The ratings of
Although real estate market conditions have shown some improvement recently, the group will be challenged to manage and sustain operating performance through the current macro-economic environment, which could hinder the rebound in real estate market activity, due to increased mortgage interest rates and changes in the legal and regulatory environment.
Negative rating actions could occur if a lack of underwriting discipline results in operating performance deteriorating to a level below peers. In addition, any erosion of surplus that causes a significant rise in the group’s underwriting leverage measures could result in rating action.
The ratings of First American PC Companies reflect the group’s relatively strong risk-adjusted capitalization. The group has also seen somewhat stable operating results over the most recent five-year period, derived from its strict underwriting discipline and loss control guidelines, which have resulted in measurable underwriting profitability over the long term. The Long-Term ICR also recognizes First American PC Companies’ use of multiple distribution channels to market its products. Besides brokers and independent agents, First American PC Companies is able to leverage FAF’s advanced computer systems and title distribution networks to facilitate direct escrow sales of homeowners’ insurance.
Partially offsetting these positive rating factors are First American PC Companies’ geographic concentration and exposure to catastrophic loss events, as well as an increase in underlying claim frequency on their portfolio.
Negative rating actions could occur if a lack of underwriting discipline results in operating performance deteriorating to a level below peers. In addition, any erosion of surplus that causes a significant rise in the group’s underwriting leverage measures could also result in rating action.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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