Best Downgrades American Live Stock to ‘A’ after Hiscox Buy

A.M. Best Co. has downgraded the financial strength rating (FSR) to “A” (Excellent) from “A+” (Superior) and the issuer credit rating to “a” from “aa-“of American Live Stock Insurance Company (ALS) of Geneva, Ill. Best also removed the ratings from under review with negative implications and assigned a stable outlook.

Best explained that the rating actions resulted from “the recent announcement that Hiscox Ltd., the Bermuda-based holding company of the Hiscox Group, has received regulatory approval completing its acquisition of ALTHOA, Inc., an insurance holding company, and its subsidiaries, ALS and Harding & Harding, Inc., an affiliated insurance agency.

“The rating actions reflect the anticipated changes in ALS’ business profile due to growth expectations in the company’s existing book of business, as well as the new professional indemnity product offerings to be introduced by Hiscox,” Best continued. “The downgrades also recognize the challenges and uncertainties emanating from the successful execution of ALS’ business plans amid increasingly competitive market conditions.”

However, Best assigned a stable outlook, as it believes “that the company will sustain favorable risk-adjusted capitalization and operating performance, while maintaining moderate underwriting leverage measures.”

Hiscox purchase of ALS is the latest in its drive to establish a strong presence in U.S. niche and specialty markets. The Company moved its corporate domicile from London to Bermuda last year (See IJ web site Oct. 25, 2006, Jan. 11, 2007) in order to facilitate management of its increased presence in the U.S.

As Best notes “Hiscox is a specialist insurance group listed on the London Stock Exchange,” and can be expected to bring “considerable expertise to ALS including a strong management team, improved technology platform and greater capital
flexibility.

“The acquisition gives Hiscox the opportunity to expand its existing U.S. operations and product offerings through ALS’ admitted status in all 50 states. ALS’ current core business focuses on animal mortality insurance for cattle and horses and is a complementary fit to the bloodstock business written by Hiscox.”

Source: A.M. Best – www.ambest.com/ratings