Best’s News & Research Service - June 04, 2015 04:12 PM (EDT)
A.M. Best Affirms Ratings of RLI Corp., RLI Insurance Co., Mt. Hawley Insurance Co. and Contractors Bonding and Insurance Co.
- June 04, 2015 04:12 PM (EDT)
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit ratings (ICR) of "aa" of the following members of the RLI Group (RLI): RLI Insurance Company and its affiliates, Contractors Bonding and Insurance Company (CBIC) and Mt. Hawley Insurance Company (Mt. Hawley).The ratings of the final member of the group, RLI Indemnity Company, Mt. Hawley's reinsured affiliate, remains under review with negative implications due to its pending sale and removal from RLI Group (see press release dated June 2, 2015). In addition, A.M. Best has affirmed the ICR of "a" and the debt rating of "a" on $150 million 4.875% senior unsecured notes due 2023 of RLI's publicly traded parent holding company, RLI Corp. [NYSE: RLI]. The outlook for all ratings, except for the ratings of RLI Indemnity Company due to its under-review status, is stable. All companies are domiciled in Peoria, IL.
The rating affirmations take into consideration RLI Corp.'s solid 2014 financial results and favorable first-quarter 2015 earnings. The ratings also reflect RLI's superior capitalization, sustained long-term operating profitability and excellent business profile as one of the leading specialty property/casualty insurance organizations in the United States. RLI has been able to maintain its focus in disciplined niche underwriting by concentrating on markets that are often underserved, which helps to somewhat insulate it from the various stages of the traditional property/casualty market cycle. The ratings acknowledge the strong financial flexibility afforded by RLI Corp., as evidenced by its modest financial leverage and strong fixed-charge coverage.
Partially offsetting these positive rating factors is RLI's above average equity leverage, which could potentially lead to earnings volatility in more turbulent financial market conditions.
A.M. Best believes that RLI is well-positioned at its current rating level. Key rating drivers that could lead to downward rating pressure are a significant deterioration in RLI's underwriting performance and a significant decline in its risk-adjusted capitalization.
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Catastrophe Analysis is A.M. Best Ratings
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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