Ratings Recap: AXA Art, National Interstate, ProMutual, Clearwater

June 10, 2009

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a+” of AXA Art Insurance Corporation, which is based in New York City. The outlook for both ratings is stable. “The ratings reflect AXA Art’s strong capitalization, outstanding long-term operating profitability indicative of its recognized insurance expertise within the fine arts industry and the implicit and explicit financial support provided by its ultimate parent,” France’s AXA S.A. and AXA subsidiaries “through the utilization of internally available insurance capacity in the form of significant reinsurance transactions.” The reinsurance transactions include excess of loss agreements with intermediate parent, AXA Art Versicherung AG (Germany), and a 60 percent quota share reinsurance agreement, effective January 1, 2008, with a domestic affiliate, AXA Insurance Company. “Offsetting these positive rating factors are the company’s significant product/market concentration and increasingly competitive market pressures. Nevertheless, the rating outlook is based upon AXA Art’s enhanced financial flexibility, strong balance sheet and historic underwriting profitability.

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a+” of the National Interstate Group and its members. Best also affirmed the ICR of “bbb+” of the group’s publicly traded parent, National Interstate Corporation. The outlook for all ratings is stable. These rating actions reflect the group’s “very strong operating results, excellent risk-adjusted capitalization, its leadership position in its core niche public transportation market and diverse product structure,” Best explained. “The ratings also reflect the additional financial flexibility provided by National Interstate. These positive rating attributes are somewhat offset by the group’s concentration of business in the public and truck transportation industries and the inherent risk in new business, particularly growth in the group’s alternative risk transfer (ART) programs, which now comprise approximately 50 percent of the group’s gross written premiums. Best said the stable outlook reflects its expectation that the group’s “diverse product structure and specialty focus will continue to generate positive earnings and organic surplus growth over the near term despite increasing competitive pressures.”

A.M. Best Co. has commented that the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of the Boston-based ProMutual Group and its members, which are led by Medical Professional Mutual Insurance Company, remain unchanged following the recent announcement that FinCor Holdings, Inc has entered into a definitive agreement to be acquired by ProMutual. FinCor and its operations include Michigan’s MHA Insurance Company and Washington Casualty Company along with three non-insurance company subsidiaries. When the acquisition is completed, common shareholders will be entitled to receive cash totaling $164 million at close. Additional costs of the transaction include assumption of preferred share obligations as well as related merger expenses. Two potential additional cash payments will be determined by future developments and could total in the range of $0 to $73 million. “With the acquisition of FinCor, ProMutual is purchasing a regional provider of medical professional liability insurance products predominantly in central and western states,” best noted. “The transaction assists ProMutual Group in achieving scale through enhanced geographic diversification and supports the group’s smart growth philosophy. The transaction is not subject to financing contingencies.”

A.M. Best Co. has removed from under review and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Delaware-based Clearwater Insurance Company, however, both of the ratings have a negative outlook. Best explained the outlook as the result of the rating agency’s “view of implicit and explicit support provided by Clearwater’s parent company, Odyssey America Reinsurance Corporation (OARC) (Stamford, CT), which is a member of Odyssey Reinsurance Group. Clearwater now receives explicit support from OARC in the form of prospective quota share reinsurance and a guarantee from OARC on all third-party reinsurance recoverables.” The revised outlook reflects Best’s “concerns about the future business strategy of Clearwater and its concerns regarding the potential for adverse loss reserve development impacting the company’s risk-adjusted capitalization. The ratings reflect Clearwater’s weak operating performance, modest business position and exposure to asbestos and environmental liabilities (A&E). Clearwater has significant liability leverage, with 47 percent of its carried net loss reserves as of year end constituting A&E claims. Somewhat offsetting these concerns are the company’s current adequate capitalization and its ownership by OARC, which maintains strong capitalization, financial flexibility and modest financial leverage at the ultimate holding company, Odyssey Re Holdings Corp.”

Was this article valuable?

Here are more articles you may enjoy.