OLDWICK, N.J., April 5 /PRNewswire/ -- A.M. Best Company today released the 1993 Best's Ratings for 77 insurance companies, including four large life/health companies and seven large property/casualty groups. Based on the evaluation of year-end 1992 financial results and subsequent relevant events, 1993 Best's Ratings will be released on a weekly basis through June. Best's Ratings are continuously monitored throughout the year, with formal rating reviews performed on six- and nine-month financial results and released in September and December, respectively.
Brief rating rationales are presented below for the four life/health companies and seven property/casualty groups:
American Life and Casualty Insurance Co., Des Moines, Iowa, and its subsidiary Vulcan Life Insurance Co., Birmingham, Ala., were assigned 1993 Best's Rating of "A" (Excellent). American Life and Casualty's excellent financial strength was affirmed, and its rating level of "A" was unchanged.
"The rating reflects the company's favorable statutory earnings performance, its reduced investment risk and strengthened risk-adjusted capital position, which was enhanced during 1992 by a $40.7 million contribution from its parent, The Statesman Group," according to Larry G. Mayweski, senior vice president of Best's life/health division. American Life and Casualty's rating also reflects its strong liquidity position and its very disciplined approach to asset/liability management. Offsetting these items are the company's concentrated business focus and the moderate financial leverage at its parent. In addition, A.M. Best believes that the company's future growth in the individual annuity market may be inhibited by capital constraints.
At year end, 54 percent of American Life and Casualty's investments represented securities issued or secured by the U.S. Government, and only a modest 1.5 percent of its asset portfolio was comprised of non-investment grade holdings. The company specializes in offering individual non-qualified single-premium deferred annuities through independent insurance agents and brokers. The company ranks among the 100 largest life/health insurers in the U.S. when measured by total assets.
Vulcan Life's 1993 Best's Rating of "A" is based on the consolidated performance of the parent and the subsidiary. The company specializes in marketing group life insurance coverage through U.S. National Guard installations.
American Re-Insurance Company, Princeton, N.J., was assigned a 1993 Best's Rating of "A+" (Superior). The company's superior financial strength was affirmed. The rating reflects the company's outstanding underwriting performance and strong capital position that was further strengthened in early 1993 with a $100 million capital contribution from an initial public offering of 13.3 million shares by American Re Corporation, the parent company.
"The company's recent financings and significant adverse loss reserve indemnification, which was secured as part of its management-led buyout from Aetna Life & Casualty in October 1992, has solidified the company's balance sheet," said John H. Snyder, senior vice president of Best's property/casualty division. The recent IPO also enabled the company to pay down bank debt and reduce the debt-to-equity ratio of the parent company to under 100 percent. "The company's relatively strong and stable cash flows enable it to comfortably service debt obligations," Mr. Snyder continued.
Over the past five years, the reinsurer's profitability has outperformed the reinsurance industry by an average of five points, and by over 14 points in 1992. The company's excellent and stable underwriting results have largely been due to its predominant casualty book of business, which has balanced its relatively modest exposure to its more volatile property business. In addition, the company is a leading direct writer that targets small- to medium-sized regional companies. These direct relationships allow the reinsurer to have greater control over price and form.
Although operating leverage is high relative to the reinsurance industry norms, it is offset by strong loss reserves including substantial stop-loss protection. Inclusive of the $100 million IPO capital contribution, current writings of slightly over $1 billion are supported by approximately $1 billion in surplus. Over 90 percent of the company's bond portfolio is rated "A" or higher. American Re- Insurance ranks among the top five professional reinsurers with over $3.5 billion in assets.
Commercial Union Insurance Companies, Boston, has been assigned a 1993 Best's Ratings of "A" (Excellent). The group's excellent financial strength was affirmed and its rating level of "A" was unchanged. The rating applies to six intercompany pool members, led by Commercial Union Insurance Company, and two affiliates that reinsure with members of the pool. The group's rating reflects Commercial Union's conservative operating strategy, significantly improved underwriting results and good capitalization derived from the group's strong middle-market position, and its maintenance of solid operating fundamentals, including its commitment to loss reserve adequacy.
According to John H. Snyder, senior vice president of Best's property/casualty division, "Commercial Union's improved operating performance and capitalization reflects management's successful execution of a corrective action plan initiated in the mid-1980s, in which its very unprofitable commercial specialty businesses were discontinued, enabling the group to refocus its underwriting on establishing a balanced personal and commercial book of business, which focused on small- to medium-sized risks."
The group's 1992 combined ratio of 109 is several points better than its prior years' underwriting results, reflective of the group's reunderwriting actions, is reduction of expenses and maintenance of pricing discipline. Operating leverage continued to decline from improved earnings, with $1.4 billion of moderately short-tail business supported by $864 million of surplus. These positive factors are enhanced by the group's conservative investment portfolio, largely U.S. government bondholdings, and the maintenance of strong loss reserves.
Northwestern Mutual Life Insurance Co., Milwaukee, was assigned a 1993 Best's Rating of "A++" (Superior). The company's superior financial strength was affirmed, and its rating level of "A++" was unchanged. This rating assignment reflects Northwestern Mutual Life's leadership position in the individual life insurance market, its conservative operating strategy, strong earnings performance, excellent capitalization and high-quality investment portfolio.
The company's assets totaled $39.7 billion, of which $17.8 billion represented investment-grade bonds, cash and short-term investments at year-end 1992. Over the past five years, it has reported operating earnings totaling $867.6 million, after paying out nearly $7.7 billion in policyholder dividends.
"This profitability, combined with realized capital gains, has enabled the company to maintain its strong financial position," according to Best's life/health division senior vice president Larry G. Mayweski. Northwestern Mutual Life generates sizable operating cash flow, which, when coupled with investment-grade securities, provide it with an excellent liquidity position, he added. Northwestern Mutual Life ranks among the top 10 life insurers in the U.S. when measured by total assets.
Ohio Casualty Group, Hamilton, Ohio, was assigned a 1993 Best's Rating of "A+" (Superior). The group's superior financial strength was affirmed and its rating level of "A+" was unchanged. The rating applies to the group's four intercompany pool members, led by Ohio Casualty Insurance Company, and reflects management's conservative operating strategy, superior financial performance and above-average capitalization derived from the group's strong agency relationships and its focus on rural and suburban markets. In addition, the group has modest catastrophic exposures and a strong reinsurance program. These positive rating factors are offset somewhat by the group's business concentration in several states that have an unfavorable operating and regulatory environment.
"The group's underwriting results historically have been superior to the industry, with a 10-point loss ratio advantage driven by consistently favorable loss results within its predominant personal automobile line," said John H. Snyder, senior vice president of Best's property/casualty division. Strong auto results reflect the group's focus on more profitable rural and suburban markets. While the group generated nearly 40 percent of its business volume from three problematic states in 1992, Ohio Casualty has shifted its operating strategies towards increased market penetration in the midwest, a more favorable operating and regulatory environment, while downsizing its voluntary business writings in Pennsylvania and New Jersey. In addition, it is continuing its withdrawal from California, which is expected to be completed in 1993. In recent years, the group has reduced its underwriting leverage and currently has $1.5 billion of premiums supported by $674 million in surplus.
Re Capital Reinsurance Corporation, Stamford, Conn., was assigned a 1993 Best's Rating of "A" (Excellent). The company's excellent financial strength was affirmed. The rating reflects the reinsurer's relatively good profitability, closely controlled and focused underwriting and strong capital position. These positive rating factors are derived from its disciplined underwriting approach with a small number of core clients, combined with its strong capital position, high-quality assets and modest debt.
Over the past five years, the reinsurer's profitability has outperformed the reinsurance industry by an average of five points on the combined ratio, according to John H. Snyder, senior vice president of Best's property/casualty division. In addition, the company's results have been relatively more stable due to its casualty orientation combined with its property risk management that limits the company's exposure to any one occurrence to 5 percent of its surplus. Excellent capitalization is maintained with $102 million in surplus supporting $121 million of moderately short-tailed business. Over 70 percent of the company's assets comprise single A or better investment-grade bonds. The parent company's debt-to-equity ratio is under 25 percent. Re Capital ranks among the top 20 professional reinsurers with over $325 million in assets.
SAFECO Insurance Companies, Seattle, was assigned a 1993 Best's Rating of "A++" (Superior). The company's superior financial strength was affirmed. The rating reflects the group's continued outstanding financial performance, conservative operating strategy and strong capital position. These positive rating factors are derived from management's disciplined underwriting approach, strong agency relationships and favorable operating environment in the northwest and midwest, where the bulk of the group's business is generated.
Over the past five years, the group's profitability has outperformed the industry by an average of four points on the combined ratio. The group's favorable results are driven by its outstanding personal auto underwriting experience, which represents approximately half of its total business. The group generates approximately 25 percent of its business in California, which is a difficult regulatory environment. However, SAFECO has managed its California automobile experience well -- approximately 25 percent of the group's total written premiums are generated in the state -- and has realized sizable assigned-risk rate increases and decreased assigned-risk assessment. Excellent capitalization is maintained with $1.4 billion in surplus supporting $1.8 billion of relatively short-tailed business. Over 66 percent of the company's assets are invested in investment-grade bonds. The company's debt-to-equity ratio is under 25 percent. SAFECO Group ranks among the top 30 property/casualty insurers with over $4.4 billion in assets.
State Farm Life Insurance Co., Bloomington, Ill., along with its affiliate, State Farm Life and Accident Assurance Co., also of Bloomington, were assigned 1993 Best's Ratings of "A++" (Superior). Both companies' superior financial strength was affirmed and their rating levels remained unchanged.
This rating assignment reflects State Farm Life's large in-force block of traditional life insurance, conservative operating strategy, superior earnings performance, exceptional capitalization and high- quality investment portfolio. The rating also acknowledges the company's strategic role as the life insurance operations of the State Farm group of insurance companies.
At year-end 1992, State Farm Life's assets totaled $15.4 billion, of which nearly four-fifths represented investment-grade bonds, cash and short-term investments. Over the past five years, the company has generated statutory operating earnings of $653.4 million, after payment of $2.6 billion in policyholder dividends. "This profitability has enabled the company to regularly increase surplus funds and maintain its superior financial position, according to Larry G. Mayweski, senior vice president of Best's life/health division. State Farm Life ranks among the top 25 life insurance companies in the U.S. when measured by total assets.
State Farm Life and Accident's assets totaled $494.3 million at year-end 1992, of which over 90 percent represented investment-grade bonds, cash and short-term investments. Favorable operating results in each of the past five years has enabled the company to increase capital and surplus funds 66 percent since the close of 1987. State Farm Life and Accident principally markets individual life and annuity products in New York and Wisconsin, where State Farm Life Insurance is not licensed.
Teachers Insurance and Annuity Association of America (TIAA), New York, was assigned a 1993 Best's Rating of "A++" (Superior). The company's financial strength was affirmed, and its rating level was unchanged.
This rating assignment reflects TIAA's leadership position in the higher education pension market, its superior capitalization and earnings performance, a stable liability structure and the favorable expense advantages the company maintains due to the cost-effective methods utilized in the distribution of its products. TIAA's investment portfolio is significantly concentrated in mortgage loans and real estate. However, due to the company's unique liability structure, in which over 90 percent of its policyholder obligations are not immediately surrenderable and the above-average quality of its mortgage and real estate portfolio, capital losses associated with the downturn in the real estate market have been very manageable. TIAA's stable liability structure enables it to accept a greater degree of credit risk without significant concern about the risk of disintermediation.
The company's capitalization has nearly doubled over the past five years due to strong operating earnings, realized gains on invested assets and a significant reduction in its conservative dividend liability reserve in 1991, according to Larry G. Mayewski, senior vice president of Best's life/health division. Due to the secure nature of the company's policyholder obligations, TIAA's need for liquidity is modest and is serviced by its sizable annual cash flow.
Teachers Insurance and Annuity Association of America, together with its companion organization, the College Retirement Equities Fund (CREF), form the largest retirement system in the U.S.
Trenwick America Reinsurance Corporation, Stamford, Conn., has been assigned a 1993 Best's Rating of "A" (Excellent). The company's