Old United Casualty

Rating Rationale: This rating reflects Old United Casualty Company’s (OUC) sustained operating profitability, solid internal surplus generation, and management’s highly specialized underwriting expertise. These positive rating factors are partially offset by elevated unearned premium reserve leverage due to long-duration vehicle service contracts. The rating outlook is based on the expectation for continued strong core underwriting results and a continued level of risk-adjusted capital that is supportive of the current rating.

These positive rating factors are derived from OUC’s favorable pre-tax operating returns over the past five years, conservative balance sheet, and the synergies gained from being affiliated with Van Enterprises, Inc. OUC specializes in providing vehicle service contracts to affiliated automobile dealerships that are owned by its ultimate parent, Van Enterprises, Inc. Through this affiliation, OUC benefits from the marketing and distribution platforms provided by these affiliated dealerships. Consistent with other automobile warranty writers, loss reserve leverage measures are not material, as the bulk of liabilities and risk resides in the unearned premium reserve that is held to fund latent warranty claims as they develop and is elevated due to the multi-year earning pattern of extended warranties.