Ratings Recap: Triad, Truckers, Genworth, Arrow, American European, America Fuji, Farm Bureau, American Farmers

May 22, 2008

Standard & Poor’s Ratings Services has changed the outlook on its ‘B’ long-term counterparty credit rating on Triad Financial Corp. to negative from stable. “The outlook change reflects the company’s weak earnings and difficulty in obtaining stable, long-term funding for new automobile receivables,” explained credit analyst Jeffrey Zaun.S&P noted: “The recent amendment to the company’s warehouse lending agreement with Citigroup Inc. will eliminate Triad’s ability to fund new originations from that facility after June 30, 2008. The company has not attempted to borrow under its remaining $500 million warehouse facility with Barclays Bank. If that long-term financing is unavailable, or if its terms and pricing undercut the interest margin Triad can earn on loans, the company could stop originating new loans after June 30, 2008.”;

A.M. Best Co. has upgraded the financial strength rating to ‘B+’ (Good) from ‘B’ (Fair) and issuer credit rating to “bbb-“; from “bb”; for Charleston, S. Caroline-based National Independent Truckers Insurance Company (NITIC) with a stable outlook. “The ratings reflect NITIC’s improved capitalization, decreased operational leverage measures, strong management team with expertise in this niche market and its strict underwriting and risk management guidelines,”; said Best. “Partially offsetting these positive rating factors is the company’s limited business profile. An additional offsetting factor is NITIC’s financial leverage position with a significant portion of the company’s surplus in the form of a letter of credit.”;

Standard & Poor’s Ratings Services has assigned its ‘A’ senior unsecured debt rating to Genworth Financial Inc.’s $600 million senior unsecured notes due in May 2018. “The rating is based on Genworth’s diversified insurance cash flows in terms of both product and geography, excellent risk management, modest financial leverage, and strong fixed-charge coverage,” noted credit analyst Kevin Ahern. “As of March 31, 2008, Genworth had about $114 billion in assets. Partially offsetting these strengths is the group’s exposure to the U.S. residential real estate market.”;

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-“; of Arrow Mutual Liability Insurance Company, and has revised both ratings to stable from negative. Best said the “ratings reflect Arrow Mutual’s excellent capitalization, improved operating profitability and unique business model whereby the company provides low cost coverage through active sharing of the operating profits with its policyholders in the form of dividends and retrospectively returned premium. Offsetting these positive rating factors are Arrow Mutual’s reliance on realized capital gains to generate growth in policyholder surplus, the limited insured base, which increases accident year volatility, and the challenges associated with operating primarily as a mono-line, mono-state insurer.”;

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘B+’ (Good) and issuer credit ratings (ICR) of “bbb-“; of American European Insurance Group and its affiliate member, American European Insurance Company (formerly Merchants Insurance Company of New Hampshire, Inc.). Best also upgraded the FSR to ‘B+’ (Good) from ‘B- (Fair) and ICR to “bbb-“; from “bb-“; of Rutgers Casualty Insurance Company, following the inclusion of the company in the American European Insurance Group. Best then withdrew the FSR of ‘B-‘ (Fair) and ICR of “bb-“; of Rutgers Casualty Insurance Group, as it has now been included in American European Insurance Group. All companies are headquartered in Cherry Hill, NJ. The outlook for all of the ratings is stable. “The rating affirmations of American European Insurance Group are based on its favorable capitalization, moderate operating profitability and regional market knowledge,”; Best explained. “These positive rating factors are partially offset by significant execution risk in the management and integration of American European on a going forward basis, following its March 30, 2007 purchase by American European Group, Inc. The rating upgrades of Rutgers Casualty are based on its improved risk-adjusted capitalization and operating performance, following the completion of its pooling agreement with American European, retroactive to January 1, 2008. Based on the completion of the pooling agreement, Rutgers Casualty has become a member of American European Insurance Group and receives the group ratings along with American European.”;

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-“; of American Fuji Fire and Marine Insurance Company with stable outlooks. “The ratings reflect American Fuji’s low underwriting leverage and consistent after-tax profits,”; Best noted. “Historically, American Fuji has written commercial lines coverages for Japanese companies operating in the United States through fronting partners and, whenever possible, on a direct basis from July 2003 through June 2006. The low underwriting leverage is expected to be maintained over the near term as the company has decided to temporarily stop writing direct and assumed business and no dividends are anticipated to be paid to the parent. In the interim, American Fuji continues to actively explore new strategic business opportunities.”;

A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-“; of Farm Bureau Town & Country Insurance Company of Missouri. Best said its rating actions “reflect Town & Country’s strong capitalization and historic local market presence as one of the leading providers of personal lines coverages in Missouri. These positive rating factors are partially offset by the company’s historically fluctuating operating results due to its business concentration, which exposes its performance to weather-related losses, as well as to changes in the regulatory and legislative environment.”;

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘B+’ (Good) from ‘B++’ (Good) and issuer credit rating (ICR) to ‘bbb-“; from ‘bbb”; of American Farmers & Ranchers Mutual Insurance Company of Oklahoma City. Best also assigned an FSR of ‘B+’ (Good) and ICRs of ‘bbb-“; to American Farmers & Ranchers Group and American Farmers & Ranchers Insurance Company (formerly General Fire and Casualty Insurance Company) of Boise, Idaho, the recently acquired and fully reinsured subsidiary of American Farmers & Ranchers Mutual Insurance Company. Best also said that it has placed all of the ratings under review with negative implications “due to the uncertainty regarding the group’s future capital position and the challenges management will face integrating new business into the current operating structure.”; Overall Best indicated that its “rating actions reflect the group’s weakened capital position from prior years as a result of costs associated with internal system improvements and the subsequent increase in the group’s non-admitted assets, as well as severe storm activity that occurred in late 2007 and early 2008 in its operating territory.”;

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