OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has upgraded the financial strength rating (FSR) to A- (Excellent) from B+ (Good) and issuer credit rating (ICR) to “a-” from “bbb-” of Trans-City Life Insurance Co (Trans-City Life). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Trans-City Life’s affiliate, Trans City Casualty Insurance Company (TCCIC). The outlook for all ratings is stable. Both companies are domiciled in Scottsdale, AZ.
The rating upgrades reflect Trans-City Life’s role as the credit life and disability insurance provider for the Trans City Insurance Companies, its strong distribution relationship with automobile dealers in Arizona and the synergies gained by common management, marketing platforms and shared services. The ratings also consider Trans-City Life’s continued solid risk-adjusted capitalization and positive earnings stream, which has historically supported steady dividends for its shareholders. A.M. Best also notes that Tran-City Life’s investment portfolio is very short term in nature with little interest rate risk and high levels of liquidity.
The rating affirmations for TCCIC reflect its solid capital position, historically positive operating results and niche market expertise as the group’s credit property/casualty insurance writer. Although TCCIC recently experienced an uptick in its loss ratio, it has experienced fluctuating premium levels over the last several years. The company’s earnings have historically benefited from management's underwriting initiatives and conservative operating philosophy. Additionally, like Trans-City Life, TCCIC maintains a narrow operating profile concentrated within the automotive market.
While recognizing the group’s solid capital position and good profitability, A.M. Best notes that growth within the enterprise depends upon the health and strength of the economy, specifically domestic auto sales. A.M. Best notes that while auto sales recently have improved, a potential decrease in consumer activity can still adversely impact the associated opportunities to market the group’s core credit products. Additionally, the ratings consider the challenges the organization faces in balancing new premium growth while maintaining favorable earnings trends and capitalization.
A.M. Best believes the companies are well positioned at their current rating level.
Negative rating actions could occur if the group’s capitalization or operating performance falls markedly short of A.M. Best’s expectations. Negative rating pressure also could occur if the business profile or the relative importance of either insurance company changes materially.
The 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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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