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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 23, 2015 02:03 PM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of the property/casualty subsidiaries of United Fire Group, Inc. (UFG) [NASDAQ: UFCS] (collectively known as United Fire & Casualty Group), which operate under an inter-company pooling agreement led by United Fire & Casualty Company. Concurrently, A.M. Best has affirmed the ICR of "bbb" of UFG. In addition, A.M. Best has assigned a financial strength rating (FSR) of A (Excellent) and an issuer credit rating (ICR) of "a" for UFG Specialty Insurance Company (UFG Specialty). At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of "a-" of United Life Insurance Company (ULIC), a wholly-owned subsidiary of UFG. The outlook for all 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 two 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 and the continued challenging, albeit improving, market conditions in the group's core markets.
The ratings for UFG Specialty reflect the implicit support provided by United Fire & Casualty Company as a result of its full integration into the group's management and operations. UFG Specialty was activated in 2014 as the dedicated carrier for the group's excess and surplus lines admitted writings.
The 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 trend of deteriorating underwriting and operating performance to a level below its peers and/or an erosion of surplus that causes a decline in risk-adjusted capital to a level that no longer supports the current ratings.
The ratings of ULIC reflect its strong risk-adjusted capitalization, improved first-year premium growth within ordinary life and the high credit quality of its investment portfolio. Partially offsetting these strengths include a decline in earnings over the five-year period due to new business strain and ongoing spread compression given its high proportion of interest rate sensitive reserves along with some geographic and distributor concentration risk.
Positive rating movement for ULIC is unlikely in the near term. Factors that may result in a negative rating action include a continued material decline in operating performance and/or a significant decline in risk-adjusted capitalization.
The FSR of A (Excellent) and the ICRs of "a" have been affirmed and/or assigned for United Fire & Casualty Company and its following property/casualty subsidiaries:
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
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 visit A.M. Best's Ratings & Criteria Center .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.