OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has revised the outlook to stable from negative and
affirmed the financial strength rating (FSR) of A (Excellent) and issuer
credit ratings (ICR) of “a” of the property/casualty subsidiaries of United
Fire Group, Inc. (UFG) (NASDAQ: UFCS) (collectively known as United
Fire), which operate under an inter-company pooling agreement led by United
Fireand Casualty Company. Concurrently, A.M. Best has affirmed the
ICR of “bbb” of UFG and revised the outlook to stable from negative.
At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and
ICR of “a-” of United Life Insurance Company (United Life), a
wholly owned subsidiary of UFG. The outlook for these ratings is stable.
All companies are domiciled in Cedar Rapids, IA. (See below for a
detailed listing of the companies and ratings.)
The ratings of United Fire reflect its solid risk-adjusted
capitalization, diversified commercial product offerings, historically
favorable core reserve levels and the financial flexibility afforded by
UFG. United Fire’s ratings also reflect the continued advantages of its
long-standing agency relationships and solid regional franchise, which
was enhanced by the acquisition of Mercer Insurance Group, Inc. and its
property/casualty insurance subsidiaries (Mercer) in March 2011. In
addition, underwriting results improved in 2012 and through the first
quarter of 2013 as a result of rate revisions, less catastrophic and
large loss activity and an increase in favorable prior year loss reserve
development.
These positive rating factors are partially offset by the variability in
United Fire’s underwriting and operating results in recent years, driven
by adverse loss reserve development from Hurricane Katrina-related
claims (in 2008 and 2009), catastrophe and weather-related losses (in
2008 and 2011) and the continuing challenging conditions in the
organization’s key target markets.
The rating of UFG recognizes the capital strength of its insurance
subsidiaries and the fact that all outstanding debt was repaid during
2012.
While A.M. Best believes UFG and United Fire’s ratings are well
positioned at their current levels, factors that may lead to negative
rating actions include a trend of deteriorating underwriting and
operating performance to a level below peers or an erosion of surplus
that causes a decline in risk-adjusted capital to a level that no longer
supports the current ratings.
The ratings of United Life acknowledge its solid level of risk-adjusted
capitalization, consistently positive operating results and improved
growth trends in life insurance premiums. These positive rating factors
are partially offset by United Life’s continued exposure to spread
compression as a majority of its product reserves are still concentrated
in interest-sensitive annuity and life products with high guarantee
rates. A.M. Best will continue to monitor the company’s ability to
improve profitability by effectively managing crediting rates for
existing and new annuity business while growing its ordinary life
insurance sales.
A.M. Best believes United Life is well positioned at its current rating
level. Future negative rating actions could occur should United Life
experience a material decline in capitalization, sizeable deterioration
in operating results or an adverse change to its strategic value to its
parent company.
The FSR of A (Excellent) and ICRs of “a” have been affirmed for United
Fireand Casualty Company and its following property/casualty
subsidiaries:
- Lafayette Insurance Company
- Addison Insurance Company
- United Fire & Indemnity Company
- United Fire Lloyds
- Mercer Insurance Company
- Financial Pacific Insurance Company
- Mercer Insurance Company of New Jersey, Inc.
- Franklin Insurance Company
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc.ALL RIGHTS
RESERVED.
A.M. Best Co.
Michael Russo, 908-439-2200, ext. 5372
Senior
Financial Analyst
michael.russo@ambest.com
or
Michael
Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice
President
michael.lagomarsino@ambest.com
or
Rachelle
Morrow, 908-439-2200, ext. 5378
Senior Manager, Public
Relations
rachelle.morrow@ambest.com
or
Jim
Peavy, 908-439-2200, ext. 5644
Assistant Vice President,
Public Relations
james.peavy@ambest.com
Source: A.M. Best Co.