A.M. Best Affirms Credit Ratings of State Automobile Mutual Insurance Company and Its Operating Subsidiaries
06 June 2017 - 11:16PM
Business Wire
A.M. Best has affirmed the Financial Strength Rating
(FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a-” of State Automobile Mutual Insurance
Company (State Auto) and its operating subsidiaries.
Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb-” of
State Auto’s intermediate holding company, State Auto Financial
Corporation (STFC) (NASDAQ:STFC). The outlook of these Credit
Ratings (ratings) is stable. All the above companies are
headquartered in Columbus, OH. (See below for a listing of the
companies.)
The ratings reflect State Auto's strong risk-adjusted
capitalization, long-standing regional market presence,
well-established agency relationships, solid brand name recognition
and diversified product offerings. State Auto’s capital position is
derived from its sound overall liquidity position and manageable
catastrophe exposure, partially offset by above-average
underwriting and common stock leverage. State Auto also benefits
from its software technology, which further enhances and cultivates
agency relationships while improving overall operating
efficiencies. The ratings also reflect the financial flexibility
and access to capital through State Auto Financial Corporation,
State Auto's publicly traded intermediate holding company.
These positive rating factors are offset by State Auto’s
exposure to localized tornadoes/hail storms and hurricane activity,
as well as its moderately adverse reserve development reported in
recent accident and calendar years. The increased frequency and
severity of storm losses in 2012 and again in 2016 adversely
impacted State Auto’s underwriting profitability, overall earnings
and surplus position. However, these exposures are mitigated
through a comprehensive reinsurance program, as well as
underwriting initiatives aimed at reducing catastrophe exposures.
Adverse loss reserve development has been driven partially by
greater-than-expected losses in the group’s specialty lines
commercial trucking and commercial restaurant programs, which are
now in run-off. To mitigate further adverse development in the
commercial restaurant program, the company purchased an adverse
development cover with $40 million of coverage at the end of 2014.
More recent adverse loss reserve development has been driven
primarily by higher severity in the lines of business with auto
exposures. Underwriting results also remain pressured by the
company’s above-average underwriting expense ratio, which primarily
relates to higher agents’ commissions.
A.M. Best believes that upward rating movement at this time is
unlikely. Negative rating actions could occur if there is a
sustained deterioration in underwriting or operating results, an
occurrence of a sudden large or catastrophic loss event that
materially hinders risk-adjusted capitalization or if there is any
material deviation from the company’s submitted financial
projections.
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have
been affirmed for the following operating subsidiaries of State
Automobile Mutual Insurance Company:
- State Auto Property and Casualty
Insurance Company
- Milbank Insurance Company
- State Auto Insurance Company of
Ohio
- Patrons Mutual Insurance Company of
Connecticut
- Meridian Security Insurance
Company
- State Auto Insurance Company of
Wisconsin
- Rockhill Insurance Company
- Plaza Insurance Company
- American Compensation Insurance
Company
- Bloomington Compensation Insurance
Company
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 the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20170606005992/en/
A.M. BestJonathan Harris, CFA, FRM,
+1-908-439-2200, ext. 5771Senior Financial
Analystjonathan.harris@ambest.comorJacqalene Lentz, CPA,
+1-908-439-2200, ext.
5762Directorjacqalene.lentz@ambest.comorChristopher
Sharkey, +1-908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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