Ratings Roundup: National Financial, HCC, CUNA Mutual

October 17, 2007

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of National Financial Group and its members – National Group Insurance Company of Coral Gables, Fla. and National Insurance Company as well as their affiliate company, National Life Insurance Company. All the ratings have been removed from under review with negative implications and assigned a negative outlook. All the companies are domiciled in San Juan, Puerto Rico, except where specified. Best explained that it has placed National Financial Group “under review due to its disclosure to A.M. Best concerning a significant miscalculation in its total risk exposure, which was not commensurate with its risk-adjusted capital. The discovery of this miscalculation raised concerns regarding National Financial Group’s organizational risk management.”

Fitch Ratings has upgraded the following ratings of HCC Insurance Holdings, Inc. and its subsidiaries:
HCC Insurance Holdings, Inc.
— Issuer Default Rating (IDR) to ‘A+’ from ‘A’;
— $172 million 2 percent convertible notes to ‘A’ from ‘A-‘;
— $125 million 1.3 percent convertible notes to ‘A’ from ‘A-‘.
Fitch upgraded its insurer financial strength (IFS) ratings to ‘AA’ from ‘AA-‘ for Houston Casualty Company; Avemco Insurance Company; HCC Life Insurance Company; HCC Specialty Insurance Company; U.S. Specialty Insurance Company. Fitch also assigned ‘AA’ IFS to Perico Life Insurance Company; HCC Insurance Company; American Contractors Indemnity Company and United States Surety Company. The outlook on all of these ratings is stable. Fitch said its “ratings upgrade reflects its belief that HCC’s capital position at its insurance subsidiaries and at the parent holding company is solid, its investment profile is conservative and loss reserves are adequate. Additionally, HCC has demonstrated its underwriting discipline throughout pricing cycles as well as its ability to select and integrate acquisitions as evidenced by an average combined ratio of 90 percent from 1991-2006.”

Fitch Ratings has affirmed the ‘AA-‘ insurer financial strength (IFS) ratings of the CUNA Mutual Insurance Society (CMIS), its wholly owned property casualty subsidiary, CUMIS Insurance Society, Inc. (CUMIS) and its affiliate, CUNA Mutual Life Insurance Company (CMLIC). Fitch also affirmed the ‘AA-‘ medium-term note rating assigned to CMLIC’s CMG Notes Program. The outlook on the ratings is stable. Fitch said it “rates all three major companies of the CUNA Mutual Group on a combined basis based on their common strategic focus, operational integration, shared management, and similar balance sheet profiles. Two of the companies, CMIS and CMLIC are in the process of merging, which is expected to be completed by year-end 2007. Fitch’s ratings on CUNA Mutual reflect the company’s strong market position in the credit union marketplace, good overall balance sheet fundamentals, and operating challenges resulting from the company’s many business lines.”

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