A.M. Best Co. upgraded the financial strength rating of Peoria, Ill.-based property/casualty insurer RLI Group to “A+” (superior) from “A” (excellent) of RLI Group (RLI). Additionally, RLI Indemnity Co.’s financial strength rating has been upgraded to “A+” (superior) from “A-” (excellent). Formerly a stand-alone rating, Best said RLI Indemnity is now group-rated based on a 90 percent quota share reinsurance arrangement with RLI Insurance Co., currently in place.
Best also has upgraded the debt rating of RLI Corp.’s existing $100 million 5.95 percent senior unsecured notes, due January 2014 to “a-” from “bbb+”. The outlook for all ratings has been revised to stable from positive.
Best said the rating actions follow RLI’s sustained operating profitability, enhanced capitalization and the financial flexibility afforded by its access to the capital markets, as demonstrated by RLI Corp.’s successful $115 million secondary common stock offering in December 2002 and $100 million senior debt offering in December 2003.
Partially offsetting are the challenges associated with RLI’s high equity leverage, increased debt service obligations, reinsurance dependence and significant susceptibility to natural and man-made catastrophe losses. Additionally, approximately 24 percent of RLI’s overall premium is written in California.
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