Ratings: Am. Underwriters, Western General, North Pointe, Ameriprise, Fairfield, R.V.I. Guaranty, Mid Georgia, Hermitage

August 29, 2008

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘B’ (Fair) and the issuer credit rating (ICR) to “a-” from “bb+” of Arkansas’ American Underwriters Insurance Company (AUIC) with stable outlooks. “These rating actions follow the recent state approval of a 100 percent quota share agreement between AUIC and its affiliate, First Mercury Insurance Company (FMIC),” said Best. The rating agency had previously affirmed the FSR of ‘A-‘ (Excellent) and ICRs of “a-” of First Mercury Group and its members, reflecting “the group’s strong capitalization and improvement in underwriting and operating performance over the current five-year period. The group’s overall capitalization was enhanced in 2006 following the IPO of its parent, First Mercury Financial Corporation.

A.M. Best Co. has revised the outlook to stable from positive and affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of Calif.-based Western General Insurance Company. “The ratings reflect Western General’s strong risk-adjusted capitalization, which was partially driven by significant capital contributions made over the past five years,” Best noted. “The revised outlook is based on the variability of underwriting and operating performance. While favorable over the last five years in total, profitability lagged the composite average. Furthermore, management will be challenged to maintain existing levels of profitability in the near term, particularly in view of the intensified competition expected in its predominant California marketplace. Western General is a non-standard automobile insurer that writes private passenger and commercial liability and physical damage coverages through brokers and dealerships, in addition to collateral protection coverage for lenders.”

A.M. Best Co. has removed from under review with positive implications and affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of North Pointe Insurance Company (NPIC), North Pointe Casualty Insurance Company (NPCIC) and Capital City Insurance Company, Inc. The outlook assigned to these ratings is stable. All of the above companies were subsidiaries of North Pointe Holdings Corp. (NPHC) of Southfield, Mich. and were acquired in April 2008 by QBE Holdings Inc. in a planned merger agreement, Best explained. The rating agency has also withdrawn the ICR of “bb+” and an “nr” has been assigned to NPHC. “The book of business acquired from NPHC complements QBE the Americas Group’s existing specialty businesses, and QBE continues to evaluate all strategic options in terms of streamlining these companies into the QBE framework,” Best explained. It has also affirmed the FSR of ‘A’ (Excellent) and ICRs of “a” of QBE Re Group-U.S. (QBE Re) (New York, NY) and its members, QBE Regional Insurance Group (Wilmington, DE) and its members and the NFU Group (NFU) and its members, as well as the FSR of ‘A-‘ (Excellent) and ICR of “a-” of United Security Insurance Company, which is the independently rated member of NFU. In naddition Best affirmed the FSR of ‘A-‘ (Excellent) and ICRs of “a-” of Praetorian Financial Group and its members. The outlook for all of the ratings is stable. “The affirmation of QBE’s ratings reflects the solid risk-adjusted capitalization of the group as well as each individual rated entity,” said Best. The ratings also “reflect the niche and/or regional focus and diversified book of business within the respective operating groups of QBE. Furthermore, QBE is strategically important within the overall organization of QBE Insurance Group Limited (Australia), which is the ultimate parent and holding company. QBE Insurance Group Limited has continually provided explicit support for many of the members within QBE.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Ameriprise Group and its members. Ameriprise consists of IDS Property Casualty Insurance Company (IDS) and its wholly owned subsidiary, Ameriprise Insurance Company, both of De Pere, Wisc. The outlook for all ratings is stable. “These ratings reflect Ameriprise’s strong capital position resulting from its conservative investment risk profile, its favorable underwriting leverage and solid profit margins,” said Best. “As a result, the group has reported pre-tax operating returns on revenue and equity that exceed the industry averages. Also contributing to Ameriprise’s favorable operating results has been its low-cost, direct marketing strategy. Partially offsetting these positive rating factors is the inherent risk associated with the business growth that the group has experienced over the last five years. In addition, although capital remains strong, the group dividends a majority of its net income to its parent company. As a result, surplus appreciation has been somewhat dampened, and underwriting leverage ratios have modestly increased.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit rating (ICR) of “aa-” of Fairfield Insurance Company with stable outlooks. “These ratings reflect the company’s strong risk-adjusted capitalization, sound liquidity position and the explicit financial support derived through affiliated reinsurance with highly rated entities,” said Best. “Somewhat offsetting these positive ratings factors are Fairfield Insurance Company’s limited business profile.”

A.M. Best
Co. has placed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Bermuda-based R.V.I. Guaranty Co., Ltd. and its Connecticut-domiciled subsidiaries, R.V.I. America Insurance Company and R.V.I. National Insurance Company under review with negative implications. “RVI Guaranty is a specialty insurance group that primarily writes residual value insurance,” Best explained. “It is one of the largest insurance companies’ specializing in underwriting and marketing of residual value insurance risk for clients engaged in the asset-based financing and securitization industry. Most often, coverage is purchased by clients in order to comply with certain regulatory and financial accounting requirements.”

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘A’ (Excellent) and issuer credit ratings (ICR) to “a-” from “a” for Middle Georgia Group and its member, Middle Georgia Mutual Insurance Company and assigned the ratings a negative outlook. Best said: “The rating downgrades reflect Middle Georgia’s historical volatile operating performance and continued exposure to weather-related catastrophic events. In recent years, the group’s profitability has been strained by unfavorable underwriting performance driven by significant and frequent weather-related events and accidental fire losses. Due to Middle Georgia’s limited business profile, operating earnings remain exposed to regulatory, economic and competitive market conditions. Despite these negative rating actions, Middle Georgia currently maintains favorable risk-adjusted capitalization due to its conservative underwriting leverage. Middle Georgia’s capital position also benefits from its generally favorable loss reserve development and long-standing local market presence. However, the negative outlook indicates that further negative rating actions may occur in future periods if material deterioration transpires with respect to the group’s risk-adjusted capital position, underwriting leverage measures and/or operating performance.”

A.M. Best Co. has commented that the financial strength rating (FSR) of ‘B++’ (Good) and issuer credit ratings (ICR) of “bbb+” of Hermitage Insurance Group and its lead member, Hermitage Insurance Company are unchanged following the announcement that Bermuda-based CastlePoint Holdings, LTD has entered into a definitive agreement to acquire Hermitage Insurance Group, Inc., an insurance holding company ultimately owned by Brookfield Asset Management Inc. The outlook for these ratings remains positive. Best also noted that the FSR of ‘B++’ (Good) and ICR of “bbb+” of New jersey-based Kodiak Insurance Company, a wholly owned subsidiary of Hermitage, are unchanged. The outlook for both ratings remains stable. The acquisition is subject to customary regulatory approvals and is expected to close in December 2008.

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