A.M. Best Affirms Ratings of State Auto Insurance Companies and Its Members
May 18 2009 - 10:58AM
Business Wire
A.M. Best Co. has affirmed the financial strength rating
(FSR) of A+ (Superior) and issuer credit ratings (ICR) of �aa-� of
State Auto Insurance Companies (State Auto) and its members.
Concurrently, A.M. Best has affirmed the ICR of �a-� and debt
rating of �a-� on $100 million 6.25% senior unsecured notes, due
2013 issued by State Auto Financial Corporation (STFC)
(NASDAQ: STFC). All the above named companies are headquartered in
Columbus, OH. The outlook for all ratings is stable. (See below for
a detailed listing of the companies.)
The ratings reflect State Auto�s strong capitalization,
generally favorable operating performance and excellent regional
market franchise. These attributes reflect its long-standing
regional market presence, well-established agency relationships,
strong brand name recognition, diversified product offerings and
adherence to sound underwriting fundamentals.
Somewhat offsetting these positive rating factors is the group�s
exposure to localized tornado/hail storms, hurricane activity in
the Southeast and an earthquake stemming from the New Madrid fault
in the Midwest. These exposures have historically been mitigated
through comprehensive reinsurance programs and available credit
facilities, as well as underwriting initiatives aimed at reducing
catastrophe exposures. However, the increased frequency of storm
losses in recent quarters has dampened State Auto�s underwriting
profitability and overall capital position. In addition, State
Auto�s capital position remains sensitive to changes in the market
value of STFC and unaffiliated equity holdings, as evidenced by the
large unrealized capital losses reported in recent years.
Furthermore, State Auto has debt servicing requirements due to the
above mentioned debt issuance and trust preferred securities, which
could put a strain on future earnings. However, State Auto has
continued to emphasize disciplined underwriting, pricing and claims
processes. As a result of this strategy, State Auto has reported
favorable operating results in most of the past five years.
The FSR of A+ (Superior) and ICRs of �aa-� have been affirmed
for State Auto Insurance Companies and its following
members:
- State Auto Florida Insurance
Company
- Patrons Mutual Insurance
Company of Connecticut
- Litchfield Mutual Fire
Insurance Company
- Beacon National Insurance
Company
- Beacon Lloyds Insurance
Company
- Farmers Casualty Insurance
Company
- Milbank Insurance
Company
- State Auto Property and
Casualty Insurance Company
- State Auto Insurance Company
of Wisconsin
- State Auto National Insurance
Company
- State Automobile Mutual
Insurance Company
- State Auto Insurance Company
of Ohio
- Meridian Citizens Mutual
Insurance Company
- Meridian Security Insurance
Company
For Best�s Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings,
including any additional methodologies and factors that may have
been considered, can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service
credit rating organization dedicated to serving the financial and
health care service industries, including insurance companies,
banks, hospitals and health care system providers. For more
information, visit www.ambest.com.
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