Ratings Recap: PMA Capital, FM Global, American Mining, Discovery, ACE/INA, Argonaut

February 14, 2008

A.M. Best Co. has placed the financial strength rating (FSR) of ‘B’ (Fair) and issuer credit rating (ICR) of “bb” of PMA Capital Insurance Company (PMACIC) under review with negative implications following the announcement that its parent, PMA Capital Corporation (PMA Capital) of Blue Bell, Penna. has entered into a letter of intent with a third party to divest its run-off operations. The ICR of “bb” of PMA Capital and the FSR of A- (Excellent) and ICRs of “a-” of PMA Insurance Group and its members are unchanged. Additionally, the debt and indicative ratings of PMA Capital and PMA Capital Trust I and II are unchanged. The outlook for these ratings is stable.

Fitch Ratings has affirmed the insurer financial strength ratings (IFS) of ‘AA’ on Factory Mutual Insurance Company and its affiliates (collectively FM Global) with a stable outlook. Fitch said its “ratings on FM Global reflect the company’s solid capital position which enables it to absorb the earnings and capital volatility inherent in its underwriting and investment strategies. Policyholders’ surplus on a GAAP basis has increased at a five-year compounded annual growth rate of 24.7 percent and totaled $6.3 billion at year-end 2007.” The ratings also reflect the company’s strong competitive position in the market for highly-protected risks, engineering and underwriting expertise, and solid balance sheet. Fitch expressed confidence in FM Global’s ability to generate underwriting results over extended periods of time that will continue to support the ratings.

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A-‘ (Excellent) and the issuer credit rating (ICR) to “aa-” from “a-” of American Mining Insurance Company of Birmingham, Ala. Best also removed the ratings from under review with positive implications and assigned a stable outlook. Best explained that in the fourth quarter of 2007, W. R. Berkley Corporation through its subsidiary, Berkley Regional Insurance Company (BRIC), had “acquired CGH Insurance Group (CGH), the parent of American Mining. The upgrades reflect American Mining’ s becoming a group member of Berkley Regional Group, the financial support and resources provided by BRIC, as well as the ultimate parent, W.R. Berkley, American Mining’ s improved underwriting performance and its niche market presence providing workers’ compensation for mining risks.”

A.M. Best Co. has upgraded financial strength rating to ‘B-‘ (Fair) from ‘C++’ (Marginal) and the issuer credit rating to “bb-” from “b+” of Discovery Insurance Company of Kinston, No. Carolina with a stable outlook. “These rating actions reflect Discovery’ s adequate capitalization and favorable operating performance in recent years,” said Best. “The improvement in risk-adjusted capitalization and operating performance has been driven by the rate increases obtained on the company’s affiliated workers’ compensation business, the reduction in written premiums and the exit from writing third party workers’ compensation business.”

A.M. Best Co. has assigned a debt rating of “a-” to $300 million of 10 year 5.8 percent senior unsecured notes to be issued by ACE INA Holdings Inc. with a stable outlook. Proceeds from the notes will be used to partially fund ACE’ s acquisition of Combined Insurance Company of America (See IJ web site – https://www.insurancejournal.com/news/national/2008/02/08/87180.htm). The notes are fully and unconditionally guaranteed by ACE Limited.

A.M. Best Co. has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and the issuer credit rating (ICR) to “a” from “a-” of Argonaut Great Central Insurance Company (AGC) of Peoria, Ill. and assigned a stable outlook. Best explained: “As a result of a series of affiliated transactions entered into in 2007 by Argo Group International Holdings, Ltd. (Argo Group), designed to streamline intercompany reinsurance amongst various subsidiaries, AGC has become a member of Argonaut Insurance Group (Argonaut) through the implementation of a 100 percent inter-company quota share reinsurance agreement with AGC’ s immediate parent, Argonaut Insurance Company of San Antonio, Texas. The ratings of the existing members of Argonaut are unchanged as four of the member companies, which formerly operated under an inter-company pooling agreement with Argonaut Insurance, have also implemented 100 percent quota share reinsurance agreements with Argonaut Insurance. Argonaut has an FSR of A (Excellent) and ICRs of “a”.”

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