Standard & Poor's Ratings Service has affirmed the rating of United Fire & Casualty Co. and the company's wholly owned subsidiaries and removed them from credit watch with negative implications.
The companies, with financial strength ratings of "A," were placed on credit watch on Sept. 9. However, S&P said the company and its subsidiary's outlook remains negative.
"The ratings on United Fire & Casualty Co. are based on the company's solid profitability excluding catastrophe losses, improved capitalization from historical levels, and diversified earnings stream," said Tom E. Thun, S&P credit analyst.
Mr. Thun said that, "Offsetting these positive factors in part is the company's competitive position as a local service insurer that can be easily duplicated…"
He also cited the company's catastrophe exposure and earnings vulnerability to a soft market.
S&P added that if net losses continue to develop and exceed $125 million, both capitalization and earnings will be negatively affected and could potentially trigger a one-notch downgrade. The firm said if net losses from the hurricane stabilize as expected, the outlook will be revised to stable from negative.
On Dec. 2, the Cedar Rapids, Iowa-based carrier said it upped its estimate of catastrophe losses and loss settlement expenses resulting from Hurricanes Katrina and Rita, from approximately $74 million to $85 million including the impact of reinsurance, reinstatement premiums and tax benefits. The company said the revision would result in a $2.22-to-$2.66 decrease in its fourth-quarter earnings per share.
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