A.M. Best Affirms Ratings of Unitrin, Inc. and Its Subsidiaries
13 Mai 2011 - 9:00PM
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.
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