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FOR IMMEDIATE RELEASE
OLDWICK - NOVEMBER 04, 2021 08:32 AM (EDT)
AM Best has upgraded the Financial Strength Rating (FSR) to B (Fair) from B- (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb” (Fair) from “bb-” (Fair) of First Chicago Insurance Company (FCIC). Concurrently, AM Best has upgraded the FSR to C++ (Marginal) from C+ (Marginal) and the Long-Term ICR to “b” (Marginal) from “b-” (Marginal) of United Security Health and Casualty Insurance Company (USHC), a wholly owned subsidiary of FCIC. The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in Bedford Park, IL.
The ratings of FCIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The rating upgrades reflect FCIC’s ability to maintain risk-adjusted capitalization at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), while organically growing surplus through underwriting, investment and other income. However, underwriting leverage metrics remain significantly elevated when compared with the private passenger nonstandard auto composite, driven by above-average premium and reserves relative to surplus. The investment portfolio is anchored in fixed-income securities with solid liquidity and enhanced by an increasing stream of fee income, partially offset by above common stock leverage.
Operating performance is expected to remain profitable, as measured by the combined ratio, which has been consistently below breakeven and in line with adequate performers. FCIC’s limited business profile reflects operations that are focused largely on nonstandard auto and taxi livery business with a geographic footprint concentrated in Midwestern states. FCIC’s management continues to enhance the ERM framework and integrate a more formalized structure into its process.
The ratings of USHC reflect its balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, very limited business profile and marginal ERM.
The rating upgrades reflect improvement in operating results in recent years, driven by expansion of the auto program. While historical trends have been inconsistent, prospective volatility of key metrics is expected to be lower due to the company’s continued focus on nonstandard auto products and run-off of its accident and health business.
The balance sheet strength reflects a dependence on capital contributions, which has been the main driver of surplus growth in the most recent five-year period. Prior to 2021, substantial premium growth outpaced surplus advances by a wide margin. The business profile reflects narrow product offerings as insurance exposures are concentrated in automobile products primarily in Arkansas and Indiana. Uncertainty exists regarding prospective results as the company continues to expand geographically. The ERM program is coordinated with FCIC and continues to evolve.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.