Best Puts Kodiak under Review

A.M. Best Co. has placed the financial strength rating (FSR) of “B+” (Good) of New Jersey-based Kodiak Insurance Company under review with negative implications. However, Best indicated that the “FSR of ‘B++’ (Good) of Hermitage Insurance Group remains unchanged.”

“The under review status of Kodiak is the result of its parent company, Hermitage Insurance Company, reaching a definitive purchase agreement to acquire American Resources Insurance Company (ARIC)” of Mobile, Ala., Best explained. “Under the terms of the agreement, Kodiak will merge with and into ARIC, and ARIC will be the surviving entity.”

Best said that the negative implications “reflect the projected decline in the combined entity’s risk-adjusted capitalization post-merger.” However, the bulletin indicated that “Hermitage intends to enter an inter-company reinsurance agreement with ARIC after the transaction closes and seek a ‘pooled’ rating from A.M. Best.”

As a result, Vest said the rating would “remain under review pending further discussions with management, the close of the transaction and the execution risk and regulatory approval associated with successfully implementing the pool.”