AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “bb+” (Fair) from “bb” (Fair) and affirmed the Financial Strength Rating (FSR) of B (Fair) of First Chicago Insurance Company and United Security Insurance Company. The outlook of the Long-Term ICRs has been revised to stable from positive, while the outlook of the FSR is stable. Both companies are domiciled in Bedford Park, IL and are collectively known as First Chicago Insurance Group (First Chicago).

The Credit Ratings (ratings) reflect First Chicago’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The upgrade of the Long-Term ICRs reflects enhancements to the group’s ERM framework that include measurable risk appetite and tolerance statements, as well as the formalization of a structured program as it relates specifically to insurance operations. Management has been memorializing and enriching the ERM function diligently within its organization over the past few years. A new ERM committee has been established to fortify the regular review of a new ERM dashboard, which tracks known risks to ensure the group remains within its appetite and to identify emerging issues proactively. A risk register was created to identify key insurance risks as it relates to underwriting, catastrophe, credit and investment risks. First Chicago’s process includes stress testing and mitigation strategies to ensure that adequate capital is maintained to support growth initiatives. These initiatives have established an appropriate ERM program as it pertains to the group’s risk profile.

First Chicago’s balance sheet strength is supported by a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at the 99.6 VaR. Notably, while the BCAR score only marginally surpasses the threshold to be considered very strong, it illustrates material improvement from prior reviews where risk-adjusted capitalization was considered adequate. Improvement reflects surplus growing over 200% during the most recent five-year period. Premiums also increased at a similar pace, owing to market dislocation that generated considerable opportunity within the non-standard auto space, coupled with rate increases to reflect increasing severity trends. In more recent years, and reflective of mechanisms used to control growth, surplus has outpaced premium growth leading to moderation in net underwriting leverage metrics, though they remain above the composite averages. Further, starting in 2024 and continuing into 2025, management has been strengthening reserves to reflect rising loss costs trends, considerably increasing ultimates in 2025 with the intent to curb prospective development. While this translated into unfavorable development, reserves are held moderately above the external actuary’s point estimate. AM Best will continue to monitor reserving trends as it relates to First Chicago’s overall balance sheet strength assessment.

The growth in the portfolio considerably grew risk-free income via material policy fees, which drove surplus growth over the five-year period, along with net investment income and to a lesser extent underwriting income. The group reported sub-100 combined ratios in four of the past five years. Management has been diligent with its growth initiatives, implementing moratoriums when necessary and an affiliated quota share in order to reduce the related underwriting risk and capital requirements. The group remains committed to the non-standard auto market, writing mainly personal lines but also growing its commercial book of business.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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