AM Best has revised the outlooks to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICRs) and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term ICRs of “bb” (Fair) of First Chicago Insurance Company (FCIC) and United Security Insurance Company (USIC). 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 marginal enterprise risk management (ERM).

The revised outlook for the Long-Term ICR to positive from stable reflects improving balance sheet strength metrics heavily influenced by robust surplus growth in four of the past five years (2019-2023) and continuing through 2024. This was primarily driven by First Chicago’s policy fee income and partially offset by its corresponding growth in both net written premium and net loss reserves. AM Best expects prospective risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), to benefit from the recent implementation of an affiliated quota share agreement that will improve the group’s underwriting leverage metrics and subsequently provide surplus relief. The positive outlook further considers enhancements to the group’s ERM framework that includes measurable risk appetite and tolerance statements. Recent updates have focused on key balance sheet components including underwriting risk, catastrophe risk, credit risk and investment risk. First Chicago’s ERM process also includes stress testing and mitigation strategies to ensure that proper capital is maintained to support growth initiatives. While not yet fully mature, management continues to actively enhance the ERM framework to integrate a more formalized structure, specifically as it relates to insurance risks.

First Chicago’s operating performance has been generally favorable over the past five years, primarily driven by fee income and net investment income, and partially offset by volatility in underwriting results. The group’s favorable combined and operating ratios benefit from refined underwriting practices, enhanced pricing sophistication and recent diversification efforts. This position is partially offset by commission costs that are strategically used to support business initiatives that subsequently elevate the expense position. The limited business profile reflects First Chicago’s product and geographic concentration as its operations are largely focused on non-standard automobile and, to a lesser extent, public transportation and commercial auto liability business. Despite maintaining strong producer partnerships that facilitate recent expansion efforts, over 80% of the group’s direct written premium is derived from Illinois, Texas, Pennsylvania and Indiana.

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