Standard & Poor’s Ratings Services said today that it affirmed its “BBB” counterparty credit and financial strength ratings on American Fire & Casualty Co., Ohio Casualty Insurance Co., Ohio Security Insurance Co., and West American Insurance Co., which make up the Ohio Casualty Insurance Co. Intercompany Pool (OCIP), based on the group’s adequate business position, improved strategic focus, good investment strategy, and improved financial flexibility at the holding company level.
Partially offsetting these factors are the slower-than-expected improvements to OCIP’s operating performance since the implementation of its new strategic plan in 2001, modestly declining premium volume because of continued restructuring and re-underwriting actions, lower-than-expected capital adequacy at the operating level, and continued high expense structure.
S&P’s also said that it affirmed its “BB” counterparty credit and senior debt ratings and its preliminary “BB-” subordinated debt rating on Ohio Casualty Corp. (OCC), OCIP’s parent holding company.
The outlook on all these companies is negative, which reflects risk related to the pool’s restructuring efforts, according to credit analyst Laline Carvalho.
OCIP ranks among the 40 largest property/casualty writers in the U.S., with net premium written of $1.45 billion in 2002. Following the entrance of a new management team in 2001, OCIP began implementing a new strategic plan to restructure and re-underwrite the group’s book of business to steer the group back into profitability.
Among the main actions taken were the non-renewal of unprofitable business, including the elimination of in monoline workers’ compensation business and business written through unprofitable agents; the cancellation of contracts with managing general agents; and the exit from the New Jersey private passenger auto business. In addition, the group is taking significant rate increases in both its commercial lines and personal lines operations. Operating performance is expected to improve over the next two years.
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