OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Besthas 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 & Casualty Group),
which operate under an inter-company pooling agreement led by United
Fire & Casualty Company. Concurrently, A.M. Best has affirmed
the ICR of “bbb” of UFG.
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 all ratings is stable.
All companies are headquartered in Cedar Rapids, IA. (See below for a
detailed listing of the companies and ratings.)
The ratings of United Fire & Casualty Group reflect its solid
risk-adjusted capitalization, diversified commercial product offerings,
historically favorable core reserve levels and the financial flexibility
afforded by UFG. United Fire& Casualty Group’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. (Mercer) and its property/casualty insurance
subsidiaries in March 2011. In addition, underwriting results improved
substantially in 2013 as a result of rate revisions, less catastrophic
and large loss activity and continued favorable prior year loss reserve
development.
These positive rating factors are partially offset by the variability in
United Fire & Casualty Group’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 2011) and the continued challenging, albeit
improving, market conditions in the group’s core markets.
The ICR of UFG recognizes the capital strength of its subsidiaries and
the fact that it has no outstanding debt.
While A.M. Best believes UFG and United Fire& Casualty Group’s ratings
are well positioned at their current rating levels, factors that may
lead to negative rating actions include a trend of deteriorating
underwriting and operating performance to a level below its peers and/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 recognize its strong risk-adjusted
capitalization, the high creditworthiness of its invested assets and
continuing trend of positive operating results. These positive rating
factors are partially offset by United Life’s high concentration of
reserves in interest-sensitive products and spread compression as a
result of low interest rates and geographic concentration risk, as most
of United Life’s business is generated from the Midwestern region. A.M.
Best notes that United Life’s business profile is expected to improve
through its plans to expand into nine new states due to UFG’s
acquisition of Mercer. Additionally, A.M. Best expects that its annuity
spreads will gradually improve as multi-year annuities roll off and
renew at lower guaranteed rates.
Positive rating movement for United Life may occur if its role and value
to the UFG enterprise is enhanced. Factors that may result in negative
rating actions include a significant and/or sustained decline in
risk-adjusted capitalization, unfavorable trends in operating
performance, deterioration in the credit quality and value of its
investment portfolio or a change in its strategic role to UFG.
The FSR of A (Excellent) and ICRs of “a” have been affirmed for United
Fire & 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. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
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 © 2014 by A.M. Best Company, Inc.ALL RIGHTS
RESERVED.
A.M. Best
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