A.M. Best Co. has placed the financial strength ratings of ‘A’ (Excellent) and issuer credit ratings of “a” of Massachusetts Homeland Insurance Company and York Insurance Company of Maine under review with negative implications. Best took the rating actions following the announcement by OneBeacon Insurance Group, Ltd. that these two 100 percent reinsured subsidiaries are to be sold to Tower Group, Inc. , as part of a transaction to sell OneBeacon’s personal lines business [See IJ Web site – https://www.insurancejournal.com/news/national/2010/02/03/107071.htm]. As a result, the existing reinsurance agreements in place that cede 100 percent of Mass Homeland and York’s businesses to OneBeacon Insurance Company “are expected to be commuted at the close of the transaction in mid-2010, depending on regulatory approvals,” Best explained. “Mass Homeland and York’s ratings will remain under review pending the close of the transaction and regulatory approval of affiliated reinsurance agreements between the acquired companies and certain Tower subsidiaries. The transaction has no other impact on the ratings of OneBeacon or its 75 percent shareholder, White Mountains Insurance Group, Ltd.”
A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-“of Rockhill Insurance Group of Kansas City, Missouri and its members. Rockhill’s member companies operate under an intercompany pooling agreement led by Phoenix-based Rockhill Insurance Company (RIC). Affiliate companies include Plaza Insurance Company American Compensation Insurance Company and Bloomington Compensation Insurance Company (both domiciled in Bloomington, Minn.). The outlook for all of the ratings is stable. The ratings reflect Rockhill’s “adequate capitalization within its niche market segments and the benefits derived from its new ultimate parent, State Automobile Mutual Insurance Company,” said best. “Rockhill’s affiliation with State Auto represents an important strategic move to enhance its geographic diversification, product design and distribution. The ratings also recognize the operational support Rockhill receives as a member of a stronger diversified organization, such as the State Auto Insurance Companies.” Best added that, while Rockhill’s “risk-adjusted capitalization supports its current ratings, challenging market conditions have adversely impacted the group’s operating results in recent years. Rockhill’s recent top line remains constrained primarily due to continued price competition and macroeconomic conditions. The group’s operating performance has been further impacted by its elevated expense ratio, which is expected to improve in the long term as it continues to expand into product lines where pricing, terms and conditions are more favorable given the changes within the specialty excess and surplus lines market. In addition, Rockhill’s future operating success will be largely determined by its ability to execute its business plan through market cycles.”
A.M. Best Co. has upgraded the financial strength rating to ‘A-‘ (Excellent) from ‘B++’ (Good) and issuer credit rating to “a-” from “bbb+” of Paratransit Insurance Company, A Mutual Risk Retention Group, based in Memphis, and has revised its outlook for both ratings to stable from positive. The ratings reflect Paratransit’s “sound capitalization, conservative reserving strategy, strong reinsurance program and high member retention rate,” Best explained. However, the company’s “business risk associated with writing one class of business within a narrow market scope, which has led to volatility in underwriting income,” is an offsetting factor. But Best also noted that the company is “committed to reserve adequacy and has numerous years of experience in its niche market of non-urban taxis and limousines.” Best said the positive rating factors are primarily derived from Paratransit’s “focus on solvency, a high quality investment portfolio and its conservative approach to the generation of new business. In addition, the company’s member contribution policy, requiring new and renewing members to pay an annual non-refundable contribution per vehicle, assists Paratransit in generating surplus and supporting expansion.” Nonetheless, due to Paratransit’s “focus on one line of business, written for a homogeneous class of insureds,” which exposes it to greater operating volatility,” remains a concern. Best also remains somewhat concerned that Paratransit’s “increased per occurrence claim retention could create more volatility in its underwriting results.” However, Best also indicated that the company’s “conservative philosophy of setting claim reserves and management’s position that this will minimize the potential for adverse loss development,” would tend to mitigate the situation.
A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of ‘B’ (Fair) and issuer credit rating (ICR) of “bb+” of Dallas-based MGA Insurance Company, Inc. Best has also revised the outlook to positive from stable and affirmed the ICR of “b” of MGA’s publicly traded holding company, GAINSCO, INC. These rating actions recognize “MGA’s enhanced risk-adjusted capitalization and generally profitable operating results during a period of challenging economic conditions,” Best explained. “Historically, elevated underwriting leverage was the result of MGA’s strategic business development in the personal nonstandard automobile business; however, premium growth has been tempered in recent years.” However, best added that these rating factors are somewhat offset by MGA’s “historically unfavorable loss reserve development, although improvement has been seen in recent periods, and its variable underwriting performance.”
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