A.M. Best Affirms Ratings of Auto-Owners Insurance Group and

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of “aa+” of Auto-Owners Insurance Group (AOIG) (Lansing, MI) and its members. AOIG is comprised of five property/casualty companies led by Auto-Owners Insurance Company (Lansing, MI) and four wholly owned subsidiaries.

Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and ICR of “aa-” of Auto-Owners Life Insurance Company (AOLIC) (Lansing, MI), a wholly owned subsidiary of Auto-Owners Insurance Company. The outlook for all ratings is stable. (See below for a detailed listing of the companies.)

The ratings reflect AOIG’s superior capitalization, trend of solid operating earnings, diversified product offerings and well-established agency relationships. These positive factors are partially offset by the group’s declining underwriting income and concentration of business in Michigan, its leading state for premium production, which exposes it to challenging economic, legislative and regulatory environments. Additionally, a significant portion of AOIG’s business is exposed to weather-related catastrophic losses and adverse legislative and regulatory actions in Florida, its second-largest state for premium production.

AOIG developed a strong capital position as a result of being managed under a conservative operating philosophy, maintaining modest underwriting leverage measures and holding a highly rated fixed income investment portfolio. The group possesses a competitive advantage through its superior claims service and agency partnering approach, which strengthened agency loyalty. During the past five years, the group’s operating results benefited from increased pricing, greater underwriting scrutiny and increased policy retention and net investment income.

AOIG’s total income during the past five-year period was impacted by declining underwriting results and capital losses primarily in its common stock portfolio. Underwriting income was impacted by weather-related losses emanating from Florida hurricane losses in 2004, Midwestern tornado/ hail and winter storms in 2008, rising loss costs in its core personal automobile book and increased loss frequency and severity trends in homeowners. Additionally, the group’s profitability was challenged by underwriting and market risks associated with its business in Florida and Michigan.

While the ratings acknowledge AOIG’s strong market presence as one of the 20 largest property/casualty insurance organizations in the United States with more than $4.2 billion in net written premium at year-end 2008, premium growth has declined over the past three years. Additionally, the ratings are based on the consolidated financial results of the subsidiaries.

AOLIC’s ratings recognize its integral role as the life/health and annuity company of AOIG, its superior level of risk-adjusted capitalization and the benefits it receives from AOIG’s strong capital base. AOLIC maintains a favorable trend of statutory operating results and new business production even as the company’s overall contribution to the group remains modest relative to the overall enterprise.

The FSR of A++ (Superior) and ICRs of “aa+” have been affirmed for Auto-Owners Insurance Group and its following members:

• Auto-Owners Insurance Company
• Home-Owners Insurance Company
• Owners Insurance Company
• Property-Owners Insurance Company
• Southern-Owners Insurance Company

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.