Ratings Recap: Agency, MGA, SeaBright

January 23, 2009

A.M. Best Co. has revised the outlook to positive from stable, upgraded the issuer credit rating to “bbb+” from “bbb” and affirmed the financial strength rating of ‘B++’ (Good) of Agency Insurance Company of Maryland, Inc. (AIC). Best said, “These ratings reflect AIC’s favorable risk-adjusted capitalization, improved operating performance and local market expertise. AIC’s capital position is the outcome of solid underwriting results derived from a disciplined underwriting approach coupled with an increasing level of investment income. As a result of management’s initiatives and market conditions, surplus has more than doubled over the most recent five-year period. The positive outlook reflects A.M. Best’s expectation that AIC’s positive operating results and level of capitalization will continue to trend favorably as management implements product and business expansion strategies. Partially offsetting these positive rating factors is AIC’s product and geographic concentration, making it susceptible to adverse changes in the judicial, competitive and legislative environments. Additionally, AIC’s underwriting leverage, although reduced over the last several years, remains slightly above the composite average.”

A.M. Best Co. has upgraded the issuer credit rating (ICR) to “bb+” from “bb” and affirmed the financial strength rating of ‘B’ (Fair) of MGA Insurance Company. Best also upgraded the ICR to “b” from “b-” of MGA’s publicly traded holding company, GAINSCO, INC. The outlook for all ratings is stable. Both companies are domiciled in Dallas, Texas. “The upgrading of MGA’s ICR reflects its improved risk-adjusted capital position, generally profitable operating performance emanating from its personal nonstandard automobile (NSA) business and its improved underwriting leverage measures,” said Best. “Historically, elevated underwriting leverage is the result of MGA’s strategic business development in the NSA business, although premium growth has been tempered in recent years. These rating factors are somewhat offset by MGA’s historically unfavorable loss reserve development trends and variable operating performance.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’- (Excellent) and issuer credit rating (ICR) of “a-” of Chicago-based SeaBright Insurance Company (SBIC) Best also affirmed the ICR of “bbb-” of SBIC’s holding company, SeaBright Insurance Holdings, Inc. (SIH) of Delaware. The outlook for all ratings is stable. “The ratings reflect SBIC’s solid capitalization achieved through contributions from its parent, in combination with retained earnings from profitable operations in recent years, its niche market focus as a specialty provider of multi-jurisdictional workers’ compensation insurance and its experienced management team,” Best explained. “These strengths are partially offset by operational and marketplace challenges associated with the successful execution of SBIC’s growth plans into additional geographic regions while cautiously expanding coverage lines. These growth initiatives could potentially strain overall capitalization should profit targets not be achieved given existing soft market conditions. Despite these concerns, the outlook reflects the financial commitment of SIH to support SBIC’s ongoing operations as well as expectations for sustained strong underwriting and operating performance.”

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