A.M. Best Affirms Financial Strength Rating of Illinois Casualty Insurance Company; Downgrades Issuer Credit Rating

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Good) and downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” of Illinois Casualty Company (Illinois Casualty) (Rock Island, IL). The outlook for the FSR has been revised to negative from stable, while the outlook for the ICR is negative.

“Risk Management and the Rating Process for Insurance Companies”

The rating actions reflect Illinois Casualty’s inconsistent underwriting results in recent years, which has led to fluctuating return measures and modest surplus growth over a five-year period. Earnings variability has been driven by poor underwriting results due to storm losses and (in select years) the negative impact of unrealized investment losses. Surplus growth also has been negatively impacted by surplus note repayments that are expected to continue to impact capital accumulation over the near term. While management has implemented various corrective measures to improve underwriting results (including firmer pricing, culling of unprofitable accounts and expense control initiatives), it will take some time to determine the effectiveness of these measures, especially considering Illinois Casualty’s expansion, both geographically and into new lines of business during a period of soft market conditions. Such factors are reflected in the outlook for the company.

The ratings recognize Illinois Casualty’s strong risk-adjusted capitalization, solid liquidity, improved loss reserve development and management’s actions to boost results going forward. The company’s positive rating attributes are supported by management’s niche underwriting expertise and long-standing position within the alcoholic beverages industry in the Midwest.

Key rating drivers that may lead to negative rating actions include a sustained material deterioration in Illinois Casualty’s operating performance that may result in diminished capitalization levels.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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