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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 06, 2012 12:00 AM (EST)
A.M. Best Co. has upgraded the issuer credit rating (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of A (Excellent) of Old United Casualty Company (OUC) (Shawnee Mission, KS). Concurrently, A.M. Best has upgraded the FSR to A (Excellent) from B++ (Good) and ICR to “a+” from “bbb+” of Old United Life Insurance Company (OUL) (Phoenix, AZ). The outlook for all ratings is stable.
The upgrading of the ICR of OUC reflects its sustained operating profitability, solid internal surplus generation and management’s highly specialized underwriting expertise. OUC specializes in providing vehicle service contracts to affiliated automobile dealerships that are owned by its ultimate parent, Van Enterprises, Inc. Through this affiliation, OUC benefits from the marketing and distribution platforms provided by these dealerships, while maintaining superior loss control capabilities.
The rating upgrades for OUL acknowledge A.M. Best’s view of its fully integrated role within the group, its ability to deliver a broad range of credit insurance product offerings and services to its customers, and the synergies gained by common management, marketing platforms and shared services. The ratings also consider OUL’s favorable growth in capital as reflected in its solid risk-adjusted capitalization, as well as its historical positive earnings stream and its captive distribution network. A.M. Best also notes that OUL’s investment portfolio is very short term in nature with little interest rate risk and high levels of liquidity.
While recognizing these positive rating factors for both companies, growth within the enterprise depends upon the health and strength of the economy, specifically domestic auto sales. While auto sales have improved in the last two years, a potential decrease in consumer activity can still adversely impact the associated opportunities to market the group’s core products.
A.M. Best believes the companies are well positioned at their current ratings.
Negative rating actions could occur if OUC or OUL’s capitalizations and/or operating performances fall markedly short of A.M. Best’s expectations. Negative rating pressure also could occur if the business profile and/or the relative importance of either insurance company materially changes.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding BCAR for Property/Casualty Insurers”; “A.M. Best’s Ratings & the Treatment of Debt”; “Rating Members of Insurance Groups”; “Understanding BCAR for Life/Health Insurers”; “Risk Management and the Rating Process for Insurance Companies.”; and “A.M. Best’s Liquidity Model for U.S. Life Insurers.” Best’s Credit Rating Methodology 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.