Ratings Roundup: Ind. Mutual Fire, HM Casualty, Constitution

September 15, 2009

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Illinois-based Independent Mutual Fire Insurance Company, both with stable outlooks. “The ratings reflect Independent Mutual Fire’s modest underwriting leverage, recognized market expertise and long-standing presence in the home service fire and burglary market sector,” said Best. “In addition, the company has generated solid investment earnings that have offset underwriting shortfalls in most years.” However, best added that Independent Mutual Fire’s limited business profile is an offsetting factor. “In addition, the variability in the company’s underwriting results has been driven by an elevated expense ratio and lack of economies of scale,” Best observed. The Company “also maintains exposure to fluctuating market values related to its common stock portfolio, which comprises more than a third of its surplus base. However, these concerns are somewhat mitigated by the company’s strong capital position.”

A.M. Best Co. has assigned a financial strength rating (FSR) of ‘A-‘ (Excellent) and an issuer credit rating (ICR) of “a-” to HM Casualty Insurance Company with a stable outlook. Best said the rating actions “follow Pennsylvania’s approval of a 100 percent quota share agreement with HM Casualty and its affiliate, Highmark Casualty Insurance Company.” Best also noted that in June 2009, it had affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-“of Highmark Casualty “based on its excellent capitalization, strong underwriting and operating performance, favorable reserve development trends as well as the financial support, extensive distribution systems and brand name recognition provided by its ultimate parent, Highmark Inc. All companies are domiciled in Pittsburgh, PA.

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Constitution Insurance Company (CIC) of Syracuse, N.Y. with stable outlooks. Best said the ratings assigned to CIC reflect its “strong capitalization and targeted earnings and capital accumulation projections, set forth by management in its start-up phase of operations. The ratings further recognize the company’s strong balance sheet, which is uninhabited of any prior year reserve liabilities, along with the successful track record of the executive team. The ratings also reflect the expectation that management will operate in the manner that is consistent with the business plan presented to A.M. Best during the initial rating process.” Best noted that “CIC provides employment practices liability insurance, defense costs only ($100,000 aggregate per occurrence) on a claims-made basis.” The rating agency said it would “continue to monitor CIC’s progress in achieving its business plan to ensure that premium growth and the accumulation of loss reserves do not strain its risk-adjusted capitalization and that overall operating results are achieved in accordance with rating expectations.”

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