Ratings: Argonaut, MAPFRE (Fla.), Pekin, Penn National, AXA Art, Tennessee Farmers, ALPS, BancInsure

June 23, 2008

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of the Texas-based Argonaut Insurance Group and its members. Best also affirmed the FSRs of ‘A’ (Excellent) and ICRs of “a” of Colony Insurance Group of Richmond, Va. and its members and Pennsylvania-based Rockwood Casualty Group and its members. The outlook for all ratings is stable. Best stated: “The rating affirmations reflect the U.S. operations’ supportive capitalization, strong operating performance of the continuing business segments and favorable market position as a national specialty underwriter with strong relationships with its primary distribution force.” Best also noted that the ratings acknowledge the “explicit support provided by an affiliate, Argo Re Ltd. (Bermuda), as well as the financial flexibility of the publicly traded holding company, Argo Group International Holdings, Ltd.”, which is based in Bermuda. The FSR of ‘A’ (Excellent) and ICR of “a” of Argo Re with a stable outlook are unchanged.

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of MAPFRE Insurance Company of Florida with a stable outlook. “The affirmations are based on MAPFRE Florida’s solid capitalization, consistent investment income and the explicit support provided to the company as a subsidiary of MAPFRE, the largest insurance organization in Spain,” Best explained. “MAPFRE Florida’s consistent investment income has helped to mitigate underwriting losses and maintain surplus levels. Furthermore, all reinsurance treaties for MAPFRE Florida are placed with MAPFRE RE, Compania de Reaseguros, S.A. (Spain). As MAPFRE Florida continues to implement stricter underwriting guidelines and improve the spread of risk, the support from MAPFRE provides security to policyholders. Moreover, in an effort to reduce its exposure to frequent and severe weather-related events, management has focused on improving its product offerings to include a comprehensive automobile policy.

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Pekin Insurance Group. The group includes two intercompany pool members, The Farmers Automobile Insurance Association and its wholly owned subsidiary, Pekin Insurance Company. The outlook for both ratings is stable. All companies are domiciled in Pekin, Ill. best sad the “ratings reflect Pekin Insurance Group’s solid risk-adjusted capitalization, strong operating performance and conservative operating strategy evidenced by consistently favorable loss reserve development during the latest five-year period. Partially offsetting these positive factors is the group’s susceptibility to frequent and severe weather-related losses, since 52 percent of its exposures are in property lines of business and 60 percent of its premiums are written in Illinois.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of the Penn National Insurance Group. The ratings apply to the three members of the group: Pennsylvania National Mutual Casualty Insurance Company (Penn Mutual), Penn National Security Insurance Company (Penn National) and Founders Insurance Company (Founders) of Lawrenceville, N.J. Except as indicated the other companies are domiciled in Harrisburg, PA. The outlook for all ratings is stable. Best has also assigned a debt rating of “bbb” to the $5 million, 9.5 percent surplus note that was previously issued by Penn Mutual. This subordinated debenture has a stated maturity of 30 years and is due in 2034. The outlook assigned to this rating is also stable. “The group’s ratings reflect its excellent capitalization, favorable loss ratio and improved operating performance since 2000. Offsetting these positive rating factors is the group’s elevated expense structure, continued price softening throughout the commercial insurance sector and the challenges associated with its geographic concentration, having more than 40 percent of its business in one state (Pennsylvania),” said Best. ”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of New York-based AXA Art Insurance Corporation with a stable outlook. “The ratings reflect AXA Art’s strong capitalization, favorable operating performance, parental support from its direct parent, AXA Art Versicherung AG (Cologne, Germany),” said Best. They also take into account the “advantages gained from its recognized insurance expertise within the fine arts industry.” AXA Art also benefits from being a subsidiary of France’s AXA S.A., one of the largest financial services organizations in the world. However, Best also indicated that the “company’s significant product/market concentration, the effects of increased competition and a high level of reinsurance dependence,” should be considered as offsetting factors

A.M. Best Co. has affirmed the financial strength rating of ‘A++’ (Superior) and issuer credit ratings (ICR) of “aa+” of Tennessee Farmers Mutual Insurance Company (TFMIC) and Tennessee Farmers Assurance Company (TFAC), both domiciled in Columbia, Tenn., the two member companies of Tennessee Farmers Insurance Companies. Best also affirmed the FSR of ‘A+’ (Superior) and ICR of “aa-” of Tennessee Farmers Life Insurance Company (TFLIC) The outlook for all of the ratings is stable. Best explained: “The ratings reflect Tennessee Farmers’ outstanding capitalization, solid operating performance and dominant market presence. Partially offsetting these positive attributes is the group’s predominant business concentration in Tennessee, which exposes its underwriting performance to weather-related losses, as well as to changes in the regulatory and legislative environment. The outlook is based on the group’s superior capital position, which enables it to absorb numerous loss events, an efficient expense structure and strong market knowledge.

A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Attorneys Liability Protection Society, Inc. (ALPS), a Risk Retention Group, headquartered in Missoula, Mont. “The revised outlook reflects ALPS’ enhanced operating performance and strengthened risk-adjusted capitalization,” Best noted. “Much of the improvement is attributable to new claims handling, a more conservative approach to setting reserves and stricter underwriting practices that were implemented in 2005 after successive years of adverse prior year reserve development. Prior year loss reserves, which began to stabilize in the latter half 2006, developed favorably in 2007. ALPS also has benefited from management’s decision to tighten its underwriting criteria in recent years, which has resulted in rate increases and the non-renewal of unprofitable firms.” Best also expressed confidence that the “operating results will continue to benefit from the aforementioned actions and that risk-adjusted capitalization will continue to strengthen over the near term.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Oklahoma City-based BancInsure, Inc. with stable outlooks. “The ratings reflect BancInsure favorable operating performance, capitalization that supports its rating level and its strong niche market focus,” said Best. “Partially offsetting these positive factors is the company’s fluctuating return measures over a five-year period and the risks associated with the debt issued at the parent company.” Best also said it continues to “monitor the run-off of its medical malpractice book of business, which has indicated a favorable status to date. ” In addition the “ratings recognize BancInsure’s excellent business position with its continued close ties to community banks that include exclusive endorsement agreements with 18 separate bankers associations,” best added. “Management believes that its new ownership structure has increased the effectiveness of its marketing entities, while the reduction in its board level from 31 to 14 directors has streamlined its decision-making process.”

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