Ratings Roundup: MMC (Marsh), American Safety, Stockbridge

November 12, 2007

Standard & Poor’s Ratings Services has placed its ‘BBB’/’A-2’ counterparty credit rating on Marsh & McLennan Cos. (MMC) on CreditWatch with negative implications. S&P said it considered MMC’s third-quarter earnings to be “well below expectations, as highlighted by consolidated operating income declining to $194 million from $244 million in the prior year. The operating loss announced for MMC’s Marsh Inc. (Marsh) subsidiary–a result of a substantial increase in operating expenses and the material distraction away from servicing and selling to clients because of recent initiatives–was both disappointing and unexpected.” Although new business grew, the gains were offset “by declining client-revenue-retention levels, which include the effect of premium rate declines. As a result Marsh’s underlying revenue declined by one percent. “Although management is proactively addressing these issues, we believe the adverse financial and competitive effect has the potential to materially delay the improvement in operating results incorporated into the current rating,” noted S&P credit analyst Steven Ader. “The severity of this development might indicate that the oversight of the operating units by executive management is not as robust as envisioned in the current rating.” S&P plans further meetings to discuss the situation with MMC.

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit ratings (ICR) of “a” of American Safety Insurance Group and its members. The FSR and ICRs apply to American Safety Casualty Insurance Company, American Safety Indemnity Company, American Safety Reinsurance Limited and American Safety Risk Retention Group, Inc. American SafetyRisk Retention Group, Inc., is reinsured by and shares common management with the related companies. Best also affirmed the ICR of “bbb” of Bermuda-based American Safety Insurance Holdings, Ltd. (ASI). The outlook for all ratings is stable. “The ratings reflect the consolidated group’ s excellent capitalization, solid overall operating results and effective management of its insurance operations,” Best explained. “The ratings also recognize the group’ s underwriting expertise and discipline in its niche markets with customized risk management programs and loss control services.”

A.M. Best Co. has withdrawn the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating of “a-” and assigned a category NR-5 (Not Formally Followed) to Stockbridge Insurance Company, of St. Paul, Minn. Best explained that effective November 2, 2007, Folksamerica Reinsurance Company sold Stockbridge to Ironshore Holdings (U.S.) Inc., a subsidiary of Bermuda-based Ironshore Inc. “as a shell with all prior liabilities assumed by Folksamerica.” Stockbridge was formerly a wholly owned stock subsidiary of Folksamerica. Folksamerica’ s ultimate owner is the Bermuda-based White Mountains Insurance Group, Ltd.

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