A.M. Best Assigns Rating to Infinity P/C’s Senior Debt Offering

A.M. Best Co. has assigned a rating of “bbb” to Alabama-based Infinity Property and Casualty Corporation’s $200 million senior secured term loan facility. The rating outlook is stable. The financial strength rating of A (Excellent) of Infinity’s insurance subsidiaries remains unaffected by this transaction.

A.M. Best expects proceeds from the senior debt issuance to be used primarily to fund insurance operations to repay a $55 million note payable to American Financial Group, Inc. (Cincinnati) and for general corporate purposes. Infinity’s financial leverage (debt to total capitalization) will be approximately 30 percent, which is manageable and within the range that A.M. Best anticipated. In addition, A.M. Best expects Infinity’s solid fixed charge coverage ratios of five to six times to be derived from expected favorable earnings.

The rating reflects Infinity’s excellent capitalization of the insurance operating entities and the historically favorable operating performance of the book of business. The rating also recognizes the group’s strong non-standard automobile market presence as one of the top non-standard auto insurance groups in the United States, with direct premiums written of approximately $905 million.

Somewhat offsetting these positive factors are the potential earnings fluctuations going forward due to localized market conditions and fraud activity prevalent in some key markets.

However, Infinity has pursued aggressive premium rate increases and will benefit from recent price firming throughout the non-standard auto market.