S&P Affirms Millers Classified Ins Co 'BBpi' Rating
21 July 2000
S&P Affirms Millers Classified Ins Co 'BBpi' Rating
NEW YORK - Standard & Poor's today affirmed its double-'Bpi' financial strength rating on Millers Classified Insurance Co.Key rating factors include improving but volatile earnings, gross catastrophe exposure and investment risk.
Based in Alton, Ill. (domiciled in Wisconsin), this company mainly writes personal auto and homeowner's insurance with an additional specialization in commercial agribusiness (including grain mills and elevators). All of the company's business lies within its major states of operation -- Wisconsin, Missouri and Illinois -- and its products are distributed primarily through an independent agent subsidiary and direct marketing. The company, which began business in 1982, is licensed in Colorado, Illinois, Iowa, Kansas, Missouri and North Dakota, and is a member of Millers First Insurance Cos., a mid-sized insurance group with 1999 surplus of $29.4 million.
Major Rating Factors:
| -- | Operating performance improved in 1999 but was still marginal, with a five-year average return on revenue of 2.1%. The gain in net income of $0.2 million in 1999 compared with the previous year was composed primarily of a gain of $0.3 million in net underwriting income offset by a decline of $0.1 million in net investment income earned. However, the company's historical returns have been very volatile with, for example, return on assets ranging from negative 7.3% to positive 6.9% over the last five years, a limiting factor. |
| -- | The company has a significant gross product line exposure to catastrophes. |
| -- | In 1999, the company had interest exposure, with the ratio of CMOs and loan-backed bonds at 1.0 times surplus. |
| -- | At year-end 1999, capital adequacy as measured by Standard & Poor's capital adequacy model remained extremely strong. The gain in surplus of $1.7 million from the previous year was composed entirely from a gain of $1.7 million in net income. |
Although the company is a member of Millers First Insurance Cos. and is 100% owned by Millers Mutual Insurance Assn. of Ill. (financial strength rating double-'Bpi'), the rating does not include additional credit for implied group support.
'pi' ratings, denoted with a 'pi' subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. 'pi' ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.
Ratings with a 'pi' subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said.--CreditWire
