JANUARY 17, 2014 12:00 AM (EST)
A.M. Best Affirms Ratings of Auto-Owners Insurance Company and Its Subsidiaries
Senior Financial Analyst
(908) 439-2200, ext. 5120
Assistant Vice President
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Senior Manager, Public Relations
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Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 17, 2014 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of aa+ of Auto-Owners Insurance Company (Auto-Owners) and its four wholly owned property/casualty subsidiaries. These companies comprise the Auto-Owners Insurance Group (AOIG). Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and ICR of aa- of Auto-Owners Life Insurance Company (AOLIC), a wholly owned subsidiary of Auto-Owners. The outlook for all ratings is stable. All above named companies are domiciled in Lansing, MI. (See below for a detailed listing of the property/casualty companies.)
The ratings reflect AOIGs superior capitalization, historic trend of solid operating income, experienced management team, blend of personal and commercial product offerings and long-standing agency relationships. In addition, AOIG has strong risk management techniques and a well-established market position.
These positive rating factors are partially offset by AOIGs modest premium growth over the recent five-year period, weakened but improving performance in its underwriting results and concentration of business in Michigan and Florida. As these are the groups two leading states, this geographic concentration exposes it to challenging economic, legislative and regulatory environments and weather-related catastrophic events. Additionally, as a member of the Michigan Catastrophic Claims Association, AOIG is exposed to rising retentions and credit risk for personal injury protection medical losses.
The ratings for AOLIC recognize its risk-adjusted capitalization, which is more than adequate to support its insurance and business risks, positive growth trends in capital and surplus, moderating fixed annuity sales, strong regional market presence and its strategic value to AOIG.
Offsetting these positive rating factors are AOLICs high percentage of reserves in interest-sensitive products, exposure to spread compression as low interest rates persist, challenges related to the performance of its commercial mortgage loan portfolio and its geographic concentration as nearly half of its total premiums are generated from Michigan.
While A.M. Best does not expect to downgrade or place a negative outlook on the ratings of AOIG in the near to mid-term, such actions would ensue if the group were to incur material losses in its capitalization; have a severe reduction in the profitability of its core book of business; be unable to contain its exposure to catastrophic events within its underwriting footprint with the current set of preventative measures that have been recently put in place; or have substantial adverse reserve development relative to its peers, as well as industry averages.
The FSR of A++ (Superior) and ICRs of aa+ have been affirmed for Auto-Owners Insurance Company and its following wholly owned property/casualty subsidiaries:
· Home-Owners Insurance Company
· Owners Insurance Company
· Property-Owners Insurance Company
· Southern-Owners Insurance Company
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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