AM Best Downgrades Credit Ratings of United Fire Group, Inc. and Its Property/Casualty Subsidiaries
August 18 2023 - 3:16PM
Business Wire
AM Best has downgraded the Financial Strength Rating
(FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer
Credit Ratings (Long-Term ICR) to “a-” (Excellent) from “a”
(Excellent) of the property/casualty (P/C) subsidiaries of United
Fire Group, Inc. (UFG) [NASDAQ: UFCS] (collectively known as United
Fire & Casualty Group), which operate under an intercompany
pooling agreement led by United Fire & Casualty Company.
Concurrently, AM Best has downgraded the Long-Term ICR to “bbb-”
(Good) from “bbb” (Good) of UFG. The outlook of these Credit
Ratings (ratings) has been revised to stable from negative. All
companies are headquartered in Cedar Rapids, IA. (See below for a
detailed listing of the companies and ratings.)
The ratings reflect United Fire & Casualty Group’s balance
sheet strength, which AM Best assesses as very strong, as well as
its marginal operating performance, neutral business profile and
appropriate enterprise risk management.
The stable outlooks reflect AM Best’s expectation of
stabilization in United Fire & Casualty Group’s operating
performance and balance sheet fundamentals over the intermediate
term given management’s initiatives intended to improve operating
performance.
The rating downgrades were driven by the downturn in the group’s
operating performance through June 30, 2023, which included $53.0
million in reserve strengthening across multiple casualty lines and
across multiple accident years, elevated catastrophe losses, a
small number of large surety losses, and the impact of surety
reinsurance reinstatement premiums.
The ratings also consider the group’s diversified product
offerings, long-standing agency relationships, solid regional
franchise and the financial flexibility afforded by UFG. These
positive rating factors are offset partially by the competitive
market conditions and resulting adverse reserve development,
particularly in its other liability line of business, product
liability and commercial auto occurring during the second quarter
of 2023. In addition, the group maintains exposure to potential
catastrophe and weather-related losses. The Long-Term ICR of UFG
recognizes the capital strength of its operating subsidiaries.
The FSR has been downgraded to A- (Excellent) from A (Excellent)
and the Long-Term ICRs downgraded to “a-” (Excellent) from “a”
(Excellent) with outlooks revised to stable from negative of United
Fire & Casualty Company and its following P/C 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 AM 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 AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of
Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2023 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Gordon McLean Senior Financial Analyst +1 908 882
2109 gordon.mclean@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Raymond Thomson Associate Director +1 908 882
2394 raymond.thomson@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com
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