Ratings: Great Northwest, General Atlantic, Penn National, Rockford, Radian, Triad, Navigators

May 6, 2008

Standard & Poor’s Ratings Services has revised its outlook on Great Northwest Insurance Co. (GNIC) to stable from negative, and has also affirmed its ‘BB-‘ counterparty credit and financial strength ratings on GNIC. “The rating action reflects our opinion that GNIC has successfully addressed the integration issues arising from its September 2006 acquisition of a substantial book of business in Hawaii,” explained S&P credit analyst Tracy Dolin. S&P also noted: “The Hawaiian business is a separate legal entity–Hawaiian Insurance & Guaranty Co. (HIG)–but HIG shares many of GNIC’s managerial and operational resources. We believe that management has in place the controls necessary to minimize the risk associated with its highly decentralized business strategy. HIG operates in the same personal lines business as GNIC, using the same Micro Insurance Center business model, which is integral to the notional group’s long-term strategy.”

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Eastern Atlantic Insurance Company (EAIC) of Harrisburg, PA with a stable outlook for both ratings. “The rating reflects EAIC’s solid risk-adjusted capitalization, improved operating results, strong management team with expertise in this niche market and the additional financial and operating benefits derived from the other insurance and construction companies controlled by the president, George A. Parmer,” Best explained. “Partially offsetting these positive rating factors is the company’s fluctuating underwriting income over a five-year period.”

Standard & Poor’s Ratings Services has revised its outlook on Pennsylvania National Mutual Casualty Insurance Co. and its affiliates, Penn National Security Insurance Co. and Founders Insurance Co. (collectively, Penn National), to negative from stable. S&P also affirmed its ‘BBB+’ counterparty credit and financial strength ratings on these companies. “The outlook revision reflects our belief that the company’s underwriting results at year-end 2008 will be much weaker than in recent years,” indicated S&P credit analyst Siddhartha Ghosh. “That would cause a sizable margin compression in 2008 and possibly in 2009.” S&P also said the “negative outlook reflects the possibility of further deterioration in the company’s expense ratio, primarily because of an expected lower premium volume in the current competitive market.” Ghosh explained: “The affirmation of the ratings reflects the company’s good and sustainable competitive position in its regionally focused market, improved operating results in recent years, and strong capital adequacy. These positive rating factors are mitigated by the company’s geographic concentration in Pennsylvania.” S&P added that it believes “Penn National’s profitability in 2008 is going to be significantly lower than in previous years as intense price competition adversely affects its profit margin.”

A.M. Best Co. has upgraded the financial strength rating to ‘A-‘ (Excellent) from ‘B++’ (Good) and issuer credit rating to “a-” from “bbb+” of Illinois-based Rockford Mutual Insurance Company. The outlook for both ratings is stable. “The ratings reflect Rockford’s strong capitalization and favorable operating performance over several years. The ratings also acknowledge the implementation of re-underwriting initiatives, reduced property exposure and rate adjustments, which contributed to significant improvements in operating profitability and growth in policyholders’ surplus since 2002,” said Best. “The ratings additionally recognize the enhancements made on Rockford’s assumed business program through the purchase of extensive reinsurance protection that further supported profitability.”

Fitch Ratings announced today that it has withdrawn its ratings of Radian Group Inc. and its mortgage insurance and financial guaranty subsidiaries (collectively, Radian). Fitch said the “action follows a request made on Sept. 5, 2007 by Radian management that Fitch withdraw its ratings following a IFS rating downgrade of the group’s financial guaranty subsidiaries. Following this request, Fitch indicated that it would maintain ratings coverage on Radian due to investor interest. At the same time, however, Fitch also indicated that at some point if Fitch believed it no longer had access to adequate public and non-public information to credibly maintain the ratings, Fitch would withdraw the ratings regardless of investor interest.”

Fitch Ratings has downgraded the ratings on Triad Guaranty Inc. and its mortgage insurance subsidiary Triad Guaranty Insurance Corporation (Triad). The affected ratings remain on Rating Watch Negative, where they were originally placed on Oct. 25, 2007 by Fitch. Fitch explained: “This action follows the announcement by Triad Guaranty that it may plan to start up a new monoline mortgage insurance company with a group of investors led by Lightyear Capital LLC, and that if the plan is executed, that it would place Triad Guaranty Insurance Corporation into voluntary runoff. Without the prospects of profitable future business to offset the likely increase in losses created by the 2006 and 2007 vintage years, or a meaningful capital infusion, Fitch believes that Triad’s margin of safety to meet policyholder obligations could become pressured if delinquency and loss development continue at a sustained pace.”

Standard & Poor’s Ratings Services has said that its counterparty credit and senior debt ratings on Navigators Group Inc. (currently ‘BBB/Stable/) and its ‘A’ financial strength ratings on NAVG’s core operating subsidiaries – Navigators Insurance Co. and Navigators Specialty Insurance Co., are unaffected by the announcement of the retirement of Chief Financial officer (CFO) Paul J. Malvasio, effective Aug. 15, 2008. He has been the group’s Executive Vice President and CFO since December 2003. NAVG has begun the search for his successor. S&P also noted: “NAVG has also appointed H. Clay Bassett Jr. as senior Vice President and Chief Underwriting Officer (CUO), which is a newly created position given the significant growth over the past few years. NAVG hired Mr. Bassett from Folksamerica Reinsurance Co., where he served as CUO. He will be the company’s first CUO and report directly to Stan Galanski, the company’s President and Chief Executive Officer.”

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