Ratings Recap: Harleysville, TIG Specialty, Co-Operative, Crusader, Pacific Star

January 18, 2008

A.M. Best Co. has revised the outlook to positive from stable on all ratings of the Harleysville Mutual Insurance Company and its subsidiaries, including the publicly-traded holding company, Harleysville Group Inc. (HGIC). Best also affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Harleysville Insurance and its property/casualty pooling members, along with the FSR of ‘B++’ (Good) and ICR of “bbb+” of Harleysville Life Insurance Company. In addition, Best affirmed the ICR of “bbb-” and the debt rating of “bbb-” on the existing senior notes of HGIC and the indicative ratings of “bbb-” on senior debt, “bb+” on subordinated debt, “bb” on trust preferred securities and “bb” on preferred stock that are filed as part of the universal shelf registration of HGIC. “The ratings reflect Harleysville’ s excellent risk-adjusted capitalization, improved operating performance, solid regional market franchise, as well as the future benefits to be derived from management’ s material corrective actions over the past several years,” Best explained. “The affirmation of the ratings acknowledges that benefits are being derived from Harleysville’ s proactive re-underwriting and pricing initiatives, loss reserve development stability, cultural changes in claim management and field operations, and investments in predictive modeling and policy management systems technology to support underwriting effectiveness and make it easier for agents to do business with Harleysville.” The positive outlook on the ratings of the group recognizes these initiatives.

A.M. Best Co. has withdrawn the financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” of TIG Specialty Insurance Company and assigned a category NR-5 (Not Formally Followed) to the company. “The rating withdrawals are due to the acquisition of TIG Specialty by Ironshore Holdings (US) Inc. (Delaware), effective December 31, 2007,” said Best. As a result of the acquisition, TIG Specialty has been removed from Best’ s TIG Insurance Group ratings. Best explained: “All direct premium has been reinsured into TIG’ s lead company, TIG Insurance Company (California) for many years. TIG and its subsidiaries constitute the U.S. run-off operations of Fairfax Financial Holdings Limited (Fairfax) (Toronto) The sale is reflective of Fairfax’ s attempts to simplify its run-off operations. TIG Specialty was sold along with its existing high quality investment portfolio and corresponding surplus. Fairfax has guaranteed TIG Specialty’ s existing liabilities.”

A.M. Best Co. has revised the outlook to positive from stable for the financial strength rating (FSR) of Co-Operative Insurance Companies of Middlebury, Vermont, and has affirmed the FSR of ‘A-‘ (Excellent) and assigned an issuer credit rating (ICR) of “a-” to Co-Operative. The outlook for the ICR is positive. “The ratings of Co-Operative reflect its strong risk-adjusted capitalization and sustained favorable underwriting performance over several years,” said Best. “In addition, Co-Operative maintains a prominent market position as one of the leading farm owner and property writers in Vermont. Co-Operative’s solid capital position is based on modest investment leverage, conservative reserving practices and several years of positive operating income.”

A.M. Best Co. has upgraded the issuer credit rating to “bbb+” from “bbb” and affirmed the financial strength rating of B++ (Good) of Crusader Insurance Company of Woodland Hills, Calif. and has revised the outlook for both ratings to positive from stable. “These rating actions reflect Crusader’ s excellent capitalization, continued improvement in underwriting and operating performance, as well as its strong regional market presence and the financial flexibility afforded through its publicly traded parent, Unico American Corporation,” Best explained.

A.M. Best Co. has assigned a financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb” to Pacific Star Insurance Company of Madison, Wisc. with a stable outlook. Best noted that, effective December 31, 2006, Pacific Star became a wholly-owned subsidiary of Anchor General Insurance Company of San Diego. “Pacific Star is under the same management as Anchor General Insurance Company and will operate in a manner consistent with Anchor General Insurance Company, said Best. In 2008, Pacific Star will begin writing non-standard automobile products in Washington, Oregon, Wisconsin, Colorado and Arkansas.

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