OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Ratings of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of Old United Casualty Company (OUC) and Old United Life Insurance Company (OUL). The outlook of these Credit Ratings (ratings) is stable. Both companies are headquartered in Merriam, KS.
The ratings of OUC reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
OUC’s balance sheet strength assessment is driven by its risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as its strong liquidity and low underwriting leverage. The company has a record of consistently strong operating performance, categorized by consistently profitable underwriting results and a healthy level of investment income from its investment portfolio. Additionally, the company benefits from being affiliated with Berkshire Hathaway, Inc. (Berkshire), its ultimate parent. OUC specializes in providing vehicle service contracts, primarily to affiliated automobile dealerships owned by Berkshire Hathaway Automotive. OUC benefits from the marketing and distribution platforms provided by these affiliated dealerships and manages to exercise superior loss control.
OUC indicated that during 2020, property/casualty loss ratios had dropped, while premiums continue to earn on long-duration contracts. Thus far, the impact of the COVID-19 pandemic has been minimal for OUC. Currently, AM Best considers these losses manageable given OUC’s limited profile in classes that are expected to be most impacted. AM Best will continue to monitor the situation with the COVID-19 pandemic and possible loss development for OUC and the insurance industry.
The ratings of OUL reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate ERM.
OUL’s strongest level of risk-adjusted capitalization, as measured by BCAR, and high levels of liquidity are offset by the company’s marginal operating performance, which includes modest but positive operating earnings and continuing sales declines as consumer preferences have shifted away from credit life and credit accident and health products to vehicle service contracts, such as those sold by OUC. OUL also benefits from its affiliation with Berkshire and the same affiliated automotive dealerships as OUC.
AM Best views OUC’s and OUL’s business profiles as limited. Auto warranty represents over 90% of OUC’s business, with substantial geographic concentration in a few states. OUL’s credit life and credit accident and health products also are focused in the automotive market and geographically concentrated with more than 90% of its business in Michigan, Texas and Arizona. ERM is considered appropriate relative to the risk profile of both companies.
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