OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength ratings of A (Excellent) and the issuer credit ratings of “a+” for Old United Casualty Company (OUC) and Old United Life Insurance Company (OUL). The outlook for all ratings is stable. Both companies are headquartered in Shawnee Mission, KS.
The ratings of OUC reflect the company’s sustained operating profitability, solid internal surplus generation and management’s highly specialized underwriting expertise. These positive rating factors are partially offset by elevated unearned premium reserve leverage due to long-duration vehicle service contracts. The outlook is based on the expectation for continued strong core underwriting results and a level of risk-adjusted capital that remains supportive of the current ratings.
The positive rating factors are derived from OUC’s favorable pre-tax operating returns, conservative balance sheet and the synergies gained from being affiliated with Berkshire Hathaway, Inc. (Berkshire), its ultimate parent. OUC specializes in providing vehicle service contracts to affiliated automobile dealerships that are owned by Berkshire Hathaway Automotive. Through this relationship, OUC benefits from the marketing and distribution platforms provided by these dealerships. Consistent with other automobile warranty writers, loss reserve leverage measures are not material, as the bulk of liabilities and risks reside in the unearned premium reserve that is held to fund latent warranty claims as they develop and is elevated due to the multi-year earning pattern of extended warranties.
While A.M. Best believes OUC is well-positioned at its current rating level, positive rating action could occur if potential synergies or expansion of its business profile are realized through its affiliation with Berkshire. Negative rating action could occur if risk-adjusted capital or operating performance falls markedly short of A.M. Best’s expectations, including a significant deterioration in loss trends or an unforeseen disruption in its distribution. Negative rating pressure also could occur if the business profile or relative importance of the company to Berkshire Hathaway Automotive materially changes.
The ratings of OUL reflect A.M. Best’s view of its fully integrated role within the Old United Group, its ability to market credit insurance product offerings and the collaboration gained by common management, marketing platforms and shared services. OUL has strong risk-adjusted capitalization, a positively trending operating profile and maintains high levels of liquidity to meet its short-term obligations. Offsetting factors include the company’s modest operating earnings and a business profile, which historically has been limited given its concentration in credit life and credit accident and health products.
While A.M. Best believes OUL is well-positioned at its current rating level, positive rating action could occur if potential synergies or expansion of its business profile are realized through its affiliation with Berkshire. Negative rating actions could occur if OUL’s risk-adjusted capitalization or operating performance falls markedly short of A.M. Best’s expectations. Additionally, negative rating pressure could also occur if the business profile or strategic importance of OUL to the group was to materially decline, or if there was a negative rating action taken on OUC.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
- A.M. Best's Liquidity Model for U.S. Life Insurers
- Evaluating Non-Insurance Ultimate Parents
- Understanding BCAR for U.S. and Canadian Life/Health Insurers
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
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