OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has affirmed the financial strength rating (FSR) of
A- (Excellent) and issuer credit ratings (ICR) of “a-” of Unitrin
Property and Casualty Insurance Group (Unitrin P&C) and its members.
A.M. Best also has affirmed the FSRs of A- (Excellent) and ICR of “a-”
of the life/health subsidiaries collectively referred to as Unitrin
Life & Health Group(Unitrin L&H) and the separately rated Reserve
National Insurance Company (Reserve National) (Oklahoma City, OK).
These companies are all subsidiaries of the publicly-traded parent, Unitrin,
Inc. (Unitrin) [NYSE: UTR].
Concurrently, A.M. Best has affirmed the ICR and senior debt ratings of
“bbb-” on unsecured senior notes and senior unsecured debt, as well as
“bb” on preferred stock of Unitrin, which is included in Unitrin’s
“automatic shelf” that expires November 2, 2013. The outlook for all the
above ratings is stable, except for the ratings of Reserve National,
which is negative. All companies are headquartered in Chicago, IL,
unless otherwise specified. (See link below for a detailed listing of
the companies and ratings.)
The affirmation of the ratings for Unitrin P&C reflects its adequate
risk-adjusted capitalization and balance sheet liquidity, historically
profitable earnings, diverse business profile, long-standing independent
agency relationships, the actions management has taken to improve
earnings, as well as Unitrin’s position as one of the 20 largest
personal lines writers in the United States. The ratings also
acknowledge excess capital within the organization and the added
financial flexibility of Unitrin to raise capital through equity or debt
offerings during favorable markets.
Partially offsetting these positive rating factors is Unitrin P&C’s
below average operating performance and elevated expense ratio,
challenging underwriting and investment markets, combined with above
average leverage ratios and negative operating cash flows each of the
last three years.
Unitrin P&C’s capitalization adequately supports its underwriting,
investment and business risks. Earnings generally have been favorable
over the last five years, despite underwriting losses from severe
weather-related events. Unitrin P&C maintains a diverse business profile
with a strong market presence, good geographic spread of risk,
multi-channel distribution and long-standing agency relationships. The
ratings and outlook also take into consideration actions by management
to improve earnings, the financial flexibility to raise capital through
equity or debt during favorable markets and excess capital within
Unitrin’s Fireside Bank, which is in run off and may be available if
needed.
The affirmation of the ratings for Unitrin L&H recognize its important
role within the Unitrin organization, strong niche presence in the home
service life insurance market, as well as its well established employee
agency field force and strong operating performance. The life/health
subsidiaries are among the market leaders in the mature home service
life insurance segment, predominantly marketing low face amount
permanent and term life policies. Unitrin L&H’s consolidated
risk-adjusted capitalization is enhanced by its strong profitability,
which historically has offset large dividend payments made to Unitrin.
With the absence of a net dividend to the parent in 2010, Unitrin L&H’s
year-end 2010 regulatory capital ratio is at its highest level in the
last five years. Furthermore, A.M. Best notes Unitrin L&H’s stable
liability structure relative to its life/annuity peers is facilitated by
sales of straightforward, lower risk product offerings through career
agents.
Partially offsetting these strengths is A.M. Best’s belief that Unitrin
L&H may be challenged to reverse declining organic premium growth trends
given its limited growth potential in the mature home service market.
A.M. Best also notes the continued high concentration of real estate and
Schedule BA assets—limited liability investment companies and limited
partnerships—relative to total capital that remain well above industry
averages.
In affirming the ratings of Reserve National, A.M. Best notes the
generally increasing net premium trends in its core individual accident
and health businesses, favorable operating performance and adequate
stand-alone risk-adjusted capitalization. The negative outlook
acknowledges A.M. Best’s view that Reserve National will be challenged
by the new health care reform landscape, which may hamper the company’s
ability to compete in its core markets as well as to maintain its
historically favorable operating performance.
The ratings of Unitrin are reflective of the financial strength of its
core insurance operations and the subordination of its senior most
creditors to the insurance companies’ policyholders. In addition, the
organization’s financial leverage and interest coverage are within
acceptable limits for its current ratings.
For a complete list of Unitrin, Inc. and its subsidiaries’ FSRs, ICRs
and debt ratings, please visit www.ambest.com/press/051306unitrin.pdf.
The principal methodology used in determining these ratings is Best’s
Credit Rating Methodology -- Global Life and Non-Life Insurance Edition,
which provides a comprehensive explanation of A.M. Best’s rating process
and highlights the different rating criteria employed. Additional key
criteria utilized include: “Risk Management and the Rating Process for
Insurance Companies”; “Understanding BCAR for Property/Casualty
Insurers”; “Understanding BCAR for Life and Health Insurers”; “A.M.
Best’s Liquidity Model For U.S. Life Insurers”; “Rating
Members of Insurance Groups”; and “A.M.
Best’s Ratings & the Treatment of Debt.” Methodologies can be
found at 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 © 2011 by A.M. Best Company, Inc.ALL RIGHTS
RESERVED.
Source: A.M. Best Co.
Contact:
A.M. Best Co.
Charles M. Huber
Senior
Financial Analyst
(908) 439-2200, ext. 5122
charles.huber@ambest.com
or
Rachelle
Morrow
Senior Manager, Public Relations
(908)
439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Joseph
Burtone
Assistant Vice President
(908) 439-2200,
ext. 5125
joseph.burtone@ambest.com
or
Jim
Peavy
Assistant Vice President, Public Relations
(908)
439-2200, ext. 5644
james.peavy@ambest.com