Best Announces Rating Actions on Munich Re/Midland Acquisition

October 19, 2007

A.M. Best Co. has commented that the financial strength rating (FSR) of ‘A+’ (Superior) and the issuer credit ratings (ICR) of “aa-” of Germany’s Munich Re Group and the FSR of ‘A’ (Excellent) and the ICRs of “a” of Munich Re America Corporation Group (MRACG) “remain unchanged following Munich’s announcement that it intends to acquire The Midland Company” (See IJ web site Oct. 17).

Best further explained that the acquisition includes the American Modern Insurance Group, a group of eight companies providing residential property, recreational casualty, financial institutions and other specialty products in the U.S.

The rating agency indicated that the “acquisition expands Munich’s primary product offerings in the United States, provides access to new markets and potential cross-selling opportunities. Munich plans to integrate the operations of both AMIG and MRACG following the completion of the acquisition.”

In a related announcement Best said it had “placed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of ‘aa-‘ of American Modern Insurance Group and its property/casualty members under review with negative implications.”

Best also placed the FSR of ‘A-‘ (Excellent) and ICR of “a-” and the FSR B++ (Good) and ICR of “bbb” of American Modern Life Insurance Company, the lead life insurer within American Modern and Southern Pioneer Life Insurance Company under review with developing implications.

Concurrently, Best placed the ICR of “a-” and debt ratings of “a-” on senior debt, “bbb+” on subordinated debt and “bbb” on preferred stock of the $150 million shelf registration under review with negative implications, which was filed by American Modern’s ultimate parent, The Midland Company.

“These rating actions follow the announcement that Midland has signed a definitive merger agreement with Munich-American Holding Corporation, Best explained, “which will result in Munich-American acquiring all of Midland’s outstanding stock,” said the bulletin. As a result, Midland would become an affiliate of New Jersey-based Munich Re America Corporation, the parent holding company of Munich Reinsurance America, Inc.

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