Ratings Recap: Financial Guaranty, American Physicians, United National, Centene, Great Western

March 25, 2008

Standard & Poor’s Ratings Services has revised its CreditWatch on Financial Guaranty Insurance Co. (FGIC, rated ‘A’) and holding company FGIC Corp. (rated ‘BBB’) to CreditWatch with negative implications from CreditWatch with developing implications. S&P explained that FGIC’s principal owner, The PMI Group, recently announced that it “no longer views FGIC as a strategic investment and will not be contributing capital as part of any recapitalization plan. In addition, while FGIC’s ability to write new business was already severely constrained, the company formally announced a suspension of new business writings in order to preserve capital. In our opinion, these announcements negatively affect the company’s ability to implement plans to raise additional capital and resume writing business in the future.”

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘B++’ (Good) and issuer credit ratings (ICR) to “a-” from “bbb+” of American Physicians Assurance Corporation, the primary member of American Physicians Group. American Physicians is the lead subsidiary of American Physicians Capital, Inc. (APCapital). Best has also upgraded the ICR to “bbb-” from “bb+” of APCapital, and has revised its outlook on all of the ratings to stable from positive. In addition Best affirmed the FSRs of ‘B+’ (Good) and ‘B-‘ (Fair) and the ICRs of “bbb-” and “bb-” of APSpecialty Insurance Corporation (APSpecialty) and Insurance Corporation of America (ICA), respectively. The outlook for APSpecialty’ s FSR and ICR is stable, and the outlook for ICA’ s FSR and ICR is negative. All companies are domiciled in East Lansing, Mich. “These rating actions follow the positive rating outlook that was assigned to APCapital and American Physicians in May 2007 and takes into consideration APCapital’ s fourth quarter 2007 earnings announcement, its record earnings reported for 2007 and the long-standing benefits derived from management’s strategic business initiatives, which were initially introduced in 2002,” Best explained.

A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of United National Group and Penn-America Group and their respective member companies. Best has also affirmed the ICR of “bbb” of the publicly traded parent holding company, United America Indemnity, Ltd. (UAI), headquartered in Georgetown, Cayman Islands. In addition Best affirmed the FSR of ‘A’ (Excellent) and ICR of “a” of UAI’ s wholly-owned reinsurer, Bermuda-based Wind River Reinsurance Company, Ltd. The outlook for all ratings is stable. “United National’s ratings reflect its strong operating results, solid risk-adjusted capitalization and well-established presence within the surplus lines and specialty admitted markets,” said Best.

Standard & Poor’s Ratings Services has placed its ‘BB’ counterparty credit rating on Centene Corp. on CreditWatch with negative implications. S&P credit analyst Hema Singh said the action “resulted from Centene’s announcement “that the company’s year-to-date February operating results are not meeting expectations.” The lower than expected operating results were caused “by higher-than-budgeted medical costs in its Ohio aged, blind, and disabled population, and impacts from a harsher than expected flu season.” S&P also noted that Centene has plans to acquire “a company in a business which differs from its core business. This will be funded principally with bank debt which would increase financial leverage. Because of a weaker operating environment and lower-than-expected profitability and leverage, Centene’s financial and operations risks are heightened.”

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘B+’ (Good) from ‘B++’ (Good) and the issuer credit rating (ICR) to “bbb-” from “bbb+” of Great Western Insurance Company, and has revised its outlook on the ratings to stable from positive. “These rating actions are based on Great Western’s net loss in 2007 due to impairment of some collateralized debt obligations (CDOs), further possible negative impact from the remaining CDOs, which currently have potential unrealized losses that may affect its overall capitalization and a decline in its capital and surplus to liability ratio,” Best explained.

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