Unitrin Downgraded by A.M. Best

A.M. Best Co. downgraded the financial strength ratings of Dallas-based Unitrin Property and Casualty Insurance Group (Unitrin) to “A” (Excellent) from “A+” (Superior) and removed them from under review. Additionally, an “a-” senior debt rating was assigned to Unitrin Corp.’s existing debt securities and the following indicative ratings to the remaining $200 million under the company’s $500 million shelf registration: senior debt “a-“; subordinate debt “bbb+” and preferred stock “bbb.”

The financial strength ratings of Unitrin property/casualty affiliates were affirmed. They include: Capital County Mutual Fire Insurance Co., “A” (Excellent); Old Reliable Insurance Co., “A-” (Excellent); and United Casualty Insurance Co. of America, “A” (Excellent).

The downgrade reflects Unitrin’s unfavorable operating earnings over recent years and decline in capitalization. Operating returns show rising underwriting losses across the group’s core business segments-attributable to inadequate premium rates, increasing loss cost trends, weather-related losses, elevated expenses and adverse loss reserve development. Unitrin also faces limited execution risk resulting from the renewal rights acquisition of Kemper Insurance Companies’ personal lines business, which will add significant net written premium to the group’s operations. Kemper’s business will operate as a separate business segment; the operational infrastructure was acquired in the transaction.

The Excellent ratings reflect Unitrin’s solid capitalization and balanced book of business among personal and commercial lines. These positive rating factors are derived from a diversified product offering, strong regional market presence, long-standing independent agency relationships and prudent catastrophe exposure management.