AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the property/casualty (P/C) subsidiaries of United Fire Group Inc. (UFG) [NASDAQ: UFCS] (collectively known as United Fire & Casualty Group), headquartered in Cedar Rapids, Iowa.
Concurrently, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb” of UFG.
AM Best said the ratings reflect United Fire & Casualty Group’s balance sheet strength, which is categorized as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The negative outlooks reflect the group’s downward trend in recent underwriting performance, stemming from numerous catastrophe events as well as reserve strengthening in the commercial auto liability line in 2019. While the group is executing on an enterprise-wide strategic plan to improve operational and financial performance, it faces execution risk due to competitive market conditions and ongoing exposure to catastrophe events, which also could potentially result in continued pressure on balance sheet fundamentals.
The ratings also reflect the group’s solid risk-adjusted capitalization, diversified product offerings, historically favorable core reserve levels, long-standing agency relationships, solid regional franchise and the financial flexibility afforded by UFG.
These positive rating factors are offset partially by the variability in United Fire & Casualty Group’s underwriting and operating results in recent years, driven primarily by continued challenging market conditions, particularly in its commercial auto liability line of business, and exposure to catastrophe and weather-related losses.
The Long-Term ICR of UFG recognizes the capital strength of its subsidiaries and that it has no outstanding debt.
The current rating actions cover United Fire & Casualty Co. and its following P/C subsidiaries:
- Lafayette Insurance Co.
- Addison Insurance Co.
- United Fire & Indemnity Co.
- United Fire Lloyds
- Mercer Insurance Co.
- Financial Pacific Insurance Co.
- Mercer Insurance Company of New Jersey Inc.
- Franklin Insurance Co.
- UFG Specialty Insurance Co.
Source: AM Best
Topics Trends Property Iowa Property Casualty Casualty
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