A.M. Best Affirms Financial Strength Ratings and Downgrades Issuer Credit Ratings of United Fire & Casualty.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) of A (Excellent) of the property/casualty members of United Fire & Casualty Group (United Fire), which operate under a business pooling agreement. Additionally, A.M. Best has downgraded the issuer credit ratings (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) to "a" from "a+" of United Fire & Casualty Company (United Fire & Casualty) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : UFCS UFCS Underwater Fire Control System ) and the other property/casualty members of United Fire. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of "a-" of United Life Insurance Company (United Life). A.M. Best has also assigned an indicative rating of "bbb" to the preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. of United Fire & Casualty's recently filed shelf registration. All ratings have a stable outlook, and all companies are domiciled dom·i·cile n. 1. A residence; a home. 2. One's legal residence. v. dom·i·ciled, dom·i·cil·ing, dom·i·ciles v.tr. 1. in Cedar Rapids Cedar Rapids, city (1990 pop. 108,751), seat of Linn co., E central Iowa, on the Cedar River; inc. as a city 1856. The second largest city in Iowa, it is named for the surging rapids in the river. , IA. The above ratings are contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the successful completion of United Fire & Casualty's $100 million capital raising initiative announced today. Also, the stable outlook for all companies contemplates United Fire's estimated exposures to catastrophe losses, which are subject to upward revision in the near term based on modeling changes and assumed data inputs, remain within A.M. Best's projected ranges of possible outcomes. The ratings of United Fire reflect the group's adequate risk-adjusted capitalization, which includes consideration of substantially increased exposure to natural catastrophes looking forward; the potential for continued adverse development of its Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. losses; the additional $100 million of proceeds from the group's announced capital raise; and increased reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. protections. A.M. Best recognizes the magnitude of the group's reported Hurricane Katrina losses in 2005 and through the first quarter of 2006--$209 million pretax, net of reinsurance--primarily reflecting excessive insured exposure in Louisiana. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. of United Fire & Casualty's ICR largely reflects the group's passive risk management of this exposure. Furthermore, the potential exists for additional development of United Fire's Katrina losses as evidenced by the $31 million of development occurring in the first quarter of 2006, which partially represented additional filed claims. United Fire's ratings, however, also take into consideration the group's substantially improved underlying underwriting performance--excluding catastrophe losses--over the past several years, due in part to material favorable loss reserve development of non-catastrophe-related reserves. This improved underlying performance continued in the first quarter of 2006 as evidenced by the group's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). reported combined ratio of 65.6--excluding catastrophe losses, but again including material favorable development of non-catastrophe-related reserves. The group's earnings and capital are unburdened by financial leverage and cannot be under its current structure and regulatory constraints. United Fire remains exposed to hurricane and other weather-related losses, although management has taken determined steps to better manage this exposure. These steps include significantly increasing the group's catastrophe reinsurance protection from a limit of 95% of $115 million excess of $10 million in 2005 to an expected 95% of $170 million excess of $15 million in 2006. A.M. Best has stress-tested United Fire's risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. for the current uncertainties surrounding its catastrophe exposures. The ratings of United Life reflect its favorable operating results, growth of its ordinary life business and improvement in its risk-adjusted capital position. While A.M. Best believes that United Life is achieving its goal of diversifying its premium base, earnings are still primarily driven by its core annuity line of business, which leave the company exposed to interest rate risk and spread compression. In the near-term, A.M. Best will continue to monitor United Life's ability to achieve a balance in both improving the credit quality of its investment portfolio and maintaining adequate spreads on its annuity business. The FSR of A (Excellent) has been affirmed and the ICRs have been downgraded to "a" from "a+" for the following property/casualty members of United Fire & Casualty Group: --United Fire & Casualty Company --Lafayette Insurance Company --Addison Insurance Company --United Fire & Indemnity Company --United Fire Lloyds The FSR of A- (Excellent) and the ICR of "a-" have been affirmed for United Life Insurance Company. An indicative rating of "bbb" has been assigned to the preferred stock of United Fire & Casualty Company's recently filed shelf registration. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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