Best’s News & Research Service - August 24, 2017 09:51 AM (EDT)
A.M. Best Revises Issuer Credit Rating Outlook to Positive for First Chicago Insurance Company
- August 24, 2017 09:51 AM (EDT)
Oldwick //BestWire// - A.M. Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of C++ (Marginal) and the Long-Term ICR of “b” of First Chicago Insurance Company (FCIC) (Bedford Park, IL). The outlook of the FSR is stable.
Concurrently, A.M. Best has affirmed the FSR of C- (Weak) and the Long-Term ICR of “cc” of United Security Health and Casualty Company (USH&C) (Bedford Park, IL), a wholly owned subsidiary of FCIC. The outlook of these Credit Ratings (ratings) is stable. FCIC and USH&C are collectively known as the First Chicago Insurance Group.
The Long-Term ICR outlook revision to positive on FCIC’s ratings reflects the company’s positive operating results in recent years.
The rating affirmations are based on the consolidated financial results of the two companies, and reflect the group’s elevated underwriting leverage measures and its significant expense disadvantage relative to its composite peers. Furthermore, the significant premium growth in recent years and the addition of the workers’ compensation line of business in 2013 have placed additional uncertainty and potential stress on the company’s risk-adjusted capital position. Lastly, the group’s geographic concentration makes it susceptible to adverse judicial decisions, regulatory and legislative changes, and increased competitive pressures in the non-standard automobile and commercial auto liability lines of business.
Partially offsetting these negative rating factors are the group’s modestly improved risk-adjusted capitalization, positive operating performance in recent years and long-standing local market presence in Illinois and several other Midwestern states. Management’s corrective actions of tightening underwriting guidelines, rate increases, increased product offerings, and adequate reserving practices have gained traction and materialized favorably. As a result, pre-tax and total returns on revenue and equity have been favorable. In addition, pre-tax operating and net income, along with additions to surplus have been reported in four of the past five years. .
This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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