Ratings Recap: Celtic, Farmers Home, Conemaugh, Allegany Co-Op, Housing Authority, Monroe, CAPCO, MGIC

March 20, 2008

A.M. Best Co. has placed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of Chicago’s Celtic Insurance Company under review with negative implications. The action follows the announcement that St. Louis-based Centene Corporation has signed a definitive agreement to purchase the company’s parent, Celtic Group, Inc. for $80 million in cash. Celtic is an individual major medical writer. The transaction is expected to close by third quarter 2008. Best noted: “Centene’s heavy concentration in the challenging Medicaid market and the relatively low risk-adjusted capitalization maintained in its operating subsidiaries. Additionally, Centene has no prior experience in the individual major medical market. Upon the close of the transaction, Celtic’s ratings would likely be downgraded.”

A.M. Best Co. has withdrawn the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” and assigned a category NR-5 (Not Formally Followed) to Farmers Home Mutual Insurance Company. The rating actions follow the announcement that FHM has merged with its affiliated company, Western National Mutual Insurance Company (WNM), a member of the Western National Insurance Group (WNG) (both of Edina, Minn., as of December 31, 2007. As part of the merger, WNM assumed all of the liabilities and obligations under and according to the terms of the policies issued by FHM. As a result, policyholders of FHM will now be insured by WNM.

A.M. Best Co. has assigned a financial strength rating (FSR) of ‘A-‘ (Excellent) and an issuer credit rating (ICR) of “a-” to Conemaugh Valley Mutual Insurance Company of Johnstown, Penna. with a stable outlook. “The ratings are based on Conemaugh’ s recent affiliation with Allegany Co-Op Insurance Company,” Best explained. On December 11, 2007, Conemaugh entered into a surplus note and expense sharing agreement with Allegany Co-Op. Conemaugh will expand Allegany Co-Op’ s operations into the Pennsylvania property market. Additionally through the affiliation, Allegany Co-Op provides marketing, agency appointment, underwriting, policy development, rating, claims and litigation management and support to Conemaugh. Conemaugh’ s ratings also reflect its favorable risk-adjusted capitalization and recently improved financial performance.

A.M. Best Co. has assigned a financial strength rating (FSR) of ‘A-‘ (Excellent) and an issuer credit rating (ICR) of “a-” to Housing Enterprise Insurance Company, Inc. (formerly known as Housing Enterprise Risk Services, Inc.). Best also assigned ICRs of “a-” and affirmed the FSR of ‘A-‘ (Excellent) of the Housing Authority Insurance Group and its remaining members. Best said the “ratings of Housing Authority apply to Housing Authority Risk Retention Group, Inc., Housing Authority Property Insurance, A Mutual Company and Housing Enterprise Insurance Company, which are the public housing authority-owned and controlled insurance operating units of Housing Authority. The outlook for all ratings is positive. All companies are domiciled in South Burlington, VT. Best added that the “ratings reflect Housing Authority’ s excellent capitalization, very strong operating results and leading position and proven expertise in the niche public housing authority market.”

A.M. Best Co. has withdrawn the financial strength ratings (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Monroe Co-Op Insurance Company of Rochester, NY and Allegany Insurance Group of Cuba, NY, and assigned a category NR-5 (Not Formally Followed) to both. Allegany Co-Op Insurance Company completed its merger of Monroe into its operations in 2007. Allegany Co-Op and Monroe previously comprised the Allegany Group and were affiliated via the surplus note, reinsurance and expense sharing agreements. As part of the merger, Allegany Co-Op assumed all of the assets, liabilities, surplus and results of operations of Monroe. Concurrent with this transaction, Best has affirmed the FSR of ‘A’ (Excellent) and ICR of “a” of Allegany Co-Op. The outlook for both rating is stable.

Standard & Poor’s Ratings Services announced that its ratings on Customer Asset Protection Co. (CAPCO; A+/Stable/–) “are unaffected by the recent, substantial deterioration in the liquidity of Bear Stearns Cos. Inc.” and its plans for acquisition by JP Morgan Chase & Co. “CAPCO provides excess SIPC (Securities Investors Protection Corp.) coverage for its members, which are broker/dealers,” S&P explained. “Bear Stearns is a member of CAPCO. In addition, the ratings are unaffected by the recent issues affecting the financial guaranty sector.”

Standard & Poor’s Ratings Services has assigned its ‘BBB’ rating to MGIC Investment Corp.’s $325 million offering of convertible junior subordinated debentures due 2063. All of the ratings of MGIC Investment and its subsidiaries (MGIC) remain on CreditWatch with negative implications. “The rating on MGIC Investment’s junior subordinated debt offering reflects standard notching for this type of security,” noted S&P credit analyst James Brender. “We typically rate junior subordinated debt two notches below the credit rating on the issuer due to subordination and the issuer’s right to defer interest payments.”

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