Ohio Casualty Ratings Lowered

Standard & Poor’s (S&P) lowered 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., known collectively as the Ohio Casualty Insurance Co. Intercompany Pool (OCG), to “BBB.”

Concurrently, S&P lowered its “BB+” counterparty credit rating on Ohio Casualty Corp., the holding company, to “BB.” The outlook on these companies was revised from stable to negative.

Cited as major rating factors were OCG’s continued poor operating performance; declining capitalization; and the holding company’s limited financial flexibility. These negative factors were offset by the group’s improved strategic focus under the leadership of a new management team and continued restructuring and re-underwriting, which should yield gradual improvements in underwriting over the medium and long terms.

S&P stated that the negative outlook reflects concerns that over the short-term, OCG’s operating losses will continue to place pressure on the group’s capitalization, limiting interest coverage and reducing resources available for principal payment of the debt at the holding company. Furthermore, the rating company expressed the belief that any meaningful improvement in the group’s operating performance will be closely linked with management’s ability to implement its strategic plan successfully.

S&P also stated that a sustained improvement in operating performance and the successful refinancing or repayment of the debt at the holding company would be necessary to revise the outlook to stable. On the other hand, a significant deterioration in operating results or capitalization beyond S&P’s expectations could lead to a further downgrade.

Topics Ohio Casualty