A.M. Best Affirms Ratings of Standard Casualty Company

OLDWICK, N.J.--(BUSINESS WIRE)--

A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer crediting rating “a-” of Standard Casualty Company (Standard Casualty) (New Braunfels, TX). The outlook for both ratings is stable. Standard Casualty is a subsidiary of Cavco Industries Inc. (Cavco) (Delaware) CVCO, a manufacturer of factory-built homes.

The affirmation of the ratings reflects Standard Casualty's adequate risk-adjusted capitalization, generally favorable operating results and its excellent local market knowledge. During the latest five-year period, Standard Casualty reported positive pre-tax operating income driven by favorable net investment income and to a lesser extent, underwriting income generated in three of those five years. Standard Casualty retuned to underwriting profit in 2013, and these improved underwriting results have continued through the third quarter of 2014. In addition, Standard Casualty maintains a generally conservative investment portfolio and favorable balance sheet liquidity. Finally, the company benefits from the financial flexibility of Cavco, which made a capital infusion to Standard Casualty in 2012 to assist in its aggressive growth initiative.

These positive rating factors are partially offset by Standard Casualty's operating losses in two of the past five years, driven by frequent and severe weather-related events, along with above average fire losses. This was particularly evidenced in 2011, due to sizable underwriting losses. As a predominantly Texas writer, along with recent aggressive growth in Arizona and New Mexico, Standard Casualty's results are exposed to frequent and severe weather-related events, as well as judicial, regulatory and economic concerns. However, these risks are partially mitigated as Standard Casualty historically has adhered to strict underwriting guidelines and a conservative operating philosophy.

Pressure may be put on Standard Casualty's ratings and outlook if its operating performance deteriorates or there is a loss of surplus, which may lead to weaker risk-adjusted capitalization. Positive rating actions are contingent upon Standard Casualty's successful execution of its growth plan over the years and its ability to consistently produce favorable operating results and organically grow surplus, while maintaining supportive capitalization and adequate leverage measures.

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:

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• Insurance Holding Company and Debt Ratings
• Risk Management and the Rating Process for Insurance Companies
• Understanding BCAR for Property/Casualty Insurers

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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