Ratings Recap: American General, Philadelphia Indemnity, First Hawaii, Minnesota Lawyers Mutual, Workmen’s Auto

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘B+’ (Good) and issuer credit rating (ICR) of “bbb-” of American General Property Insurance Company (AGPIC), based in Nashville, Tenn., both with stable outlooks. Best concurrently withdrew the ratings in response to management’s request to no longer participate in Best’s interactive rating process. Best said the affirmations reflect “AGPIC’s solid level of risk-adjusted capitalization, which is maintained to support the remaining liabilities on its books, offset by its limited business profile.” Best noted that in December 2012, AGPIC was acquired by White Mountains Solutions Holding Company, a wholly owned subsidiary of White Mountains Insurance Group, Ltd., and the group’s specialist run-off acquisition operation.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A++’ (Superior) and issuer credit ratings (ICR) of “aa+” of Philadelphia Indemnity Insurance Company (PIIC) and its affiliate, Tokio Marine Specialty Insurance Company, both of which are headquartered in Bala Cynwyd, Penna., and operate under a pooling agreement, collectively referred to as Philadelphia Insurance Companies. The outlook for these ratings is stable. Best also affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Liberty American Insurance Company and Liberty American Select Insurance Company, both domiciled in Altamonte, Florida, which operate under a pooling agreement, collectively referred to as Liberty American Insurance Group. The outlook for these ratings is also stable. All of these companies are subsidiaries of Tokio Marine North America Inc., which is an insurance holding company subsidiary of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF), a subsidiary of Tokio Marine Holdings, Inc. (TMHD), domiciled in Tokyo, Japan. Best said the ratings of Philadelphia reflect its “superior operating performance, strong level of capitalization, solid liquidity and excellent market presence within the specialty commercial marketplace. The ratings also acknowledge the group’s excellent operating cash flow, solid liquidity measures, well-developed enterprise risk management (ERM) platform and strong management team, which takes into consideration the leadership change earlier this month with the appointment of Mr. Robert D. O’Leary as President and CEO, who has been with the organization since 1982.” In addition Best explained that the ratings “recognize the strategic importance of the group to TMHD, as the group plays an important and strategic role in supporting TMHD’s global expansion strategy.” Best added that it believes that Philadelphia “is well positioned at the current ratings. Looking forward, negative rating action could occur if capitalization and/or operating performance fall markedly short of Best’s expectations primarily as a result of any material increase in frequency and severity of catastrophe losses. The ratings can also be negatively impacted by any negative rating actions on TMNF and/or a change in support from or relationship with TMHD.” Best said the ratings of Liberty American recognize its “modest underwriting leverage and adequate liquidity, which more than support the current run off of the group’s personal lines business and the pass-through business written on behalf of the National Flood Insurance Program, a program that is being transferred to PIIC. Potential upward movement in Liberty American’s ratings could result from a more defined role as a subsidiary of TMHD. Possible downward movement in the ratings could result from a significant decline in operating performance and capitalization, any negative rating actions taken on TMHD’s subsidiaries and/or any lessening of support provided by TMHD and its subsidiaries.”

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A’ (Excellent) and issuer credit ratings (ICR) to “aa-” from “a+” of First Insurance Company of Hawaii, Ltd. (FICOH) and its reinsured subsidiaries, collectively referred to as First of Hawaii Group. The outlook for the FSR remains stable, while the outlook for the ICR has been revised to positive from stable. Best explained that on November 29, 2011, “Tokio Marine Holdings, Inc. (TMHD) (Tokyo, Japan) acquired through its wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Tokyo, Japan), 50 percent of the outstanding shares of FICOH, which previously was owned by CNA Financial Corporation. Best said that as a result, FICOH became a wholly owned subsidiary of TMNF. “On November 30, 2012, TMNF contributed 100 percent of the outstanding shares of FICOH to Tokio Marine North America Inc., an insurance holding company domiciled in the State of Delaware and a wholly owned direct subsidiary of TMNF. The ratings reflect First of Hawaii Group’s excellent earnings profile through 2012, its unique role within TMHD and its 100 percent ownership by TMNF since late 2011.” Best also said the “ratings recognize FICOH’s consistently profitable underwriting performance, conservative reserving, strong risk-adjusted capitalization and sound localized market presence as one of the leading insurance providers in Hawaii. The ratings also consider the operational and financial support provided by TMNF.” As partial offsetting factors Best cited the group’s “concentration risk as a single state insurer, its potential exposure to catastrophe and terrorism losses and the existing weak economic conditions and highly competitive environment in its marketplace.” Best added, however, that the “outlook reflects the group’s strong risk-adjusted capitalization and Best’s expectation of continued profitable operating results in the near term.” Best said: “Potential upward movement in the ratings of First of Hawaii Group could result from continued profitable underwriting performance and maintaining a strong risk-adjusted capital position. Possible downward movement in the ratings could result from a significant decline in operating performance and capitalization, any negative rating actions taken on TMNF and/or any change in support or relationship with TMHD.” Best summarized its rating actions as follows: The FSR has been upgraded to ‘A+’ (Superior) from ‘A’ (Excellent) and the ICR to “aa-” from “a+” for the following members of First of Hawaii Group: First Insurance Company of Hawaii, Ltd.; First Fire and Casualty Insurance of Hawaii, Inc.; First Indemnity Insurance of Hawaii, Inc.; First Security Insurance of Hawaii, Inc.

A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of ‘A’- (Excellent) and issuer credit rating of “a-” of Minnesota Lawyers Mutual Insurance Company (MLM), headquartered in Minneapolis. The rating actions reflect the “continued improvement in MLM’s underwriting results, the success of its new rating model implemented over the last two years and maintenance of high policyholder retention levels,” Best said, adding that ” MLM’s newly modified premium rating structure is expected to continue to generate a better correlation of premiums to losses and improve its profitability.” Best also noted that the affirmation of the ratings reflects MLM’s “excellent capitalization, recent overall favorable operating performance and good geographic spread of risk. Positive rating factors are derived from the company’s focus and commitment to the members of the legal profession, which has led to its high policyholder retention levels. The company benefits from its excellent service, knowledge of the legal environment, longevity in the market and the payment of policyholder dividends to members during profitable periods. Although MLM continues to experience price competition and has exited a number of states in recent years, it has generally maintained consistent earned premium levels while conservatively growing its insured base in core markets.” Best also indicated, however, that these positive rating factors “are partially offset by MLM’s product concentration, the volatility in its results exhibited over the last several years and the deterioration in its underwriting and operating performance seen over the latest five-year period, though having improved recently. Additionally, there remains the execution risk associated with the continued implementation of underwriting initiatives put in place in recent years to return MLM to profitability.” Best noted that “management has implemented a number of initiatives designed to favorably influence the company’s financial performance over the near term. MLM began by initiating base rate increases and real estate area of practice surcharges, reducing high hazard practices, improving systems and exiting certain geographic locations where performance had not met the company’s expectations. While its success may not necessarily be evident in the immediate future, sizeable operating profits were generated during 2012, as rate adequacy improved.” Best said its ratings for MLM “could be downgraded as a result of significant underwriting losses, such as from a decline in premium revenue, elevated loss costs due to claim severity and/or inadequate loss reserves. Positive rating actions for MLM could result from continued favorable results stemming from initiatives put in place to restore its underwriting performance back to profitability while demonstrating less volatility in operating profitability going forward, and maintaining supportive capitalization.”

A.M. Best Co. has downgraded the financial strength rating to ‘C+’ (Marginal) from’ B-‘ (Fair) and issuer credit rating to “b-” from “bb-” of Los Angeles-based Workmen’s Auto Insurance Company (WAIC), and has assigned a negative outlook to both ratings. The rating actions reflect WAIC’s” rapid decline in policyholder surplus caused by the increased frequency and severity of Florida personal injury protection (PIP) and California physical damage claims that have resulted in significant adverse loss reserve development,” Best explained. “Consequently, these heightened underwriting losses along with elevated PIP losses in Oregon, have led to a significant decline in WAIC’s capitalization in recent years, well below the company’s originally projected levels.” Best did indicate, however, that these negative rating actions “are partially offset by WAIC’s strategic downsizing of its written premium through multiple rate increases, cancellation of unprofitable agents, stricter underwriting and internal controls, and actions to reduce expenses. In addition, the ratings reflect the continued financial support provided by the company’s owners. Further downward movement in the ratings as indicated by the negative outlook could occur should there be continued deterioration in WAIC’s risk-adjusted capitalization.”

Topics AM Best Hawaii Minnesota Japan