Best Affirms American Modern and Subsidiaries ‘A+’ Ratings

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Ohio-based American Modern Insurance Group and its P/C members. Best has also upgraded the FSR to ‘A+’ (Superior) from ‘A-‘ (Excellent) and ICR to “aa-” from “a-” of American Modern’s formerly separately rated subsidiary, First Marine Insurance Company of Osage Beach, Missouri. The outlook for all ratings is stable.

Best noted that the American Modern companies are owned by Munich American Holding Corporation, the U.S. based subsidiary of Germany’s Munich Reinsurance Company.

“The ratings of American Modern reflect its historical favorable capitalization, consistent investment income and generally profitable underwriting performance in recent years,” said Best. “The group functions as a niche provider of insurance products for the residential property, recreational vehicles and financial services markets through its multi-faceted distribution channels. The ratings also acknowledge the financial flexibility afforded American Modern as part of the Munich American Holding Corporation organization.

Partially offsetting these positive rating factors are American Modern’s above average expense levels in relation to the property lines industry composite and elevated premium leverage. In addition, as over half of American Modern’s business is residential property, its performance is susceptible to frequent and severe weather events as demonstrated in 2008.”

However, Best added, “American Modern continues to maintain reinsurance programs, modify underwriting criteria and selectively spread its geographical risks in catastrophe-prone areas to mitigate potential effects of future catastrophic events.”

First Marine is a provider of various watercraft coverages and was purchased by American Modern Home Insurance Company of Cincinnati in 2008. “The ratings of First Marine reflect its participation as a new member of American Modern’s inter-company pooling agreement.”

Best also said it has affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of American Modern Life Insurance Company and the FSR of ‘B++’ (Good) and ICR “bbb” of Southern Pioneer Life Insurance Company of Trumann, Ariz. The outlook for these ratings is also stable.

Best explained that the ratings on the life companies reflect their “strong risk-adjusted capitalization and the support of their holding company, American Modern.
Partially offsetting these factors are the companies’ modest earnings performance, their relatively small contributions to the parent organization and a susceptibility to further erosion of direct premiums written due to the economic environment and decline in lending.”

Source: A.M. Best – www.ambest.com