A.M. Best Affirms Ratings of Unitrin, Inc.; Upgrades Ratings of Mutual Savings Fire and Mutual Savings Life

Business Wire, May 5, 2008

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Unitrin Property and Casualty Insurance Group (Unitrin) and some of its members. The outlook for these ratings is stable.

A.M. Best also has continued the under review with negative implications status of the FSRs of A (Excellent) and ICRs of "a" of the remaining members of Unitrin: Milwaukee Casualty Insurance Company (Brookfield, WI), Security National Insurance Company, Trinity Lloyd's Insurance Company (both of Dallas, TX) and Trinity Universal Insurance Company of Kansas, Inc. (Topeka, KS). These ratings will remain under review with negative implications pending the close of their sale to AmTrust Financial Services, Inc. (AFSI) (Delaware).

Concurrently, A.M. Best upgraded the FSR to B (Good) from C (Marginal) and ICR to "bbb-" from "b" of a recently acquired and separately rated subsidiary of Unitrin, Mutual Savings Fire Insurance Company (Decatur, AL). These ratings have been removed from under review and assigned a positive outlook.

Additionally, A.M. Best has affirmed the ICR of "bbb" and debt ratings of the outstanding senior notes of Unitrin's parent, Unitrin, Inc. (Chicago, IL) (NYSE:UTR). The outlook for these ratings is stable.

In addition, A.M. Best has affirmed the FSR of A (Excellent) and ICRs of "a" of United Insurance Company of America (UICA) (Chicago, IL), Union National Life Insurance Company (Baton Rouge, LA) and The Reliable Life Insurance Company (St. Louis, MO), the three career agent life/health insurance subsidiaries of Unitrin, Inc. At the same time, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of "a-" of Reserve National Insurance Company (RNIC) (Oklahoma City, OK), the independent agent life/health insurance subsidiary of Unitrin, Inc. The outlook for these ratings is stable.

A.M. Best also has upgraded the FSR to B (Good) from B- (Fair) and ICR to "bbb" from "bb-" of Mutual Savings Life Insurance Company (MSL) (Decatur, AL), a recently acquired subsidiary of Unitrin, Inc. These ratings have been removed from under review with positive implications and assigned a stable outlook. (See link below for a detailed listing of the companies and ratings.)

Unitrin's ratings reflect its solid operating income in recent years, geographic spread of risk and operational support of its parent. These positive rating factors are partially offset by the group's elevated underwriting and investment leverage ratios. Unitrin's outlook is based on the solid operating performance in recent years.

Mutual Savings Fire Insurance Company's ratings recognize its improved underwriting leverage measures, return to profitable operating performance in recent years, reduced exposure to weather-related losses and the support of Unitrin, Inc. Partially offsetting these positive rating factors is the company's geographic concentration in Alabama and Mississippi and its limited product offerings. The outlook reflects the expectation that the company eventually will be covered by a reinsurance contract with Unitrin's lead company, Trinity Universal Insurance Company (Dallas, TX).

The ratings of the life/health career agent subsidiaries reflect their important role within the Unitrin, Inc. organization, strong niche presence in the home service life insurance market, a well established employee agency field force and overall positive operating performance. Furthermore, A.M. Best believes that the risk-adjusted capitalization of the three life/health career agent subsidiaries, both on a combined and stand-alone basis, remains sufficient despite large dividend payments made to Unitrin, Inc. over the past several years.

Partially offsetting these positive rating factors is A.M. Best's belief that the life/health career agent subsidiaries may be challenged to sustain organic premium growth given the limited growth potential in the mature home service market and to sustain and improve upon historical earning results given the reduced levels of invested assets and the current low interest rate environment.

The ratings of RNIC acknowledge its improved accident and health premium trends, favorable operating performance and adequate stand-alone risk-adjusted capitalization. Partially offsetting these positive rating factors is the challenge for RNIC to sustain its operating performance given its limited business profile marketing accident and health insurance products and Medicare supplement insurance to individuals and small business owners living in rural areas.

The rating actions on MSL follow the completion of the acquisition of MSL's former parent, Primesco, Inc. by Unitrin, Inc. on April 1, 2008. A.M Best believes MSL will benefit from its new parent through additional financial flexibility and expanded marketing resources while modestly enhancing Unitrin, Inc.'s market share in the home service and limited supplemental health benefit segments and expanding Unitrin, Inc.'s geographic footprint. Additionally, A.M Best believes that MSL will be modestly accretive to Unitrin, Inc.'s earnings. The rating actions also reflect MSL's profitable operating performance and the expected improvement in both the company's absolute levels of capital and surplus and stand-alone risk-adjusted capitalization.