AM Best Downgrades Credit Ratings of United Fire Group, Inc. and Its Property/Casualty Subsidiaries

Rhea-AI Summary

AM Best downgrades Financial Strength Rating of United Fire Group, Inc. subsidiaries to A- from A, stable outlook

Positive

• Balance sheet strength assessed as very strong
• Stable outlook reflects expectation of stabilization in operating performance and balance sheet fundamentals

Negative

• Downturn in operating performance through June 30, 2023
• $53.0 million in reserve strengthening
• Elevated catastrophe losses
• Adverse reserve development in other liability line of business

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” (Excellent) from “a” (Excellent) of the property/casualty (P/C) subsidiaries of United Fire Group, Inc. (UFG) [NASDAQ: UFCS] (collectively known as United Fire & Casualty Group), which operate under an intercompany pooling agreement led by United Fire & Casualty Company. Concurrently, AM Best has downgraded the Long-Term ICR to “bbb-” (Good) from “bbb” (Good) of UFG. The outlook of these Credit Ratings (ratings) has been revised to stable from negative. All companies are headquartered in Cedar Rapids, IA. (See below for a detailed listing of the companies and ratings.)

The ratings reflect United Fire & Casualty Group’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

The stable outlooks reflect AM Best’s expectation of stabilization in United Fire & Casualty Group’s operating performance and balance sheet fundamentals over the intermediate term given management’s initiatives intended to improve operating performance.

The rating downgrades were driven by the downturn in the group’s operating performance through June 30, 2023, which included $53.0 million in reserve strengthening across multiple casualty lines and across multiple accident years, elevated catastrophe losses, a small number of large surety losses, and the impact of surety reinsurance reinstatement premiums.

The ratings also consider the group’s diversified product offerings, long-standing agency relationships, solid regional franchise and the financial flexibility afforded by UFG. These positive rating factors are offset partially by the competitive market conditions and resulting adverse reserve development, particularly in its other liability line of business, product liability and commercial auto occurring during the second quarter of 2023. In addition, the group maintains exposure to potential catastrophe and weather-related losses. The Long-Term ICR of UFG recognizes the capital strength of its operating subsidiaries.

The FSR has been downgraded to A- (Excellent) from A (Excellent) and the Long-Term ICRs downgraded to “a-” (Excellent) from “a” (Excellent) with outlooks revised to stable from negative of United Fire & Casualty Company and its following P/C subsidiaries:

• Lafayette Insurance Company
• Addison Insurance Company
• United Fire & Indemnity Company
• United Fire Lloyds
• Mercer Insurance Company
• Financial Pacific Insurance Company
• Mercer Insurance Company of New Jersey, Inc.
• Franklin Insurance Company
• UFG Specialty Insurance Company

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Gordon McLean

Senior Financial Analyst

+1 908 882 2109

gordon.mclean@ambest.com

Christopher Sharkey

Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com

Raymond Thomson

Associate Director

+1 908 882 2394

raymond.thomson@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best