A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of United Fire & Casualty Group (United Fire) and its members, including the publicly traded company, United Fire & Casualty Company (UFCS) [NASDAQ: UFCS]. The outlook for these ratings is negative.
Concurrently, A.M. Best has removed from under review with negative implications, assigned a negative outlook and affirmed the FSR of A (Excellent) and ICR of “a” of Mercer Insurance Group (Mercer) (headquartered in Pennington, NJ) and its members. Mercer’s parent, Mercer Insurance Group, Inc. (MIG), was acquired by UFCS on March 28, 2011. In conjunction with these actions, A.M. Best also has withdrawn the ICR of “bbb” of MIG.
At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of United Life Insurance Company, (United Life) a subsidiary of UFCS. The outlook for these ratings is stable. All companies are domiciled in Cedar Rapids, IA, except where specified. (See below for a detailed listing of the companies and ratings.)
The ratings of United Fire reflect its solid risk-adjusted capitalization and improved underwriting and operating results in 2010. The ratings consider United Fire’s diversified commercial product offerings, historically favorable core reserve levels and the financial flexibility afforded by UFCS. At March 31, 2011, UFCS maintained modest consolidated debt-to-total capital and solid interest coverage ratios that were well within A.M. Best’s guidelines for its given ratings.These positive rating factors are partially offset by United Fire’s underwriting and operating losses in 2008 and 2009, which were driven by adverse reserve development of Katrina-related claims, continued exposure to hurricane and other weather-related catastrophe losses, areas of modest adverse reserve development and continuing challenging conditions in its key target markets.
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