Ratings Roundup: Doctors Company, Old Republic Financial, 21st Century

October 31, 2007

A.M. Best Co. has commented that the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit ratings (ICR) of “a-” of California-based The Doctors Company Insurance Group (TDCG) and its members, which is led by The Doctors Company, an Interinsurance Exchange, remain unchanged following the recent announcement that SCPIE Holdings Inc. has entered into a definitive agreement to be acquired by The Doctors Company.
Best noted: “SCPIE Holdings Inc. and its operations will be acquired for an aggregate purchase price of approximately $281 million in an all cash transaction. These operations include SCPIE Companies (SCPIE) (Los Angeles, CA), a group of three pooled members, which are led by SCPIE Indemnity Company. The acquisition will expand The Doctors Company’s market leadership in California to nearly 19,000 physicians; thus, becoming one of the largest insurers of physician and surgeon professional liability insurance in the United States.”

Standard & Poor’s Ratings Services has placed its ‘AA’ counterparty credit and financial strength ratings on the insurance subsidiaries of Old Republic International Corp. (ORI) on CreditWatch with negative implications. S&P also placed its ‘A+’ counterparty credit rating and long-term debt ratings on ORI on CreditWatch with negative implications.
“These ratings actions follow Thursday’s announcement by ORI that the incurred loss ratio for its mortgage insurance operations, Republic Mortgage Insurance Co. and Republic Mortgage Insurance Co. of NC (RMIC), was 162 percent in the third quarter of 2007,” S&P explained. While the rating agency characterized RMIC’s insured loan portfolio as “relatively conservative,” it also indicated that “recent growth has created a material exposure to loans originated in 2006 and 2007.” S&P said it “believes these vintages will be the industry’s worst performing in recent years. ORI’s title insurance segment, Old Republic Title Insurance Group (ORTIG), has reported a pretax operating loss of $3 million because of deteriorating conditions in the industry.”
S&P credit analyst James Brender said the rating agency’s “primary concern is RMIC’s operating performance in the next two years. We believe RMIC will report underwriting losses in 2008.”

Standard & Poor’s Ratings Services has raised its counterparty credit rating on Woodland Hills, Calif.-based 21st Century Insurance Group to ‘AA’ from ‘BBB+’ and removed it from CreditWatch with positive implications, where it was placed on Jan. 25, 2007. S&P also raised its counterparty credit and financial strength ratings on 21st Century Insurance Co., 21st Century Casualty Co., and 21st Century Insurance Co. of the Southwest to ‘AA+’ from ‘A+’ and removed them from CreditWatch positive.The outlook on all these companies is stable.
“We originally placed the ratings on CreditWatch following the announcement by American International Group Inc. that it intended to increase its ownership stake in 21st Century Insurance Group to 100 percent,” S&P explained. The rating agency then indicated that following discussions with AIG regarding its intended strategy, it now expects “the 21st Century operating units to become participating members of the AIG personal insurance pool.” “As a result, we consider the 21st Century operating companies to be core rating members of AIG’s personal lines business and are rating them accordingly,” indicated S&P credit analyst Steven Ader.

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