OLDWICK, N.J., April 19 /PRNewswire/ -- A.M. Best Company today released 1993 Best's Ratings for 106 property/casualty insurers and 44 life/health companies, including the Chubb Group of Insurance Companies, Hanover Insurance Companies, Equitable Life Insurance Company of Iowa, Nationwide Life Insurance Company and New York Life Insurance Company.
Based on the evaluation of year-end 1992 financial results and subsequent relevant events, Best's Ratings will be released on a weekly basis through June. To date, Best's Ratings have been assigned to 230 property/casualty companies and 92 life/health entities. Best's Ratings are continuously monitored throughout the year with formal rating reviews performed on six-month and nine-month financial results.
Rating rationales for nine property/casualty groups and seven life/health companies are presented below: Allendale Group, Johnston, R.I., 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 Allendale Mutual Insurance Company and its two wholly owned affiliates, Appalachian Insurance Company and Affiliated FM Insurance Company. The group's rating reflects management's conservative operating strategy, outstanding capitalization and superior liquidity position. The Allendale Group is one of a small number of companies which insure highly protected industrial and commercial risks in the domestic and international markets. This business requires a highly specialized underwriting process which utilizes engineers to analyze buildings and sites, determine premium costs and provide loss control. The underwriting process involves insuring multi-billion dollar commercial and industrial facilities for both property damage and business interruption. Substantial capitalization and a very strong reinsurance program are required to underwrite due to the high policy limits involved. As a result, significant barriers to entry exist in this business. The Allendale Group commands a leading position in this field and can exert significant underwriting control versus other standard commercial lines writers.
The underlying loss experience of the Allendale Group is subject to volatility and reflects the nature of large claims which can occur. Nevertheless, the overall underwriting profitability of the group has been consistently superior as evidenced by a five-year average combined ratio of 105, which is five points better than the industry average. In addition, the group's profitability has remained consistently superior to its competition. The disciplined underwriting approach, especially in light of recent catastrophes, has enabled the group to report outstanding loss ratios as claims are constantly analyzed following a catastrophe to determine engineering recommendations. The 1992 combined ratio of 128 was due to the unusual frequency of catastrophes, including Hurricane Andrew and the Chicago flood. Liquidity and leverage ratios are far superior to the industry as policyholders' surplus has doubled since 1987 to $670 million, which conservatively supports $355 million in net writings.
The Allendale Group, a member of the Factory Mutual System, is a commercial lines writer specializing in property insurance coverages for businesses worldwide. The group is one of the 100 largest property/casualty writers in the U.S. with $1.3 billion in assets.
Auto-Owners Group, Lansing, Mich., 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 Auto-Owners Insurance Company and its subsidiaries, Home-Owners Insurance Company, Property Owners Insurance Company and Owners Insurance Company. The rating reflects the group's outstanding operating performance and strong capital position that increased 13 percent in 1992 by $95 million of operating income. The group's positive rating factors are derived from its strong agency relationships and generally favorable operating and regulatory environments in the Midwest, where the bulk of the business is generated.
Over the past five years, the group's underwriting profitability has outperformed the industry in many of its key lines, which has been enhanced by strong investment returns on its large asset base. The group maintains a competitive advantage with an effective cost structure with an expense ratio of 24 percent, which is five points better than the average for agency-based companies. The group manages its catastrophe exposure well and sustained relatively minor losses from Hurricane Andrew, despite writing almost 20 percent of its direct premium in Florida, their second largest state by volume of business ($250 million all lines; one-half auto and one-quarter homeowners and commercial multiple peril combined). A strong and loyal relationship with the agency force contributes to the group's success by providing preferred risks with favorable retention levels. The group has strong reinsurance protection, good geographic spread of risk and operates in favorable regulatory jurisdictions. It also maintains a conservative investment portfolio comprised largely of investment-grade government and government agency issues. The Auto-Owners Group ranks among the top 50 property/casualty insurance groups in the country by premium volume and has over $3 billion of admitted assets.
California Compensation Insurance Company, Novato, Calif., was assigned a 1993 Best's Rating of "B" (Good). The company's financial strength was affirmed and its rating level of "B" was unchanged.
On April 12, 1993, the company announced that its parent, Business Insurance Corporation, was being acquired for $64 million in cash by the Foundation Health Corporation, a leading publicly owned managed health care company that provides HMO and TPA services to more than 3 million individuals in government and business. The transaction should benefit California Compensation, as this California workers' compensation specialty carrier is expected to receive additional capital support from its new owner to enhance its balance sheet and support future growth plans. In addition, the company will be well positioned to capitalize on the nation's evolving 24-hour health care coverage reform. California Compensation is expected to retain its key management and operational integrity. The transaction is expected to close by August 1993 and is subject to regulatory approval.
Christiania General Insurance Group, Tarrytown, N.Y., was assigned a 1993 Best's Rating of "A" (Excellent). The financial strength of the group, led by Christiania General Insurance Corporation of New York, was downgraded from Superior to Excellent and its rating level was lowered from "A+" to "A". The current rating reflects the group's stable underwriting performance, derived by its well-established close working treaty relationships with small- to medium-sized regional property/casualty companies. In addition, the reinsurer maintains good underwriting stability through a diversified book of business. Marine and aviation business is written directly and represents 15 percent of its book and casualty writings represent approximately 30 percent, while the remaining 55 percent consists of geographically diversified property business. The current rate hardening in the reinsurance property marketplace should improve the reinsurer's overall underwriting experience in 1993. However, these positive rating factors are offset by the group's deteriorating operating performance and weakened leverage position in recent years, relative to the reinsurance sector.
Underwriting results have been stable, as evidenced by a five-year average combined ratio of 107, but overall operating performance has deteriorated, due to continued loss reserve development and reduced investment returns, producing a modest five-year pretax return on revenue of 5 percent, compared to the reinsurance sector's 15 percent return. In addition, net leverage has increased by over 65 percent in the last four years due to diminished earnings, resulting in a static surplus position, while premium volume has increased nearly 60 percent through expansion into international markets. Christiania General Group ranks among the top 20 professional reinsurers, placing the majority of its business through brokers and has over $170 million in net premiums and $97 million in surplus.
Chubb Group of Insurance Companies, Warren, N.J., 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 five intercompany pool members and four other Chubb companies that are fully reinsured by the pool members. The rating reflects management's conservative operating strategy, outstanding financial performance and very strong capitalization. These positive rating factors are derived from the group's superior underwriting results and leading position in the specialty personal and commercial lines market. In addition, the group has high-quality investments, strong loss reserves and excellent reinsurance protection.
Chubb is one of a few large groups that continues to produce outstanding underwriting results with an average combined ratio over the past five years that has outperformed the industry by nearly 10 points. Its underwriting and reinsurance strength was demonstrated in 1992, as the group recorded a combined ratio of 101, despite almost six points stemming from catastrophe losses. These superior underwriting results are derived from Chubb's favorable loss experience within its upscale personal property and specialized commercial lines. They also reflect the group's disciplined underwriting approach and adherence to solid operating fundamentals, including its commitment to maintaining adequate loss reserves and pricing throughout an underwriting cycle.
Chubb's strong operating performance, combined with significant investment gains, has led to further improvements in its operating leverage, with $2.9 billion of net premiums written supported by $1.8 billion of surplus. Chubb is well positioned to capitalize on market opportunities. Additional financial flexibility is afforded by its parent holding company that has modest financial leverage, with a debt-to-equity ratio of approximately 25 percent. The group also has maintained prudent liquidity enhanced by very strong operating cash flows averaging $750 million in recent years. The Chubb Group ranks among the top 15 property/casualty insurers in the United States with $2.9 billion of net writings.
Cincinnati Financial Group, Cincinnati, 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.
The rating reflects the group's continued outstanding financial performance, conservative operating strategy and very strong capital position. These positive rating factors are derived from management's disciplined underwriting approach, strong agency relationships and a favorable operating environment in the 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 10 points on the combined ratio. The group's favorable results are driven by its consistently favorable loss results within its commercial lines book, which represents approximately half of its total business. In addition the group utilizes a centralized home office approach combined with a field and claims personnel staff that operates out of their homes. This operating structure eliminates the need for branch offices and attendant overhead expenses. While the group generates approximately 15 percent of its business volume from workers' compensation, a problematic line in many jurisdictions for the industry, its underwriting results have not been adversely impacted by residual market assessments, due to the group's Midwest market orientation and deliberate avoidance of certain problem states. Outstanding capitalization is maintained, with $933 million in surplus supporting $1 billion of written premiums, enhanced by a high- quality investment portfolio and significant financial flexibility at the parent holding company with nominal debt. Over 85 percent of the group's assets are invested in investment-grade bonds. Cincinnati Financial Group ranks among the top 50 property/casualty insurers with over $4 billion in assets.
Equitable Life Insurance Company of Iowa, Des Moines, Iowa, 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 the company's strone?arnings performance, its high-quality balance sheet and excellent capitalization. Equitable Life Insurance Company of Iowa continues to generate strong earnings results from its stable traditional individual life insurance segment, where historically, the company has concentrated its sales activities. However, since the close of 1990, growth in new individual life sales has declined modestly. Offsetting this decline has been the company's expansion of its individual annuity operations in recent years. The company currently is benefiting from improving results in this line.
Equitable Life Insurance Company of Iowa's investment portfolio is of high quality, which, combined with strong cash flow, provide the company with excellent liquidity. At year end, investment-grade bonds and cash comprised nearly two-thirds of invested assets.
Due to its strategic role as a subsidiary of Equitable Life Insurance Company of Iowa, USG Annuity & Life Company, Oklahoma City, 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 is based on the consolidated performance of the parent and the subsidiary. USG Life & Annuity specializes in the sale of flexible and single-premium annuity contracts. Since 1988, expansion of its individual annuity operations has resulted in total assets increasing from $159.1 million at year-end 1988 to $2.8 billion at the close of 1992. USG Annuity & Life's balance sheet is of excellent quality with investment-grade bonds, cash and short-term holdings representing over 92 percent of invested assets.
Franklin Life Insurance Company, Springfield, Ill., 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 the company's conservative operating strategy, the strong earnings performance of its traditional individual life business, excellent balance-sheet quality and superior risk- adjusted capitalization. Franklin Life historically has concentrated its activities on the sale of traditional individual life insurance products. However, expansion in the company's individual annuity operations in recent years has resulted in considerable growth in assets. Individual annuity liabilities currently account for 36 percent of total reserves.
Franklin Life's investment portfolio is of very high quality, which, combined with strong annual cash flow, provides the company with excellent liquidity. At year-end 1992, investment-grade bonds, cash and short-term holdings represented over three-quarters of invested assets. Franklin Life ranks among the 60 largest life insurers in the United States when measured by total assets.
Due to its strategic marketing role as a subsidiary of Franklin Life, The American Franklin Life Insurance Company, Springfield, was