CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed Unitrin, Inc.'s (Unitrin) holding company ratings, including the senior debt rating at 'BBB-', as well as the Insurer Financial Strength (IFS) ratings of its operating subsidiaries at 'A-'. The Rating Outlook is Stable. A full list of ratings follows this press release.
Fitch's affirmation of Unitrin's ratings reflects its adequate capitalization, modest financial leverage and operating results that remain within rating expectations, albeit below peer company results.
Unitrin has taken several underwriting initiatives to improve its profitability; however, its results continue to be pressured by a persistently competitive property/casualty insurance marketplace and lower favorable reserve development. The company announced its preliminary estimate of catastrophe losses related to April storm activity at $65 to $75 million. This represents approximately 8% of Unitrin's property/casualty operations year-end 2010 surplus.
Fitch views the capitalization of Unitrin's insurance subsidiaries as adequate. At year-end 2010, the risk based capital ratios of Trinity Universal Insurance Company and United Insurance Company of America (its primary property/casualty and life insurance subsidiaries) were 276% and 377%, respectively. Operating leverage - net premiums written to surplus - for Unitrin's property/casualty operations remain modest at 1.84 times (x).
Unitrin's financial leverage remains within Fitch's expectation with debt to capital of 22.4% as of March 31, 2011.
Fireside Bank, Unitrin's auto finance business, continues to runoff at a measured pace. In April 2011, the bank redeemed all outstanding CD's, which eliminates its match funding risk. Fireside is in the process of surrendering its bank charter, after which time it will no longer be required to seek regulatory approval to pay dividends to Unitrin. Fireside ultimately expects to return at least $265 million of capital to Unitrin, which is more than it had initially anticipated.
Fitch could downgrade Unitrin's ratings if any of, but not limited to, the following takes place:
--Debt to capital ratio exceeds 30%;
--Earnings-based interest coverage falls below high single digits for a sustained period;
--Significant deterioration in capital;
--Catastrophe losses exceed 15% of prior year surplus.
Fitch could upgrade Unitrin's ratings if any of, but not limited to, the following takes place:
--Significant improvement in capitalization;
--Meaningful and sustained improvement in underwriting results.
Fitch has affirmed the following ratings with a Stable Outlook:
--IDR at 'BBB';
--$610 million senior notes at 'BBB-'.
Trinity Universal Insurance Co.
United Insurance Co. of America
Union National Life Insurance Co.
Reliable Life Insurance Co.:
--Insurer Financial Strength rating at 'A-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria & Related Research:
--'Insurance Rating Methodology' (March 31, 2011);
--'Non-Life Insurance Rating Methodology' (March 31, 2011);
--'Life Insurance Rating Methodology' (March 31, 2011).
Applicable Criteria and Related Research:
Insurance Rating Methodology
Non-Life Insurance Rating Methodology
Life Insurance Rating Methodology