A.M. Best Co. reiterated the issuer credit ratings ("ICR") of
United Fire Group Inc.
). Concurrently, the rating agency also reiterated the financial
strength rating ("FSR") of A (Excellent) and ICR of 'a' of the
property and casualty subsidiaries of United Fire Group. The
outlook is negative.
Additionally, A.M. Best also reiterated the FSR of A- (Excellent)
and ICR of 'a-' of United Life Insurance Company, a wholly owned
subsidiary of United Fire Group. The outlook is stable.
The rating affirmation of United Fire Group takes into account the
solid capitalization of its insurance subsidiaries, moderate
financial leverage and strong interest coverage ratios.
The rating affirmations of the property and casualty subsidiaries
came on the back of its wide array of product offering, favorable
reserves, strong risk adjusted capitalization and financial cushion
offered by the parent company. Also, the benefit it derives from
agency relationships and its strong regional franchise, further
fueled by the Mercer Insurance Group, Inc. purchase in March 2011,
added to the strong ratings.
However, unstable underwriting and operating results due to cat
losses, challenges faced in principal target markets and
integration risks of Mercer temper these positives.
The rating affirmations of United Life can be attributed to its
continued favorable operating results, rising life insurance
premiums and considerable risk-adjusted capitalization.
Nevertheless, exposure to an unstable interest rate environment is
a partial offset, as most of its offerings are concentrated in
interest-sensitive annuity and life products.
A.M. Best stated that the ratings of United Fire Group and its
property and casualty subsidiaries might be subject to a downgrade
if its underwriting and operating performance deteriorates below
the peer level, risk-adjusted capital erodes and if there arise any
unfavorable effect from the Mercer integration.
The ratings of United Life will be subject to downgrade if its
investment portfolio and capital level suffer adversely.
Rating affirmations or upgrades from credit rating agencies play an
important part in retaining investor confidence in the stock as
well as maintaining creditworthiness in the market. We believe the
company's strong ratings scores will help retain investor
confidence and help it to write more businesses going forward,
thereby augmenting the results.
The Travelers Companies Inc.
), which competes with United Fire Group, received rating
affirmations from Fitch Ratings last month. Fitch Ratings
reiterated Issuer Default Rating ("IDR") at 'A+' of Travelers.
Concurrently, the rating agency reiterated IFS on the company's
subsidiaries at 'AA'. The outlook remains stable.
The quantitative Zacks #1 Rank (short-term Strong Buy rating) for
United Fire Group indicates an upward boost on the stock over the
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UNITED FIRE GRP (UFCS): Free Stock Analysis
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