Ratings Recap: Assurant, PacWest, New Mexico Casualty, Campmed

January 22, 2010

Standard & Poor’s Ratings Services announced that its ratings on “U.S.-based Assurant Inc. (BBB/Negative/A-2) and related entities are not affected by the settlement of an SEC investigation regarding certain loss-mitigation insurance products. The reinsurance contract under examination had $2.6 million in premiums and $10 million in losses in 2004, the year it was terminated. Assurant will pay a $3.5 million fine, but the SEC made no allegation of fraud against the company. Instead, the SEC alleges that Assurant violated certain nonfraud-related sections of the Securities Exchange Act of 1934 with the accounting of this reinsurance contract. Nevertheless, the SEC will not pursue any charges against Robert B. Pollock, CEO of Assurant Inc., and Adam Lamnin, chief operating officer of Assurant Health. The settlement is subject to court approval. The resolution of the SEC investigation was within our expectations. The investigation was a concern, but its effect on financial results, competitive positioning, and management strategies has been marginal. The negative outlook on all entities reflects earnings pressures on Assurant’s various business units because of the economic downturn.”

A.M. Best Co. has upgraded the issuer credit rating to “bbb+” from “bbb” and affirmed the financial strength rating of’ B++’ (Good) of Arizona-based PacWest Captive Insurance Company, and has revised the outlook on both ratings to positive from stable. These rating actions “reflect PacWest’s excellent capitalization, strong profitability and the continued financial support it receives in the form of ongoing capital contributions by participating agencies (shareholders) of Leavitt Group,” said best. “PacWest’s favorable operating performance is derived from its strict underwriting guidelines, conservative investment policy and successful business model. These positive factors are somewhat offset by the company’s aggressive growth in both premium volume and associated liabilities in recent years, as well as its business concentration risk, operating as a monoline workers’ compensation insurer with the majority of its premium volume coming from the state of California. In an effort to limit its concentration risk, PacWest’s management is focused on growing its book of business outside of California in states where Leavitt Group agencies are located.

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” to New Mexico Assurance Company (NMAC), New Mexico Employers Assurance Company (NMEAC) and New Mexico Premier Insurance Company (NMPIC), following the recent state approval of a 100 percent quota share agreement between NMAC, NMEAC, NMPIC and their parent, New Mexico Mutual Casualty Company (NMMCC). Best assigned a stable outlook to all of the ratings. All of the companies are domiciled in Albuquerque, New Mexico. “The ratings of NMMCC and its other subsidiaries were affirmed in March 2009 based on the consolidated group’s solid capitalization, historically strong operating performance and its dominant market position in the New Mexico workers’ compensation market, where it is able to maintain a strong policyholder retention rate,” said Best.

A.M. Best Co. has placed the financial strength rating (FSR) of ‘B’ (Fair) and issuer credit rating (ICR) of “bb” of Campmed Casualty & Indemnity Company, Inc. of Maryland under review with positive implications. Best took the rating actions following the announcement that The Hanover Insurance Group and Campania Holding Company of Virginia, the parent of Campmed, have signed a definitive merger agreement. Best has also placed the FSR of ‘C’ (Weak) and ICR of “ccc” of Health Facilities Insurance Corporation, Ltd. (HFIC), which is headquartered in Bermuda and is a wholly owned subsidiary of Campania, under review with positive implications. “The transaction is subject to regulatory approval by the Maryland Insurance Administration and is expected to close before the end of first quarter 2010,” said Best. “Campania provides professional and general liability insurance solutions for a range of allied healthcare providers and durable medical equipment suppliers, which will broaden Hanover’s professional lines portfolio. The execution of the agreement would give Campania the opportunity to accelerate the growth of its business through Hanover’s independent agent partners and realize the financial flexibility afforded by Hanover. Hanover’s subsidiaries currently have an FSR of ‘A’ (Excellent) and ICRs of “a”. The ratings of Campmed and HFIC will remain under review pending regulatory approval and the successful closing of the agreement.”

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