Ratings: CUNA/CUMIS, Fremont, National Interstate, Patrons et.al., FGIC, Munich Re (US)

February 4, 2008

A.M. Best Co. has assigned an issuer credit rating (ICR) of “a+” and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) of Madison Wis.-based CUNA Mutual Insurance Society, the lead parent organization within the CUNA Mutual Group. The outlook assigned to both ratings is stable. “The ratings of CUNA Mutual reflect its consolidated positive statutory and GAAP net operating results, favorable risk-adjusted capitalization as measured by Best’ s Capital Adequacy Ratio and its diverse business profile that is supported by several lines of business and distribution channels,” Best noted. “The ratings also acknowledge CUNA Mutual’ s long-established position as a leader in providing financial solutions through its life, health and retirement products to members and employees of credit unions. CUNA Mutual Group operates through life, property/casualty, and investment companies in the U.S., Canada and selected international markets.” In related actions to the ratings assigned to CUNA, Best also assigned a financial strength rating (FSR) of ‘A’ (Excellent) and an issuer credit rating (ICR) of “a+” to CUMIS Specialty Insurance Company, Inc. (CUMIS Specialty), and has affirmed the FSR of ‘A’ (Excellent) and assigned an ICR of “a+” to its parent, CUMIS Insurance Society, Inc. (CUMIS). Best explained that both “companies operate under an intercompany pooling agreement and each is a member of a newly created group, CUMIS Insurance Society Group (the group), which has been assigned an FSR of ‘A’ (Excellent) and an ICR of “a+”. CUMIS and CUMIS Specialty are wholly owned property/casualty subsidiaries of CUNA Mutual Insurance Society.” Best also indicated that the “ratings reflect the group’ s excellent risk-adjusted capitalization, overall operating profitability, conservative balance sheet and well entrenched foothold among credit unions.”

A.M. Best Co. has affirmed the issuer credit rating (ICR) of “bbb” and the financial strength rating (FSR) of ‘B++’ (Good) of Fremont Insurance Company, and has revised its outlook for the ICR to positive from stable, while the outlook for the FSR remains stable. Best also affirmed the ICR of “bb” of Fremont’ s holding company, Fremont Michigan InsuraCorp, Inc, and revised the outlook to positive from stable. Both companies are domiciled in Fremont, Mich. “The ratings reflect Fremont’ s well-established market presence as a writer of personal lines insurance in Michigan, strong capitalization, improved overall operating results, tightened underwriting guidelines and expansion into less catastrophe-prone areas of Michigan,” said Best.

A.M. Best Co. has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) of the Ohio-based National Interstate Group and its members. Best also upgraded the ICR to “bbb+” from “bbb” of the group’ s publicly traded parent, National Interstate Corporation. The outlook for all ratings is stable. “These rating actions reflect the group’ s excellent operating results, strong risk-adjusted capitalization, its leadership position in its core niche public transportation market and diverse product structure,” Best explained. “The ratings also reflect the additional financial flexibility provided by National Interstate.”

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A-‘ (Excellent) and the issuer credit ratings (ICR) to “aa-” from “a-” of Patrons Mutual Insurance Company of Connecticut, Litchfield Mutual Fire Insurance Company and Beacon National Insurance Company of Wichita Falls, Texas. Best said it had upgraded the companies following they’re “becoming pooled members of State Auto Insurance Companies, effective January 1, 2008.” State Auto’s publicly traded holding company is State Auto Financial Corporation (both of Columbus, Ohio). Best also upgraded the FSR to ‘A+’ (Superior) from ‘A-‘ (Excellent) and the ICR to “aa-” from “a-” of Beacon Lloyds Insurance Company, also located in Wichita Falls, based on the inter-company reinsurance arrangement in place with its parent, Beacon National. The outlook for all ratings has been revised to stable from positive.
In connection with other ratings of companies within this group, Best said it had withdrawn the FSRs of ‘A-‘ (Excellent) and the ICRs of “a-” of Beacon Insurance Group and Patrons Mutual Group of Connecticut, assigning both groups a category NR-5 (Not Formally Followed) due to their affiliation. Best also withdrew the FSR of ‘A’- (Excellent) and ICRs of “a-” of Petrolia Insurance Company and First Preferred Insurance Company and assigned the companies a category NR-5. They were former members of Beacon, and were dissolved in December 2007. Additionally, Best withdrew the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Patrons Fire Insurance Company of Rhode Island and assigned it a category NR-3 (Rating Procedure Inapplicable). Patrons Fire, which was a former member of Patrons, is currently inactive.

Standard & Poor’s Ratings Services and Fitch Ratings have both announced that they have downgraded their ratings on Financial Guaranty Insurance Co. (FGIC). S&P lowered its financial strength, financial enhancement, and issuer credit ratings to ‘AA’ from ‘AAA’ and its senior unsecured and issuer credit ratings on FGIC Corp. to ‘A’ from ‘AA.’ Fitch downgraded its Insurer Financial Strength ratings on FGIC and FGIC UK Ltd. from ‘AAA’ to ‘AA.’ Fitch said it had based its decision on “FGIC’s not yet raising new capital, or having executed other risk mitigation measures, to meet Fitch’s ‘AAA’ capital guidelines within a timeframe consistent with Fitch’s expectations,” following discussions. S&P said it has also placed all the above ratings on CreditWatch with developing implications. S&P also note that it has “placed various ratings on MBIA Insurance Corp., XL Capital Assurance Inc., XL Financial Assurance Ltd., and their related entities on CreditWatch with negative implications. The ratings on various related contingent capital facilities were also affected. These ratings actions, including the affirmations, take into account the ratings actions announced yesterday by our Structured Finance group concerning RMBS and CDO downgrades and credit watch actions.”

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A’ (Excellent) and the issuer credit ratings (ICR) to “aa-” from “a” for Munich Re America Corporation Group and its member companies – Munich Reinsurance America, Inc., American Alternative Insurance Corporation and The Princeton Excess & Surplus Lines Insurance Company (all domiciled in Wilmington, Del.). The outlook for the FSR is stable and the outlook for the ICRs has been revised to stable from positive. Best also upgraded the ICR and senior debt rating to “bbb+” from “bbb” for Munich Re America Corporation (MRAC) and revised the outlook for the ICR to stable from positive and
the outlook for the debt has been revised to stable from negative. The rating upgrades reflect the significant level of support provided by MRAC’s ultimate parent, Germany’s Munich Reinsurance Co., “as well as MRAC’s enhanced returns, substantial improvement in risk-adjusted capitalization and continued progress in operational and risk management controls,” said Best. The rating agency also noted that it “believes that MRAC’s current strategies, operations and risk management are now fully integrated with Munich Re.”

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