The affirmation of the ratings for Pekin reflects its solid risk-adjusted capitalization, conservative investment risk profile and consistently favorable loss reserve development over the past several years. Pekinís increase in policyholdersí surplus over the past five years was derived primarily from pre-tax earnings driven by solid investment income, capital gains and other surplus gains, which were partially offset by underwriting losses mostly attributed to significant weather-related events. Considering the groupís experienced management team, broad product offerings and well-established regional market presence, continuation of its trend of steady growth in surplus is expected in the near term.
These positive rating factors are partially offset by Pekinís geographic concentration in Midwestern states, which subjects its operating performance to volatility from frequent and severe weather-related events as observed in recent years amid challenging market conditions. While the groupís underwriting performance lags the private passenger standard automobile & homeowners composite, its overall performance is consistent with other mutual companies in its region as reflected by fairly consistent growth in surplus over the past 10 years.
Based on recent corrective initiatives, it is managementís expectation that Pekin will be positioned for sustained improvement in operating profitability that is commensurate with its current ratings. However, negative rating actions will occur if Pekinís operating performance does not meet A.M. Bestís expectations and/or significant deterioration in operating results or risk-adjusted capitalization were to occur.
The ratings of Pekin Life acknowledge itsstrong level of risk-adjusted capitalization, diversified product portfolio and steady premium growth within its ordinary life segment.
Partially offsetting these positive rating factors is Pekin Lifeís continued fluctuating operating results, as evidenced by a statutory net operating loss of
Positive rating actions could occur for Pekin Life if
The methodology used in determining these ratings is Bestís Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestís rating process and contains the different rating criteria employed in the rating process. Bestís Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS
Maurice ThomasóP/C, 908-439-2200, ext. 5794
Senior Financial Analyst
Mike AdamsóL/H, 908-439-2200, ext. 5133
Senior Financial Analyst
Assistant Vice President, Public Relations