A.M. Best Co. has affirmed the financial strength rating (FSR) of
A+ (Superior) and issuer credit ratings (ICR) of "aa-” of State Auto
Insurance Companies (State Auto)
and its members.
Concurrently, A.M. Best has affirmed the ICR of "a-” and debt rating of
"a-” on $100 million 6.25% senior unsecured notes, due 2013 issued by State
Auto Financial Corporation (STFC) (NASDAQ: STFC). All the above
named companies are headquartered in Columbus, OH. The outlook for all
ratings is stable. (See below for a detailed listing of the companies.)
The ratings reflect State Auto’s strong capitalization, generally
favorable operating performance and excellent regional market franchise.
These attributes reflect its long-standing regional market presence,
well-established agency relationships, strong brand name recognition,
diversified product offerings and adherence to sound underwriting
fundamentals.
Somewhat offsetting these positive rating factors is the group’s
exposure to localized tornado/hail storms, hurricane activity in the
Southeast and an earthquake stemming from the New Madrid fault in the
Midwest. These exposures have historically been mitigated through
comprehensive reinsurance programs and available credit facilities, as
well as underwriting initiatives aimed at reducing catastrophe
exposures. However, the increased frequency of storm losses in recent
quarters has dampened State Auto’s underwriting profitability and
overall capital position. In addition, State Auto’s capital position
remains sensitive to changes in the market value of STFC and
unaffiliated equity holdings, as evidenced by the large unrealized
capital losses reported in recent years. Furthermore, State Auto has
debt servicing requirements due to the above mentioned debt issuance and
trust preferred securities, which could put a strain on future earnings.
However, State Auto has continued to emphasize disciplined underwriting,
pricing and claims processes. As a result of this strategy, State Auto
has reported favorable operating results in most of the past five years.
The FSR of A+ (Superior) and ICRs of "aa-” have been affirmed for
State Auto Insurance Companies and its following members:
-
State Auto Florida Insurance Company
-
Patrons Mutual Insurance Company of Connecticut
-
Litchfield Mutual Fire Insurance Company
-
Beacon National Insurance Company
-
Beacon Lloyds Insurance Company
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Farmers Casualty Insurance Company
-
Milbank Insurance Company
-
State Auto Property and Casualty Insurance Company
-
State Auto Insurance Company of Wisconsin
-
State Auto National Insurance Company
-
State Automobile Mutual Insurance Company
-
State Auto Insurance Company of Ohio
-
Meridian Citizens Mutual Insurance Company
-
Meridian Security Insurance Company
For Best’s Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including
any additional methodologies and factors that may have been considered,
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals and
health care system providers. For more information, visit www.ambest.com.
