Ratings Recap: Western National, Westminster, Carolina Casualty, MedPro, Tower Hill

A.M. Best Co. has upgraded the financial strength rating to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit ratings to “a” from “a-” of Western National Insurance Group (WNG) and its members. The group’s ratings are based on the consolidated operating results and financial positions of Western National Mutual Insurance Company and its wholly owned subsidiaries, Western National Assurance Company, Pioneer Specialty Insurance Company and Western Home Insurance Company. The outlook for all of the ratings has been revised to stable from positive. All companies are domiciled in Edina, Minn. “The ratings of WNG reflect its excellent risk-adjusted capitalization and trend of strong operating performance,” said Best. “These results were achieved through the group’s adherence to strict underwriting fundamentals, execution of a conservative investment policy and a commitment to long-term agency relationships. WNG’s strong operating performance over the past five years resulted from five consecutive years of underwriting profits generated from its broad array of commercial and personal lines products and consistently increasing net investment income. The group expanded its geographic diversification into Nevada and Utah through the successful integration of the Farmers’ Home Group, while maintaining its significant market presence in Minnesota where it ranks among the top 10 companies in the state.” However, Best said “WNG’s continued exposure in Minnesota where it writes the majority of its business,” is a somewhat offsetting factor. This concentration exposes WNG to potentially frequent and severe weather-related loss activity and increased competitive, market and regulatory conditions. But Best also indicated that the Group had “mitigated the potential impact of catastrophic weather-related events on its operating performance and capitalization by reducing property exposures over the past three years and by a comprehensive reinsurance program, which includes catastrophe and aggregate coverage.”

A.M. Best Co. has upgraded the financial strength rating to ‘B++’ (Good) from ‘B+’ (Good) and issuer credit rating to “bbb+” from “bbb-” of Maryland-based Westminster American Insurance Company, and has revised its outlook on both ratings to stable from positive. “The ratings reflect Westminster’s favorable risk-adjusted capitalization and improved operating performance,” Best explained. “Westminster’s strong capital position is derived from the 2005 demutualization, several years of positive operating results and a capital contribution from its new owner. In addition, the new management team, which has been overseeing Westminster’s operations since 2005, continues to implement strategies that have improved the company’s operating performance and increased policyholders’ surplus. Furthermore, the management team is focused on growing its commercial book of business and, as such, continues to enhance the company’s product offerings and technology capabilities. As partially offsetting factors, Best cited “Westminster’s geographic concentration of property risks in Maryland and Washington D.C., which exposes the company to weather-related events and potential market pressures, as well as the financial leverage at the holding company, Westminster American, LLC. Additionally, the underwriting expense ratio is elevated due to reinsurance costs, automation improvement expenses and other general operating expenses.”

A.M. Best Co. has upgraded the financial strength rating to ‘A+’ (Superior) from ‘A’ (Excellent) and issuer credit rating to “aa-” from “a” of Carolina Casualty Insurance Company of Urbandale, Iowa. The outlook for both ratings is stable. Best said the rating actions reflect the explicit support provided by an affiliate, Delaware-based Admiral Insurance Company, in the form of a 100 percent quota share reinsurance agreement. Both Carolina Casualty and Admiral are ultimately owned by W. R. Berkley Corporation (headquartered in Greenwich, Conn.)

A.M. Best Co. has assigned a financial strength rating of ‘A++’ (Superior) and issuer credit rating of “aa+” to MedPro RRG Risk Retention Group of Washington, D.C., both with stable outlooks. These ratings actions recognize the implementation of a 95 percent quota share reinsurance agreement between MedPro RRG and The Medical Protective Company of Fort Wayne, Ind. Best noted that in addition to “providing substantial reinsurance to MedPro RRG, Medical Protective maintains board control of MedPro RRG’s attorney-in-fact and will provide all administrative services to MedPro RRG through a management and services agreement with the company. MedPro RRG is domiciled in the District of Columbia and writes medical professional liability insurance. The company, which was formed in late 2008, will initially write insurance, on a primary basis, for individual and group physicians, dentists, health care professionals, hospitals and miscellaneous health care facilities in the State of New York.”

A.M. Best Co. has downgraded the financial strength ratings (FSR) to ‘D’ (Poor) from ‘B’ (Fair) and issuer credit ratings (ICR) to “c” from “bb” of Tower Hill Preferred Insurance Company, Tower Hill Prime Insurance Company and Omega Insurance Company (known collectively as Tower Hill). The outlook for these ratings is negative. All companies are domiciled in Gainesville, Fla. Best then noted that it has withdrawn the ratings and has assigned a category NR-4 (Company Request) to the FSRs and an “nr” to the ICRs “in response to Tower Hill’s management’s request to be removed from A.M. Best’s interactive rating process.” Best said its rating actions took into consideration the “companies’ exposure as Florida personal property writers to frequent and severe catastrophic weather events, which is significant on both a gross and net basis, in relation to their surplus positions. However, the entities current catastrophe programs rely less on the Florida Hurricane Catastrophe Fund (FHCF), as no reinsurance was purchased from the FHCF’s Temporary Increase In Coverage Limits (TICL) layer, as the entities remained skeptical on the ability of the FHCF to fund all obligations associated with a severe hurricane event.” Best also explained that as the companies recently eliminated their quota share programs, combined with modest catastrophe reinsurance coverage in potential multiple event scenarios, it now views “their risk-adjusted capital positions as poor, particularly as measured on a catastrophe stress test basis. The uncertainties inherent in the companies’ risk-adjusted capital positions and overall catastrophe reinsurance programs are reflected by the negative outlook. Partially offsetting these negative rating factors are the companies’ efforts in improving their underwriting standards and geographic spread in Florida, as well as the historical financial support from their parent companies and management’s long standing presence in the Florida property insurance market.”