AM Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the long-term issuer credit rating (ICR) to “a-” (Excellent) from “a” (Excellent) of the property and casualty subsidiaries of United Fire Group (UFG).
All headquartered in Iowa, UFG’s subsidiaries are collectively named United Fire & Casualty Group (the group), which operates under an intercompany pooling agreement led by United Fire & Casualty Company.
Concurrently, AM Best has downgraded the long-term ICR to “bbb-” (Good) from “bbb” (Good) of UFG.
The outlook of these ratings has been revised to stable from negative.
AM Best says the “ratings reflect the group’s balance sheet strength, which it assesses as “very strong”, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.”
The rating company expects United Fire & Casualty Group’s operating performance and balance sheet fundamentals to stabilise over the intermediate term, given management’s initiatives intended to improve operating performance.
The rating downgrades were driven by the downturn in the group’s operating performance through 30 June. This included US$53 million in reserve strengthening across multiple casualty lines and accident years, elevated catastrophe losses, a small number of large surety losses, and the impact of surety reinsurance reinstatement premiums.
AM Best notes: “They also consider the group’s diversified product offerings, long-standing agency relationships, solid regional franchise and the financial flexibility afforded by UFG. These positive rating factors are offset partially by the competitive market conditions and resulting adverse reserve development — particularly in its other liability line of business, product liability and commercial auto occurring during the second quarter of 2023. In addition, the group maintains exposure to potential catastrophe and weather-related losses.”
