Best Assigns Ratings to United National’s Wind River Companies; Removes from Review Status

December 16, 2004

A.M. Best Co. announced that it has assigned financial strength ratings of “A-” (Excellent) to Wind River Insurance Company, Ltd. based in Hamilton, Bermuda, and “A” (Excellent) to Wind River Insurance Company (Barbados) Ltd. with stable outlooks.

Best also said it has affirmed the financial strength rating of “A” (Excellent) of United National Group, based in Bala Cynwyd, Penna., and has removed the rating from under review with developing implications.

“The initial ratings are based on the historical profitability of United National’s core domestic book of specialty admitted and surplus lines business and the solid capitalization of both companies,” said Best. “United National Group is acknowledged as a leader in the domestic surplus lines market ranking 16th in the United States among surplus lines groups in terms of direct premium written as of the end of 2003.”

Best also noted that both companies “will benefit from the balance sheet strength of the ultimate parent company, United National Group, Ltd. Wind River Insurance Company Ltd. has been established to serve as the primary reinsurer of United National Group, receiving a 60 percent cession of the group’s net retained premium. In addition to the ceded business received from its onshore affiliates, Wind River Insurance Company, Ltd. will write a small portion of unaffiliated premium, similar to the specialty business that it assumes from the onshore companies. The company will then retrocede approximately 35 percent of its business to Wind River (Barbados) with this business comprising all that Wind River (Barbados) will write.”

Best also expressed confidence in the management of United National’s offshore companies, indicating that they will be “run by the long-term president and chief executive officer of United National Group who presided over the company’s operations for almost two decades, generating significant operating profits annually.”

In addition, Best said: “The business model used for writing the unaffiliated business in Wind River Insurance Company, Ltd. will mirror that of the domestic group in terms of appetite.”

Concerning the group’s removal from “under review,” Best explained that it had taken the action after an “analysis of the potential impact of the announced merger with Penn-America Group, Inc. through a taxable exchange of stock.” Best said it “believes that the solid operating performance and considerable balance sheet strength of the group from the parent company level through the insurance subsidiaries is not likely to change materially to the point of causing a change in the financial strength rating or rating outlook, regardless of the outcome of the merger.

“As is its customary practice, A.M. Best expects to conclude its review of Penn-America Group, Inc. after the final disposition of the merger. At this time, the rating of Penn America will remain under review with developing implications.”

In addition to the ratings assignments on the offshore companies detailed above, Best said the financial strength ratings of “A” (Excellent) have also been affirmed for the following subsidiaries of United National Group:
— Diamond State Insurance Company
— United National Casualty Insurance Company
— United National Insurance Company
— United National Specialty Insurance Company
They are also no longer “under review.”

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