CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 21, 2002 12:00 AM (EST)
A.M. Best Co. has downgraded the financial strength ratings to A (Excellent) from A+ (Superior) of Unitrin Property and Casualty Insurance Group (Unitrin) (Dallas) and removed them from under review. A.M. Best has also affirmed the financial strength ratings of A (Excellent) for three life/health insurance companies and A-(Excellent) for two life/health insurance companies.
Additionally, A.M. Best has assigned an "a-" senior debt rating to Unitrin Corporation's existing debt securities and the following indicative ratings to the remaining $200 million under the company's $500 million shelf registration: senior debt "a-"; subordinate debt "bbb+" and preferred stock "bbb". The rating outlooks are stable. (Please see listing of companies below.)
The downgrade of the ratings reflect Unitrin's unfavorable operating earnings over recent years and decline in capitalization. Operating returns reflect rising underwriting losses across the group's core business segments, which are attributable to inadequate premium rates, increasing loss cost trends, weather-related losses, elevated expenses and adverse loss reserve development.
Further, Unitrin faces execution risk that reflects the renewal rights acquisition of Kemper Insurance Companies' personal lines business, which will add significant net written premium to the group's operations. However, this risk will be limited since Kemper's business will operate as a separate business segment, and the operational infrastructure was acquired in the transaction. Although capital has been re-allocated from the life/health subsidiaries to support the Kemper acquisition and to offset operating losses, capitalization is no longer supportive of a Superior rating. (For more information about the Kemper acquisition please refer to A.M. Best's press release on Unitrin dated April 15, 2002.)
Nevertheless, the Excellent ratings reflect Unitrin's solid capitalization and balanced book of business among personal and commercial lines. These positive rating factors are derived from a diversified product offering, strong regional market presence, long-standing independent agency relationships and prudent catastrophe exposure management. The ratings also acknowledge the group's actions to improve profitability, which have included implementing rate increases, geographically diversifying business and re-underwriting select books of business.
The ratings assigned to the life/health subsidiaries of Unitrin Inc. reflect their consistently profitable operating performance, adequate level of risk-adjusted capitalization and continuing premium growth. Partially offsetting these strengths is a significant reduction in the absolute capital and surplus funds due to stockholder dividends to reallocate capital in order to support the property/casualty operations.
The debt ratings reflect the attributes of the insurance subsidiaries and Unitrin's financial flexibility that is characterized by moderate financial leverage, favorable fixed-charge coverage and access to capital markets.
Further, A.M. Best has affirmed the financial strength ratings of the property/casualty affiliates of Unitrin Property and Casualty Insurance Group.
The financial strength ratings have been downgraded to A (Excellent) from A+ (Superior) for the following members of the Unitrin Property and Casualty Insurance Group:
- Trinity Universal Ins Co
- Alpha Property & Casualty Ins
- Charter County Mutual Ins Co
- Charter Indemnity Company
- Financial Indemnity Company
- Kemper Auto & Home Ins Co
- Kemper Independence Ins Co
- Milwaukee Casualty Ins Co
- Milwaukee Mutual Ins Co
- Milwaukee Safeguard Ins Co
- Security National Ins Co
- Trinity Lloyds Insurance Co
- Trinity Universal Ins Co KS
- Union National Fire Ins Co
- Unitrin Direct Insurance Co
- Valley Insurance Company
- Valley Property & Casualty Ins
The following financial strength ratings have been affirmed for these property/casualty affiliates of Unitrin Property and Casualty Insurance Group:
- Capital County Mutual Fire Insurance Company A (Excellent)
- Old Reliable Insurance Company A- (Excellent)
- United Casualty Insurance Company of America A (Excellent).
The following financial strength ratings have been affirmed for these life/health subsidiaries of Unitrin Property and Casualty Insurance Group:
- United Insurance Company of America A (Excellent)
- Union National Life Insurance Company A (Excellent)
- Reliable Life Insurance Company A (Excellent)
- NationalCare Insurance Company A- (Excellent)
- Reserve National Insurance Company A- (Excellent)
The following rating has been assigned to existing debt:
Unitrin, Inc.-
"a-"on $300 million 5.75% senior notes, due 2007
The following indicative ratings have been assigned:
Unitrin, Inc.-
- "a-" on senior debt
- "bbb+" on subordinated debt
- "bbb" on preferred stock
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.