The affirmation of the ratings for Unitrin L&H recognize its important role within the Unitrin organization, strong niche presence in the home service life insurance market, as well as its well established employee agency field force and strong operating performance. The life/health subsidiaries are among the market leaders in the mature home service life insurance segment, predominantly marketing low face amount permanent and term life policies. Unitrin L&H’s consolidated risk-adjusted capitalization is enhanced by its strong profitability, which historically has offset large dividend payments made to Unitrin. With the absence of a net dividend to the parent in 2010, Unitrin L&H’s year-end 2010 regulatory capital ratio is at its highest level in the last five years. Furthermore, A.M. Best notes Unitrin L&H’s stable liability structure relative to its life/annuity peers is facilitated by sales of straightforward, lower risk product offerings through career agents.Partially offsetting these strengths is A.M. Best’s belief that Unitrin L&H may be challenged to reverse declining organic premium growth trends given its limited growth potential in the mature home service market. A.M. Best also notes the continued high concentration of real estate and Schedule BA assets—limited liability investment companies and limited partnerships—relative to total capital that remain well above industry averages. In affirming the ratings of Reserve National, A.M. Best notes the generally increasing net premium trends in its core individual accident and health businesses, favorable operating performance and adequate stand-alone risk-adjusted capitalization. The negative outlook acknowledges A.M. Best’s view that Reserve National will be challenged by the new health care reform landscape, which may hamper the company’s ability to compete in its core markets as well as to maintain its historically favorable operating performance. The ratings of Unitrin are reflective of the financial strength of its core insurance operations and the subordination of its senior most creditors to the insurance companies’ policyholders. In addition, the organization’s financial leverage and interest coverage are within acceptable limits for its current ratings.
For a complete list of Unitrin, Inc. and its subsidiaries’ FSRs, ICRs and debt ratings, please visit www.ambest.com/press/051306unitrin.pdf.The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition , which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding BCAR for Life and Health Insurers”; “A.M. Best’s Liquidity Model For U.S. Life Insurers”; “ Rating Members of Insurance Groups”; and “ A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.