A.M. Best Affirms Financial Strength and Debt Ratings of United Fire & Casualty; Revising Outlook to Stable.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--March 3, 2004 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of A (Excellent) of the members of United Fire & Casualty Group (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), which operate under a business pooling arrangement. Concurrently, A.M. Best has affirmed the debt rating of "bbb" on the $69 million 6.375% convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". of United Fire & Casualty Company (Texas) (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 ) due 2014. All the rating outlooks have been changed to stable from negative. The financial strength rating affirmation A solemn and formal declaration of the truth of a statement, such as an Affidavit or the actual or prospective testimony of a witness or a party that takes the place of an oath. An affirmation is also used when a person cannot take an oath because of religious convictions. is based on the group's strong risk-adjusted capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. , favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results, as well as good overall liquidity position and diversified product offerings. The rating is supported by the group's $69 million convertible preferred stock issuance of May 6, 2002, various initiatives taken by management to further improve profitability and the continued advantages to be gained from the group's longstanding agency relationships and solid regional franchise. Corrective underwriting actions taken over the last three years include rate increases, consolidation of regional offices, as well as the elimination of unprofitable lines of business and agencies, limiting coverage for potential mold exposure under its homeowners' policies and reducing exposure to construction defect claims in its commercial lines of business. Furthermore, the group's business mix is shifting to more liability- related lines of business, which should lower its exposure to weather-related and catastrophe losses. Offsetting these positive rating factors are the group's below average operating results in earlier years, high expense structure and exposure to weather-related and catastrophe losses. The group's operating results have been negatively impacted by the integration of American Indemnity--which historically had poor operating results--weather-related losses and catastrophes particularly in the Midwest and South and competitive market conditions, which had been prevalent throughout the commercial lines sector in prior years. Also, growth in surplus has been influenced by the payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. of shareholder dividends as well as unrealized capital losses in its equity portfolio in prior years. Given the group's recent improvement in operating profitability resulting from re-underwriting initiatives implemented by management, conservative loss reserve practices and adequate risk-adjusted capitalization, A.M. Best revised the rating outlook to stable. Going forward, it is A.M. Best's expectation that the group will continue to maintain its current level of operating profitability at least through 2004. The financial strength rating of A (Excellent) has been affirmed for the following members of United Fire & Casualty Group: -- United Fire & Casualty Company -- Lafayette Insurance Company -- Addison Insurance Company -- United Fire & Indemnity Company -- United Fire Lloyds The following debt rating has been affirmed: United Fire & Casualty Company-- -- "bbb" on $69 million 6.375% convertible preferred stock, due 2014 For a list of A.M. Best's debt ratings, please visit http://www3.ambest.com/debtratings/. 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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