KBRA Assigns Ratings to the Key Operating Subsidiaries of Producer’s National Corporation

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency, LLC (KBRA) assigns a BBB- insurance financial strength rating (IFSR) to the three insurance subsidiaries of Producer’s National Corporation: Unique Insurance Company; Stonegate Insurance Company; and Viva Seguros Insurance Company. The Outlook for all ratings is Stable.

The ratings for Producer’s National Corporation’s operating companies (collectively referred to as Producer’s National or PNC), reflect significant capital contributions in recent years, which resulted in improved underwriting leverage measures and sound risk-adjusted capitalization. The group maintains conservative investment portfolios and benefits from corporate structural support through agency operations and equity ownership. The ratings further reflect PNC’s sizeable market presence in the Illinois non-standard auto market and long-standing agency relationships.

KBRA analyzed the impact of recent market volatility on Producer’s National and has stress tested the companies’ reserve positions and investment portfolios. KBRA believes the near-term effects are manageable due to the high credit quality of the companies’ invested assets. KBRA continues to monitor the direct and indirect impacts of the coronavirus (COVID-19) on the insurance sector. Please click here for more detail on KBRA’s research on the continuing impact of COVID-19.

Balancing these strengths are the companies’ poor operating results since 2016. Historically, the operating companies generated stable profits. However, in recent years underwriting performance and net income has been negatively impacted by increased loss frequency and severity. In addition, results in calendar years 2017 to 2019 were significantly impacted by adverse development arising from the 2015 to 2018 accident years. To help address the adverse reserve development, in 2019, PNC entered into loss portfolio and unearned premium transfers. Looking forward, KBRA notes the organization’s strategic plans and performance improvement initiatives to return to breakeven underwriting.

Click here to view the report. To access ratings and relevant documents, click here.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.