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| [November 13, 2012] |
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A.M. Best Affirms Ratings of Standard Casualty Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer crediting rating "a-" of Standard Casualty
Company (Standard Casualty) (New Braunfels, TX). The outlook for all
ratings is stable. Standard Casualty is a subsidiary of Cavco Industries
Inc. (Delaware Corporation) [NASDAQ: CVCO], a manufacturer of
factory-built homes.
The rating actions reflect Standard Casualty's adequate risk-adjusted
capitalization, excellent local market knowledge and generally favorable
operating results. Standard Casualty has shown a historical pattern of
net earnings driven by its conservative underwriting philosophy and a
steady stream of investment income. As a result, the company has
reported positive pre-tax operating gains in four of the last five years
(2007 - 2011). The exception being 2011, in which the company was
adversely impacted by weather-related events and wildfire losses.
Furthermore, Standard Casualty's investment portfolio is fairly
conservative and has been the primary driver of pre-tax operating gains.
In addition, balance sheet liquidity is excellent and the company has
generated positive operating cash flow in most years.
These positive rating factors are partially offset by Standard
Casualty's aggressive growth mainly in Arizona and New Mexico and its
recent operating losses driven by frequent and severe weather-related
events. As a result, underwriting losses were reported in 2011 and have
continued into 2012. A.M. Best anticipates that Standard Casualty may
experience underwriting volatility due to its anticipated aggressive
growth and inherent exposure to frequent and severe weather-related
events. In addition, as a predominate Texas writer, Standard Casualty is
exposed to potential judicial, regulatory and economic concerns.
However, these risks are partially mitigated as the company historically
has adhered to strict underwriting guidelines and a conservative
operating philosophy.
In future rating cycles, pressure may be put on Standard Casualty's
ratings and outlook should its growth strategy result in operating
losses and loss of surplus, which may lead to weaker risk-adjusted
capitalization.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best's rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilized include: "Risk Management and the Rating Process for Insurance
Companies"; "Understanding BCAR for Property/Casualty Insurers"; and
"Rating Members of Insurance Groups." Best's Credit Rating Methodology
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
RESERVED.
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