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FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 28, 2014 11:56 AM (EST)
A.M. Best has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and issuer credit rating to "a-" from "bbb+" of Prime Insurance Company (PIC) (Chicago, IL). The outlook for both ratings is stable.
The rating upgrades take into consideration PIC's 2013 results, sustained profitability, recent partnership with RLI Insurance Company (RLI) (Peoria, IL)--via reinsurance and equity ownership--and the concurrent reduction in financial leverage at the parent company, Prime Holdings Insurance Services, Inc. (Prime Holdings).
Effective February 5, 2014, Prime Holdings issued new shares of common stock to RLI, the proceeds of which were contributed to PIC. Including the additional equity issued to RLI, pro forma adjusted debt-to-total capital of Prime Holdings amounted to 29% at year-end 2013, down from 51% at year-end 2012. These actions also consider PIC's supportive capitalization, favorable operating profitability, demonstrated underwriting acumen and the new quota share reinsurance support provided by RLI.
Upward rating movement is unlikely in the near term; however, long-term rating triggers that could prompt positive movement in PIC's ratings include sustained profitability, returns that outperform peer averages, improved retained earnings and adherence to prudent capital management, as it pertains to holding company leverage, underwriting and operating leverage and risk-adjusted capitalization. Drivers that could cause rating downgrades include increased financial leverage at the holding company, the inability to sustain healthy profit margins in the future, excessive growth and lack of supportive 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.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.