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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 05, 2016 02:34 PM (EDT)
A.M. Best has removed from under review with developing implications and upgraded the financial strength rating to A+ (Superior) from A (Excellent) and the issuer credit rating to “aa-” from “a+” of Rural Community Insurance Company (RCIC) (Anoka, MN). The outlook assigned to each rating is negative.
On Dec. 21, 2015, the ratings of RCIC were placed under review following the announcement that RCIC’s parent, Wells Fargo & Company (Wells Fargo) [NYSE: WFC] had entered into a definitive agreement with Zurich Insurance Group Ltd (Zurich), under which Zurich, through its U.S. non-life subsidiary, Zurich American Insurance Company, would acquire all outstanding shares of RCIC and its immediate parent company, Rural Community Insurance Agency, Inc. This transaction closed March 31, 2016.
The rating actions reflect A.M. Best’s expectation that RCIC will benefit from its new position as a member of Zurich, a large globally diversified insurance group that will ultimately provide RCIC with significant reinsurance support, eventual operating efficiencies and strong financial flexibility. This transaction is expected to strengthen Zurich’s earnings and enhance the diversification of its General Insurance portfolio; however, the negative outlook reflects the profitability issues affecting Zurich’s General Insurance segment and the expectation that Zurich will be challenged to implement the remedial actions necessary to support near-term improvements of this existing General Insurance business. This segment represents two-thirds of Zurich’s insurance portfolio.
RCIC currently benefits from favorable risk-adjusted capital levels, historically profitable operating performance and a leading market position within the multi-peril crop insurance market. Somewhat offsetting these positive factors are the highly specialized and concentrated nature of RCIC’s business. which exposes it to potential underwriting volatility caused by severe weather events, changing marketplace conditions and changes in federal legislation.
This press release relates to rating(s) 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.
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