Best Rating Updates
Property/Casualty—April—June 2005
MA Status Codes:
D=State of domicileL=LicensedR=Licensed for Reinsurance
A=Approved for Reinsurance O=Reinsurance (Other)
S=Surplus Lines Writer F=Authorized under the Risk Retention Act
Rating Action codes:
(+) or (-) Rating upgraded or downgraded
(New) Assigned initial rating
(U) Rating placed under review
(*) Rating was downgraded to E from C– on March 22. Current rating effective 3/25.
Secure Best’s Ratings
A++ and A+ = SuperiorA and A- = ExcellentB++ and B+ = Very Good
Vulnerable Best’s Ratings
B and B- = FairC++ and C+ = MarginalC and C- = WeekD = Poor
E =Under Regulatory SupervisionF= In LiquidationS= Rating Suspended
Effective Date-Represents effective date of Rating Action
Rating Modifiers
u - Under Reviewpd-Public Datas-Syndicate
Affiliation codes
g - Groupp– Poolr - Reinsured
Not Rated Categories (NR)
NR-1 Insufficient DataNR-2– Insufficient Size and/or Operating Experience
NR-3 Rating Procedure InapplicableNR-4 Company Request
NR-5 Not formally Followed
Rating CurrentEff. Prior MA
Action CompanyAMB# Rating Date Rating Status
Acceptance Insurance Company02681 NR-16/13/05E S
+ACSTAR Insurance Company10607 A4/25/05A- L
-AIG Centennial Insurance Company00876 A+u5/16/05A++u L
-AIG Premier Insurance Company02123 A+u5/16/05A++u L
-AIU Insurance Company02389 A+u5/16/05A++u L
UAlea North America Insurance Co12467 A-u6/20/05A- L
+American Feed Industry Ins Co RRG 10730 A-5/30/05B++ F
-American Home Assurance Co02034 A+u5/16/05A++u L
-American Internat Specialty Lines 03535 A+u5/16/05A++u S
-American International Ins Co03641 A+u5/16/05A++u L
-American International Pacific02359 A+u5/16/05A++u L
Rating CurrentEff. Prior MA
Action CompanyAMB# Rating Date Rating Status
American Manufacturers Mutual Ins02273 NR-45/9/05 D L
American Motorists Ins Co02274 NR-45/9/05 D L
-American Road Insurance Co00152 A-5/16/05A L
-Armed Forces Ins. Exchange03240 A-5/30/05A L
-Birmingham Fire Ins Co of PA02349 A+u5/16/05A++u L
-Chicago Title Insurance Company04645 A-5/30/05A L
-CIM Insurance Corporation02197 A-5/16/05A L
-Commerce and Industry Ins Co04000 A+u5/16/05A++u L
+Countryway Insurance Company03206 A-4/4/05 B++ L
-CPA Mutual Ins Co of America RRG 11319 B6/27/05B+ F
Eastern Casualty Group18541 NR-56/20/05B++ D
Eastern Casualty Insurance Co01961 NR-36/20/05B++ D
-Fidelity National Title Ins Co11977 A-5/30/05A L
-Granite State Insurance Co02360 A+u5/16/05A++u L
Groveland Mutual Insurance Co11701 NR-54/4/05NR-3 D
Highlands Insurance Company02239 NR-56/20/05E L
NEWIndependence Casualty Ins Co10088 A6/6/05 D
-Illinois National Insurance Co02361 A+u5/16/05A++u L
-Insurance Co of State of PA02035 A+u5/16/05A++u L
Insurance Corporation of NY03500 NR-16/13/05E L
-Integon General Ins. Corp.02459 A-5/16/05A L
-Integon National Ins Co02387 A-5/16/05A L
-Integon Preferred Ins Co11650 A-5/16/05A L
Kemper Casualty Ins Co12301 NR-45/9/05 D L
-Landmark Insurance Co03756 A+u5/16/05A++u L
-Lexington Insurance Co02350 A+u5/16/05A++u S
Lumbermens Mutual Casualty Co02279 NR-45/9/05 D L
-Medical Mutual Ins. Co. of ME01757 B++4/4/05A- L
UMedical Protective Co00591 A-u5/16/05A- L
-MIC General Ins Corp02669 A-5/16/05A L
-MIC Property & Casualty Ins Corp02652 A-5/16/05A L
Monumental General Cas. Com.03694 NR-36/13/05A-
-Motors Insurance Corp00654 A-5/16/05A L
-National General Ins Co03366 A-5/16/05A L
-National Union Fire Ins Co Pit PA02351 A+u5/16/05A++u L
-New Hampshire Ins Co02363 A+u5/16/05A++u L
-New South Insurance Co00698 A-5/16/05A L
Omaha Property&Casualty Ins Co01860 NR-55/23/05A-u L
+Pennsylvania Lumbermens Mutual 00756 A6/6/05 A- L
-Pharmacists Mutual Ins Co00320 A6/27/05A+ L
UPutnam Reinsurance Co03727 a+U5/16/05a+O
+Savers P&C Ins. Co.00524 B++4/25/05B+ L
-Security Union Title Ins Co11908 A-5/30/05A L
-Senior Citizens Mutual Insurance 10835 F6/27/05B-u F
Specialty Surplus Insurance Co12349 NR-45/9/05D S
Rating CurrentEff. Prior MA
Action CompanyAMB# Rating Date Rating Status
-South Carolina Insurance Co00840 F4/11/05E L
+Star Insurance Company00695 B++4/25/05B+ L
+State Farm General Ins Co02478 B++6/27/05B+ L
-Ticor Title Insurance Company11918 A-5/30/05A L
UTransatlantic Reinsurance Co03126 A+U5/16/05A+ L
Trenwick America Reinsurance 03747 NR-36/6/05NR-4 A
Ulico Indemnity Company11329 NR-55/30/05B- S
RATIONALE
ACSTAR Insurance Company (A.M. Best #: 10607 NAIC #: 22950)
RATING RATIONALE
Rating Rationale: The rating reflects the company's strong capitalization, solid operating performance, favorable liquidity, as well as management's strict discipline and noteworthy ability to manage through market cycles. These positive rating factors are offset by the company's limited product diversification, elevated loss reserve leverage, continued debt service obligations, stockholder dividends and the heightened challenges associated with current investment yields. Despite these attenuating factors, the rating and rating outlook support management's prudent business strategy, ACSTAR's excellent financial position, favorable earnings prospects, and the reduced financial leverage at ACMAT Corporation (parent holding company).
Much of ACSTAR's success over the years stems from its parent's long-standing involvement in the construction industry and the advantages gained by management's expertise. ACSTAR also benefits from the utilization of construction and underwriting services provided by ACMAT Corporation, a construction services contractor.
Specializing in surety bonds for the general building, specialty trade, environmental contractors and asbestos abatement contractors, ACSTAR's product offerings are limited to surety and are highly prone to competition and market cyclicality in this segment. This is partially offset by the company's considerable geographic diversity and management's approach to managing market cycles. During the most recent period of soft market conditions and intense price competition, ACSTAR demonstrated its resiliency and unwillingness to compete as premium volume declined substantially further corroborating management's adherence to disciplined underwriting and pricing strategies. However, since 2002, this trend has reversed as more favorable market conditions have led to vast opportunities at ACSTAR. According to management, new business prospects via increased submissions remain prevalent.
At year end 2004, ACMAT Corporation maintains financial leverage (total debt & preferred stock to capital) of 27%, which is less than half the level reported in 1998. Over the years, ACSTAR has been the principal provider and source of funding that has enabled ACMAT the ability to repay its debt, reduce interest expense and lower its financial leverage. In addition, debt restructuring in 2002 helped to significantly lower interest expense and, in turn, accelerated principal payments. Proceeds from various private debt offerings have been used to facilitate an aggressive share repurchase program. A.M. Best anticipates that management may continue to repurchase shares but on a far more limited scale over the near-term. Share repurchases are also expected to be funded through available cash flow at ACMAT Corp.
Best's Rating: A Outlook: Stable
AIG Centennial Insurance Company (A.M. Best #: 00876 NAIC #: 34789)
AIG Premier Insurance Company (A.M. Best #: 02123 NAIC #: 20796)
RATING RATIONALE
The following text is derived from the report of AIG Personal Lines Pool.
Under Review Rationale: A.M. Best placed the financial strength ratings of member companies of American International Group, Inc. (NYSE: AIG) under review with negative implications following their announcement that the Chairman and CEO, Maurice Greenberg, would retire as CEO, although he remained non-executive Chairman at the time. The retirement of Mr. Greenberg followed concern over an increasing number of regulatory inquiries as well as queries from the New York Attorney General and the SEC. The company additionally announced that the CFO, Howard Smith, had taken leave and that the filing of AIG's 2004 10-K had been delayed. Mr. Greenberg was succeeded by Martin J. Sullivan, who had been AIG's vice chairman and co-chief operating officer. Howard Smith was succeeded by Steven J. Bensinger.
The ratings were lowered on May 1, 2005 and remain under review. There remain a number of unresolved issues with the potential for continued uncertainty. The ratings have been placed under review due to the delay in the filing, the premature retirement of top senior executives, and the numerous regulatory inquiries. A.M. Best believes that the operating fundamentals within AIG are sound, there is significant management bench-strength among the leaders of the business segments, and barring any additional negative reports, the ability to generate historical earnings should continue. The ratings will remain under review pending A.M. Best's review of the filed 10-K as well as any further company developments.
Rating Rationale: The rating applies to American International Group Inc. 's (AIG) twelve member personal lines pool, led by American International Insurance Company (AIIC), and is based on the consolidation of these entities.
A.M. Best has downgraded the financial strength of most of American International Group, Inc.'s (AIG) (New York, NY) (NYSE:AIG) wholly-owned insurance subsidiaries to A+ (Superior) from A++ (Superior) following the company's disclosure on May 1, 2005 of the more complete findings of its extensive internal review. Additionally, the issuer credit ratings (ICR) assigned to the operating companies on April 6, 2005 have been downgraded to "aa-" from "aa+". The more pervasive level and extent of the internal control issues disclosed in the press release were beyond A.M. Best expectations, although the financial impact to shareholders' equity was not. The financial strength and ICR ratings remain under review with negative implications. The under review status was placed on the financial strength ratings of these companies on March 15 following the company's announcement that Maurice Greenberg stepped down as CEO and that the filing of AIG's 2004 10K had been delayed.
The extent and number of accounting re-statements, as well as the disregard of accounting regulations and financial reporting to auditors, regulators and others made even more apparent in the current press release is the direct cause of the downgrade. Rating determinations have many components on both a qualitative and quantitative basis. The downgrade is not based on the absolute level of negative financial affect on shareholder's equity, which A.M. Best understands and believes is manageable on a GAAP accounting basis given the still formidable financial strength of AIG. Rather, the action reflects the fact that such a failure in internal controls, which is expected to result in an adverse opinion by AIG's auditors, is inconsistent with A.M. Best's highest rating category. While A.M. Best believes the new management team is actively addressing the control issues and is instituting a new culture of heeding those controls, absolute faith in financial reporting, particularly on a statutory basis, cannot be assumed at the present time. Further, it may take time to re-establish the confidence of the group's constituents.
On Aug. 29, 2003 five personal lines companies were acquired by AIG from GE Assurance Holdings, Inc. and on Dec. 31, 2004, four of these companies were added to the AIG Personal Lines Pool. The former GE companies are directly owned by Lexington Insurance Co., an excess and surplus lines company and member of AIG's Domestic Brokerage Group, which also provides an unconditional and irrevocable guarantee to the companies. The rating reflects the advantages of being affiliated with American International Group, Inc., one of the largest property/casualty insurance organizations in the U.S. The benefits of AIG ownership is supported by the pool's broad geographic diversification, low-cost distribution channels and strategic partnering. Since its formation in 1996, the pool has benefited from the ongoing support and commitment of its parent through substantial reinsurance linkage, sharing of intellectual resources, the formation of a dedicated personal lines business unit and increased brand-building initiatives. American Home Assurance Co., a member of the AIG commercial lines pool, provides an unconditional and irrevocable guarantee to AIIC. In addition, the pool's utilization of multiple distribution channels enhances its market penetration and limits its reliance on any one distribution source. Finally, upgraded technological capabilities and a rapidly growing direct marketing program continue to enhance its already low-cost expense structure. Offsetting these positive factors are the historical variability in premium, underwriting income and net income, which have all improved in 2003 and 2004. However, the average combined ratio over the past five years has remained acceptable at 100.9%. The inclusion of the GE companies acquired by AIG should prove beneficial going forward as their underwriting performance in 2004 has produced an underwriting profit. Capitalization is adequate for the rating level, although growth in premiums and liabilities have outpaced surplus appreciation in recent years.
The pool has historically maintained elevated underwriting and investment leverage relative to its personal lines peers. However, this aggressive leverage is mitigated by the financial strength and flexibility of AIG, its strong balance sheet, outstanding profitability and excellent capital formation capability, and the explicit support provided to the personal lines pool. Other negative factors include very competitive market conditions and increasing, but still somewhat modest, brand-name recognition. These factors are tempered by AIG's expense advantage and its extensive advertising campaign, effectively enhancing AIG's ability to compete and increasing consumer awareness.
Best's Rating: A+ pu Implication: Negative
AIU Insurance Company (A.M. Best #: 02389 NAIC #: 19399)
American Home Assurance Company (A.M. Best #: 02034 NAIC #: 19380)
American Internat Specialty Lines Ins Co (A.M. Best #: 03535 NAIC #: 26883)
American International Insurance Company (A.M. Best #: 03641 NAIC #: 32220)
American International Pacific Ins Co (A.M. Best #: 02359 NAIC #: 23795)
Birmingham Fire Insurance Company of PA (A.M. Best #: 02349 NAIC #: 19402)
Commerce and Industry Insurance Company (A.M. Best #: 04000 NAIC #: 19410)
Granite State Insurance Company (A.M. Best #: 02360 NAIC #: 23809)
Illinois National Insurance Company (A.M. Best #: 02361 NAIC #: 23817)
Insurance Company of State of PA (A.M. Best #: 02035 NAIC #: 19429)
Landmark Insurance Company (A.M. Best #: 03756 NAIC #: 35637)
Lexington Insurance Company (A.M. Best #: 02350 NAIC #: 19437)
National Union Fire Ins Co PittsburghPA (A.M. Best #: 02351 NAIC #: 19445)
New Hampshire Insurance Company (A.M. Best #: 02363 NAIC #: 23841)
RATING RATIONALE
Under Review Rationale: A.M. Best placed the financial strength ratings of member companies of American International Group, Inc. (NYSE: AIG) under review with negative implications following their announcement that the Chairman and CEO, Maurice Greenberg, will retire as CEO, although he remains non-executive Chairman. Mr. Greenberg will be succeeded by Martin J. Sullivan, who had been AIG's vice chairman and co-chief operating officer. The company additionally announced that the CFO, Howard Smith, has taken leave and that the filing of AIG's 2004 10-K has been delayed. Howard Smith will be succeeded by Steven J. Bensinger. The retirement of Mr. Greenberg follows concern over an increasing number of regulatory inquiries as well as queries from the New York Attorney General and the SEC.
The vast majority of AIG's major insurance subsidiaries have held financial strength ratings of A++, A.M. Best's highest rating, for many years. There remain a number of unresolved issues with the potential for continued uncertainty. The ratings have been placed under review due to the delay in the filing, the premature retirement of two top senior executives, and the numerous regulatory inquiries. A.M. Best believes that the operating fundamentals within AIG are sound, there is significant management bench-strength among the leaders of the business segments, and barring any additional negative reports, the ability to generate historical earnings should continue. The ratings will remain under review pending A.M. Best's review of the filed 10-K as well as any further company developments.
The following text is derived from the report of American International Group.
Rating Rationale: The rating of the eleven members of the American International Group (AIG) Commercial Lines Pool, led by National Union Fire Insurance Company of Pittsburgh, Pa., and certain strategic affiliates is based on the consolidated operating performance of AIG's domestic property / casualty insurance group, which includes the operating results of the following companies: the AIG Commercial Pool; the AIG Personal Lines Pool; the Lexington Insurance Pool; the Hartford Steam Boiler Group; majority-owned Transatlantic Holdings, Inc.; and majority-owned 21st Century Industries. Each of the aforementioned Pools/Groups are separately rated.
A.M. Best downgraded the financial strength of most of American International Group, Inc.'s (AIG) (New York, NY) (NYSE:AIG) wholly-owned insurance subsidiaries to A+ (Superior) from A++ (Superior) following the company's disclosure on May 1, 2005 of the more complete findings of its extensive internal review. Additionally, the issuer credit ratings (ICR) assigned to the operating companies on April 6, 2005 have been downgraded to "aa-" from "aa+". The more pervasive level and extent of the internal control issues disclosed in the press release were beyond A.M. Best expectations, although the financial impact to shareholders' equity was not. The financial strength and ICR ratings remain under review with negative implications. The under review status was placed on the financial strength ratings of these companies on March 15 following the company's announcement that Maurice Greenberg stepped down as CEO and that the filing of AIG's 2004 10K had been delayed.
The extent and number of accounting re-statements, as well as the disregard of accounting regulations and financial reporting to auditors, regulators and others made even more apparent in the current press release is the direct cause of the downgrade. Rating determinations have many components on both a qualitative and quantitative basis. The downgrade is not based on the absolute level of negative financial affect on shareholder's equity, which A.M. Best understands and believes is manageable on a GAAP accounting basis given the still formidable financial strength of AIG. Rather, the action reflects the fact that such a failure in internal controls, which is expected to result in an adverse opinion by AIG's auditors, is inconsistent with A.M. Best's highest rating category. While the new management team is actively addressing the control issues and is instituting a new culture of heeding those controls at the highest levels, absolute faith in financial reporting, particularly on a statutory basis, cannot be assumed at the present time. Further, it may take time to re-establish the confidence of the group's constituents.
The rating continues to reflect AIG's positive operating performance, specialty underwriting focus, and recognized global leadership position within its select and highly specialized market segments, particularly management liability (including directors and officers liability), commercial umbrella, environmental coverages and excess and surplus lines. The nation's largest underwriters of commercial and industrial coverages, AIG is widely recognized in the broker community for its unique and highly innovative product offerings, substantial risk management and service capabilities, as well as its ability to provide high coverage limits and broad global capacity. AIG also benefits from its profit center approach and strong broker relationships. Through its extensive overseas network and full array of commercial products, AIG can accommodate most of its clients' global insurance needs. Finally, the group maintains a high-quality investment portfolio and a conservative net limit risk profile that minimizes AIG's exposure to potentially large losses.