The upgrading of the ICR reflects Shelter Lifeís role as an important strategic subsidiary of Shelter Mutual, its integration within the group and the implicit support provided by Shelter Mutual. The ratings also recognize Shelter Lifeís strong risk-adjusted capitalization, favorable operating performance and its focus on traditional ordinary life distributed through its property/casualty agents.
Offsetting rating factors include geographic concentration of its in-force business, its dependence on a single multi-line distribution channel, limited product portfolio and a modest overall market profile.
The rating affirmations for the property/casualty operations acknowledge their solid risk-adjusted capitalization, overall improved operating performance, conservative reserving philosophy and diverse business profile. These positive rating factors are partially offset by the group's exposure to frequent and severe weather-related events and earthquakes. However, these exposures are manageable and partially mitigated through a comprehensive reinsurance program.
While the ratings and outlook were affirmed, negative rating movements could occur if there is a continuation of the deterioration in operating results that occurred in 2011, driven by significant catastrophe losses causing capitalization to erode.
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.
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Senior Financial Analyst
Assistant Vice President, Public Relations