S&P Rates CA State Auto Association Inter-Insurance Bureau 'Api'

29 September 1998

S&P Asgns CA State Auto Assn. Inter-Ins. 'Api' Rtg

    NEW YORK--Sept. 29, 1998--NY--Standard & Poor's CreditWire 9/29/98 - Standard & Poor's today assigned its single-'Api' insurer financial strength rating to California State Auto Association Inter-Insurance Bureau.
    California State Auto Association Inter-Insurance Bureau is licensed in Utah, Nevada, and California. With $1.6 billion in surplus it is a large insurer, whose major line of business is private passenger auto liability. The company commenced operations in 1914 and the principle state in which it operates is California.
    Below is a summary of the analysis that resulted in a rating of single-'Api'.
    -- Capital adequacy as measured by Standard & Poor's capital adequacy model is over 300%, which is superior. The company's rating is based on stand-alone characteristics.
    -- The company has a product and geographic concentration in California where it writes over 95% of its direct business, a limiting factor.
    -- The two-year development of reserves to surplus has displayed more volatility than higher rated companies.
    -- The company's five-year average return on revenue is 15.6%. However, when adjusted for risk, the company scores below the median of higher rated insurers.
    '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