OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the property/casualty subsidiaries of United Fire Group, Inc. (UFG) [NASDAQ: UFCS] (collectively known as United Fire & Casualty Group), which operates under an inter-company pooling agreement led by United Fire & Casualty Company. Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb” of UFG. At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of United Life Insurance Company (ULIC), a wholly owned subsidiary of United Fire & Casualty Company, which is a wholly owned subsidiary of UFG. The outlook of these Credit Ratings (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, long-standing agency relationships, solid regional franchise and the financial flexibility afforded by UFG. In addition, underwriting results have improved over the past three years 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 mainly by catastrophe and weather-related losses, as seen in the first half of 2016, and the continued challenging, albeit improving, market conditions in the group’s core markets.
The Long-Term 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 severe reduction in the profitability of its core operating entities' core books of business, material losses in the risk-adjusted capitalization of the operating units, a severe and sustained reduction in the profitability of the group’s investment portfolio, or acute deterioration of the group’s reserves effecting surplus. The inverse is also true if the group were to continue to sustain consistent profitable results that add to surplus and outperforms its peers.
The ratings of ULIC are based on its strategic importance in marketing life insurance and fixed annuities to UFG, its property/casualty parent, more-than-adequate risk-adjusted capitalization, and positive ordinary life sales trends. Partially offsetting these rating factors include declining earnings trends resulting in weaker return ratios, high allocation to, albeit declining, interest-sensitive liabilities, and regional business profile.
Positive rating actions may occur if there is a positive rating action at the parent company. Negative rating actions may occur if ULIC does not meet A.M. Best’s expectations, or if there is a significant decline in risk-adjusted capitalization due to continued trends in operating results or material dividends taken out of the company.
The FSR of A (Excellent) and the Long-Term 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
- UFG Specialty Insurance Company
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160915006015/en/
