. Somewhat offsetting these strengths is the sustainability of the company's historical marketing approach and ability to generate good top-line growth and continued excellent profitability as the company enters new markets given the competitiveness of the market. ALIC's rating also reflects its importance to the organization as a whole in fulfilling AMICA's corporate mission.

Major rating factors include:

• Superior capitalization. Under Standard & Poor's capital model, AMICA produced a ratio in excess of 450% in 1997. Included in this ratio is the also-strong capital position of its life insurance subsidiary
• Excellent operating results. ROR has averaged an excellent 8.9 percent over the past five years. While management's goal is to manage the underlying operations to break-even, it is the investment income earned off its excess capital base that enables the company to produce such strong RORs
• Strong liquidity. Management's quality underwriting and astute claims management has resulted in consistently strong cash flow ratios with underwriting and total cash flow ratios averaging 118.6 percent and 109.8 percent, respectively, since 1993
• Prudent investment strategy. The company's bond portfolio consists of high quality fixed income securities and represent 60% of invested assets. Unaffiliated common stock holdings represent 35% of assets and 65% of surplus. Management's common stock investing philosophy is to provide a hedge against inflation in order to keep rates competitive, and
• Business review, while solid, may be challenged in the longer-term. Management has historically focused on the preferred segment in the personal lines market and has attracted its policyholders mainly through a referral program from other existing policyholders. This strategy has served the company well over the years and has created a loyal customer base with retention rates well into the 90% range. At the same time, the highly competitive personal lines market has increasingly put pressure on the company's primary policyholder-acquisition source and growth potential. The company has responded to this challenge by implementing related avenues for growth and adding a program to boost its traditional referrals. Standard & Poor's remains cautiously optimistic about the company's ability to sustain growth trends given the competitiveness of the personal lines market.

OUTLOOK: STABLE
Standard & Poor's expects:

• Business from newly-created joint ventures or its regional expansion will gradually add to both the top and bottom line
• Maintenance of excellent capitalization. While there may be some weakening as the company redeploys some of its excess capital to support growth initiatives, capital should remain a primary strength of AMICA, and
• ROR should remain in the 6%-8% range.