A.M. Best Co. placed the financial strength ratings of “A+” (superior) and issuer credit ratings of “aa-” of GeoVera Ins. Co., USF&G Specialty Ins. Co., both domiciled in Hunt Valley, Md., under review with negative implications, as well as Pacific Select Property Ins. Co. of Fairfield, Calif.
These rating actions follow the announcement by The St. Paul Travelers Companies Inc. regarding the signing of a definitive agreement to sell its CATRisk business operation, which consists of the three above entities, to affiliates of private equity investors, Friedman Fleischer & Lowe LLC and Hellman & Friedman LLC.
The three companies’ current ratings of “A+” (superior) are a result of their affiliation with St. Paul Travelers Insurance Co. of St. Paul, Minn., and their inter-company reinsurance agreements. This affiliation will continue until the transaction is finalized. Upon completion of the transaction, anticipated to occur in the fourth quarter 2005, a newly formed group including these three companies will be assigned a rating separate from St. Paul Travelers Insurance Co. The negative implications indicate the ratings will likely be downgraded as the above companies will no longer be affiliated with St. Paul. Based upon a review of the proposed business plan, it is anticipated that the ratings will be downgraded two notches.
The newly formed group will focus on underwriting catastrophe exposed residential property risks, primarily in California, Florida and Texas. Also, the group will consist of a Bermuda domiciled holding company and reinsurance operating company, which will assume fifty-percent of the business produced from the three U.S.-based entities.
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