Ratings Roundup: Motor Club, CIFG, Nationwide, Medical Savings

March 13, 2008

A.M. Best Co. has withdrawn the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” and assigned a category NR-5 (Not Formally Followed) to Motor Club Insurance Association of Omaha, Nebr. “These rating actions follow the announcement that MCIA has merged with its sister company, Auto Club Insurance Association (ACIA), a member of the Auto Club Group, as of December 31, 2007,” Best explained

Standard & Poor’s Ratings Services has lowered its financial strength, financial enhancement, and issuer credit ratings on CIFG Guaranty, CIFG Europe, and CIFG Assurance North America Inc. (collectively CIFG) to ‘A+’ from ‘AAA’. “The downgrades reflect our view of CIFG’s impaired franchise value, reflected in its scaled-back underwriting activity, turnover of senior staff, and recent other rating downgrades, which, in our opinion, will impinge on CIFG’s ability to carry out its business plans and broaden its market acceptance,” S&P explained. “CIFG has lagged the industry in terms of par volume in recent years and, in our view, has not developed a strong franchise,” the report continued. “Because of this, and given our view that total insured business volume will be off for the industry in 2008, we believe that the company is more prone to damage to its franchise than the more well-established financial guarantors. The outlooks remain negative, reflecting our reservations regarding the company’s ability to maintain its position as a viable competitor in the bond insurance industry, given its current staffing levels and its below-average earnings and return on earnings.”

Fitch Ratings said its ratings on Nationwide Mutual Insurance Company and its related intercompany pool members (collectively, Nationwide Mutual), Nationwide Life Insurance Company and Nationwide Life Insurance Co. of America will remain at the current rating level pending additional analysis of the proposed acquisition of all of the outstanding publicly held Class A shares of common stock of Nationwide Financial Services, Inc. (NFS) for approximately $2.2 billion in cash (See IJ web site – https://www.insurancejournal.com/news/national/2008/03/10/88059.htm. Fitch added: “NFS is a life insurance holding company that is 66 percent owned by Nationwide Mutual, one of the largest property/casualty companies in the U.S. Fitch currently considers NFS to be a strategic operation for Nationwide Mutual due to NFS’ relative capital size and earnings contribution to the overall organization.”

A.M. Best Co. has downgraded the financial strength rating to ‘B-‘ (Fair) from ‘B’ (Fair) and the issuer credit rating to “bb-” from “bb ” of Medical Savings Insurance Company of Indianapolis, Indiana, and assigned a negative outlook to the ratings. Best said its actions “reflect Medical Savings’ considerable decline in capital and surplus in 2007 due to an unexpected operating loss. The company’ s risk-adjusted capital position is currently very low, although it did receive a contribution from its parent, Medical Savings Investment, Inc., to alleviate some of the impact of the loss. Medical Savings’ operating results in the last two years have been negatively impacted primarily by higher than expected loss ratios in its primary individual major medical line of business and high legal expenses. In an effort to improve its future operating results, the company is in the process of non-renewing its South Carolina and Florida books of business. These two states accounted for a large amount of its 2007 revenues and losses.”

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