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A.M. Best Upgrades Issuer Credit Rating of First Chicago Insurance Company and United Security Health and Casualty Company

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A.M. Best has upgraded the Long-Term Issuer Credit Rating
(Long-Term ICR) to "b+" from "b" and affirmed the Financial Strength
Rating (FSR) of C++ (Marginal) of First Chicago Insurance Company (FCIC).
The outlook of the FSR has been revised to positive from stable, while
the Long-Term ICR remains positive. Concurrently, A.M. Best has upgraded
the FSR to C (Weak) from C- (Weak) and the Long-Term ICR to "ccc" from
"cc" of United Security Health and Casualty Company (USH&C), a
wholly owned subsidiary of FCIC. The outlook for the Long-Term ICR
rating has been revised to positive from stable, while the outlook for
the FSR remains stable. Both companies are domiciled in Bedford Park, IL.

The Credit Ratings (ratings) of FCIC reflect its balance sheet strength,
which A.M. Best categorizes as weak, as well as its adequate operating
performance, limited business profile and marginal enterprise risk
management.

The rating upgrades reflect the FCIC's improved operating performance,
based on the consolidated financial results of the two companies, which
has resulted in favorable pre-tax operating gains, positive net income
and surplus increases for five consecutive years. These favorable
operating metrics mainly are due to a consistent stream of net
investment income, other fee income, and to a lesser extent, improved
underwriting results. As a result, the FCIC's five-year average combined
and operating ratios outperform the private passenger non-standard
automobile composite. The positive outlook on FCIC's ratings anticipates
the company's continued favorable operating performance and improved
overall risk-adjusted capitalization.

Partially offsetting these positive rating factors is the FCIC's
significantly elevated underwriting leverage and expense ratios, which
compare unfavorably with the composite. Despite adding to surplus for
five consecutive years, FCIC continues to grow its direct and net
premiums written. As a result, its net and gross underwriting leverage
ratios remain well above the composite averages. In addition, elevated
underwriting expenses driven by commissions and other expenses dampen
overall profitability. Furthermore, FCIC has a geographic concentration
of risk, as nearly 86% of direct premium written is in two states,
Illinois and Indiana, and a narrow product offering as 89% of direct
premium written in three lines of business: private passenger auto
liability, commercial auto and auto physical damage.

The ratings of USH&C reflect its balance sheet strength, which A.M. Best
categorizes as weak, as well as its weak operating performance, very
limited business profile and marginal enterprise risk management. These
assessments reflect the company slowly transitioning from a life/health
entity to a health and property/casualty entity.

These rating upgrades mainly reflect an additional capital contribution
of $2.5 million made in 2017.

Partially offsetting this positive rating factor is the inherent
execution risk in management's ability to execute successfully the
business plan to a property/casualty writer. This execution risk is
somewhat mitigated as the management of FCIC, USH&C's parent company, is
experienced and has a history of operating in the property/casualty
industry. The positive outlook on the Long-Term ICR is based on A.M.
Best's expectation that the company will meet its projections for
premium growth and operating profitability in 2018.

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
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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