Ratings Roundup: Iron Horse, American Physicians, United Contractors

July 13, 2010

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a+” of Vermont-based Iron Horse Insurance Company, both with stable outlooks. The ratings reflect Iron Horse’s “superior risk-adjusted capitalization, experienced management team and the role it plays as a direct captive subsidiary of Chevron Corporation. As offsetting factors Best cited Iron Horse’s “high net loss exposures, as the coverages provided tend to result in claims that are characterized as low frequency but high severity. This is somewhat mitigated by the captive’s ability to secure capital from Chevron in the event of a covered shock loss. Iron Horse directly benefits from the attention of Chevron’s experienced risk management team. Iron Horse also gains from Chevron’s global operations, which provide favorable geographic spread of risk and line of business diversification.” Best explained that in its role as a captive insurer, “Iron Horse along with Heddington Insurance Limited, Heddington Insurance (U.K.) Limited and other active Chevron captives, currently provide broad and competitive global insurance products for Chevron and its subsidiaries. The insurance needs of Chevron are supplied through these captive operations, where appropriate, and the commercial market. Iron Horse and the other Chevron captives, provide comprehensive coverage above Chevron’s internal retentions, while its reinsurance is placed through a corporate wide plan with the world’s significant providers of capacity, resulting in a diversified and balanced distribution of reinsurers.”

A.M. Best Co. has commented that the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of American Physicians Group and its primary member, American Physicians Assurance Corporation, are unchanged following the recent announcement that Michigan-based American Physicians Capital, Inc. (APCapital) has entered into a definitive agreement to be acquired by The Doctors Company, an Interinsurance Exchange. The FSR of ‘B+’ (Good) and ICR of “bbb-” of APSpecialty Insurance Corporation (APSpecialty) also are unchanged. The transaction is expected to close during the fourth quarter of 2010, subject to shareholder and regulatory approval. Best explained that under the terms announced, “The Doctors Company will pay $41.50 per share, representing a 31 percent premium over APCapital’s closing price on July 7, 2010, the last trading day prior to the announcement of the acquisition. The terms of the merger agreement also prohibit APCapital from paying dividends or repurchasing its shares without the prior consent of The Doctors Company.”

A.M. Best Co. has assigned a financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” to United Contractors Insurance Company, Inc., A RRG (UCIC), headquartered in Washington D.C. The outlook for both ratings is stable. The ratings reflect UCIC’s “adequate capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), its thorough business plan and experienced management team,” Best explained. “Other positive rating factors are UCIC’s hands-on claims handling procedures as well as its niche insuring contractors and artisans. Partially offsetting these factors are the company’s geographic concentration as well as the risks associated with a young business.” Best also noted that UCIC has “met more stringent requirements for a new company formation. Its ratings reflect its ability to meet higher capitalization requirements, which mandate a more conservative level of risk-based capital to support its ratings.” Best said it would continue to monitor UCIC on a quarterly basis.

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