Ratings Roundup: Commerce, Northwind, Harbor Point Re (US)

Fitch Ratings has placed the following Commerce Group, Inc. (CGI) ratings and subsidiaries on Rating Watch Positive: Commerce Group, Inc. – Issuer Default Rating (IDR) at ‘BBB+’ – $300 million 5.95 percent senior notes due Feb. 26, 2013 at ‘BBB’ – Commerce Insurance Company – Citation Insurance Company – Commerce West Insurance Company – American Commerce Insurance Company. Fitch has assigned an insurer financial strength (IFS) rating of ‘A’ to the companies. The actions follow the Oct. 30, 2007 announcement that Spain’s MAPFRE S.A. has agreed to acquire CGI for $2.207 billion in cash (See IJ web site Oct. 30). Fitch said its decision “reflects potential benefits derived from the companies becoming a part of a much larger, multinational organization with a strong commitment to increase its presence in the US market. MAPFRE’s property casualty insurance subsidiary, MAPFRE Mutualidad, has an IFS rating of ‘AA-‘.” However, Fitch added that it “has concerns about the execution and operational risks associated with the transaction.”

Northwind Holdings LLC’s $800 million floating rate insured notes have been rated ‘AAA’ by Standard & Poor’s, A.M. Best and Fitch. S&P credit analyst Gary Martucci said the “rating on the notes is based on the ‘AAA’ financial enhancement rating on MBIA Insurance Corp., which will issue a financial guaranty insurance policy that guarantees the timely payment of scheduled interest payments on the notes and the repayment of principal on the legal final maturity date in October 2037. Fitch made a similar statement, and also addressed “the likelihood that noteholders will receive full payments of interest and principal in accordance with the terms of the transaction documents.” Best concurred in this analysis, and further explained that, “Northwind Holdings was formed for the limited purpose of holding the stock of Northwind Reinsurance Company (Northwind Re), issuing the notes and engaging in other activities incidental to the performance of the aforementioned items.”

A.M. Best Co. has assigned a financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” to Harbor Point Reinsurance U.S., Inc. (HPRUS), which is based in Greenwich, Conn., with a stable outlook. Best explained that HPRUS is a recently acquired member of Bermuda-based Harbor Point Re Limited, and “will provide reinsurance for casualty, property, marine and aviation and other specialty lines of business. Harbor Point and its subsidiaries provide direct reinsurance and operational support to HPRUS.” Best said it expects “HPRUS to perform in line with projections and maintain risk-based capitalization within required levels.” [Ed. Note: Harbor Point was created as a spin-off of the reinsurance operations of Chubb Re, a subsidiary of Chubb Corp. Its initial capitalization was $1.3 billion.]