Ratings Recap: Safe, Philadelphia, Premier, Starr Indemnity, Hanover, LUBA, Premier, American Underwriters

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘B++’ (Good) and issuer credit rating (ICR) to “a-” from “bbb” of Safe Insurance Company of Huntington, W.Va. with stable outlooks. “The ratings reflect Safe’s strong risk-adjusted capitalization and favorable operating results over the long term,” said Best. “These results are due to Safe’s solid underwriting performance and favorable investment income. The ratings further recognize management’s niche market expertise and conservative operating strategy. Partially offsetting these positive rating factors is Safe’s elevated expense structure and geographic concentration. As a predominant property writer with a single state concentration, earnings are exposed to localized and severe weather-related events, as well as regulatory and competitive market pressures. However, management’s product offering and reinsurance program have tempered these risks.”

A.M. Best Co. has upgraded the ICR to “a-” from “bbb+” of Philadelphia Consolidated Holding Corp. of Bala Cynwyd, Penna. and affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-“of Philadelphia Insurance Companies and its members. Best has also affirmed the FSR of ‘A-‘ (Excellent) and ICRs of “a-” of Liberty American Insurance Group and its members. Philadelphia Consolidated is the parent holding company of the member companies of Philadelphia and Liberty American. The outlook for all ratings is stable. “The ICR of Philadelphia Consolidated acknowledges its excellent balance sheet strength and considerable financial flexibility,” Best explained. “For liquidity purposes, Philadelphia Consolidated maintains a $50.0 million revolving credit facility, of which $15.0 million was available as of March 31, 2008. In addition, the two insurance companies that comprise Philadelphia are members of the Federal Home Loan Bank of Pittsburgh (FHLB), providing a borrowing capacity of approximately $736.9 million as of March 31, 2008. The rating actions on Philadelphia recognize its consistently superior operating results, strong capitalization and excellent market presence as a writer of specialty commercial business. The ratings also acknowledge the group’s excellent operating cash flow, solid liquidity measures and the financial flexibility of Philadelphia Consolidated.” Best said its rating actions on Liberty American “reflect its strong capitalization and adequate liquidity in support of the current plan not to renew all of the Florida-domiciled group’s personal lines business, except for the business it writes under the National Flood Insurance Program. These positive rating factors are partially tempered by Liberty American’s narrow geographic concentration and the inherent susceptibility of its run-off book of Florida property business to catastrophe losses.

A.M. Best Co. has upgraded the issuer credit rating (ICR) to “bbb+” from “bbb” and affirmed the financial strength rating (FSR) of ‘B++’ (Good) of Premier Group Insurance Company, and has revised its outlook on the ratings to positive from stable. “The ratings reflect Premier’s very good capitalization and liquidity, low leverage and conservative investment portfolio,” said Best. “The ratings also recognize Premier’s solid operating performance driven by strong underwriting results, which compare favorably to the workers’ compensation industry composite averages. The rating also considers the financial benefits and enhanced business profile derived from Premier’s ultimate parent company, National HealthCare Corporation (NHC). Premier has leveraged its monoline focus and its role within NHC to achieve consistently profitable underwriting results.”

A.M. Best Co. has assigned a financial strength rating (FSR) of ‘A’ (Excellent) and an issuer credit rating (ICR) of “a” to Dallas-based Starr Indemnity & Liability Company (SILC), an indirect wholly-owned subsidiary of Panama-based Starr International Company, Inc. (SICO), a private investment holding company. The outlook for both ratings is stable. “SILC currently participates in quota-share reinsurance programs managed by a group of specialized insurance agency subsidiaries of Starr Underwriting Agencies, LLC (SUA), a subsidiary of C.V. Starr & Co., Inc.,” said the bulletin. “These programs focus on specialty commercial lines, and the company expects to participate on several other programs later in 2008. The company also plans to distribute certain products directly. The initial ratings reflect SILC’s sound business plan, solid risk-adjusted capitalization and its existing relationships with the various parties who will also be involved in the programs in which SILC intends to participate and the quality of those other participants. SILC benefits from the management, underwriting, claims handling and loss control expertise provided by the SUA agencies. While it is expected that the diversification of SILC’s business across several commercial lines will minimize the impact of any specific event on the company, SILC has purchased third-party reinsurance to limit its net
exposures on a per risk basis and to catastrophic events.

Standard & Poor’s Ratings Services has raised its counterparty credit rating on Hanover Insurance Group Inc. (THG) to ‘BBB-‘ from ‘BB+’. S&P also raised its counterparty credit and financial strength ratings on Hanover Insurance Co., Citizens Insurance Co. of America, and THG’s other rated property/casualty affiliates (collectively referred to as Hanover) to ‘A-‘ from ‘BBB+’. The outlook on THG and Hanover is stable. “The rating actions reflect the company’s good competitive position and the successful execution of management’s strategy to refocus the company on its property/casualty business,” explained credit analyst John Iten. “They were also based on its improved operating performance, strong capital position, and very strong financial flexibility.” S&P also noted: “Over the past two years, Hanover’s underwriting results have improved significantly. Operating company capitalization at year-end 2007 was strong for the rating level. Another positive factor is the favorable outcome in 2007 of litigation in Louisiana over the flood exclusion language in Hanover’s policies and its applicability to flooding caused by levee breaks during Hurricane Katrina.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and assigned an issuer credit rating (ICR) of “a-” to LUBA Casualty Insurance Company of Baton Rouge, both with stable outlooks. “The rating reflects LUBA’s adequate risk-adjusted capitalization, excellent operating performance and strong business profile in the Louisiana workers’ compensation market,” Best explained. “These positive rating factors are somewhat offset by the company’s business concentration in a single line and single state, which magnifies its exposure to competition and adverse economic and regulatory changes. LUBA maintains moderate leverage measures, and its balance sheet strength is supported by a conservative investment portfolio and a suitable reinsurance program. While controlling its growth, LUBA retains a very high percentage of its policyholders and has become one of Louisiana’s largest writers of workers’ compensation business, offering coverage to a large and diverse population of mostly small to medium-sized businesses.”

A.M. Best Co. has upgraded the issuer credit rating (ICR) to “bbb+” from “bbb” and affirmed the financial strength rating (FSR) of ‘B++’ (Good) of Premier Group Insurance Company, and has revised its outlook on both ratings to positive from stable. “The ratings reflect Premier’s very good capitalization and liquidity, low leverage and conservative investment portfolio,” Best explained. “The ratings also recognize Premier’s solid operating performance driven by strong underwriting results, which compare favorably to the workers’ compensation industry composite averages. The rating also considers the financial benefits and enhanced business profile derived from Premier’s ultimate parent company, National HealthCare Corporation (NHC). Premier has leveraged its monoline focus and its role within NHC to achieve consistently profitable underwriting results.”

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘B’ (Fair) from ‘B-‘ (Fair) and the issuer credit rating (ICR) to “bb+” from “bb-” of the American Underwriters Insurance Company (AUIC) of Conway, Ark. with stable outlooks. Best said the “upgrades reflect the results of management’s initiatives to improve its underwriting performance along with the company’s conservative investment portfolio. These initiatives have improved underwriting and operating performance and stabilized risk-adjusted capitalization. While performance and capitalization have improved in recent years, the ratings continue to reflect AUIC’s modest capitalization, historically poor underwriting and operating performance and AUIC’s limited business profile. The rating outlook is based on A.M. Best’s expectation that improved operating results will continue to add to surplus in the medium term.”