Standard & Poor’s affirmed its ‘BBpi’ counterparty credit and financial strength ratings on Alabama-based American Mining Insurance Co. Inc. The ratings reflect the company’s weak operating performance, high geographic and product line concentration, and very strong capitalization.
Major rating factors
— Operating performance has been weak, with a Standard & Poor’s earnings adequacy ratio of negative 1.6 percent. In addition, the company has incurred losses for the last two years, $0.5 million in 2002 and $0.2 million in 2001. This is primarily due to its increasing loss and LAE expenses which have been adversely affected due to legal rulings concerning reversal of workers’ compensation reforms implemented in Kentucky in 1996 and the decision to award black lung benefits to coal miners.
— Geographic concentration is high with the top five states accounting for 91.5 percent of the total premium revenue. In addition, there is product line concentration, with the workers’ compensation insurance segment accounting for 78 percent of total business.
— Capitalization remained very strong at year-end 2002, as measured by a Standard & Poor’s capital adequacy ratio of 152.1 percent. However, the company was more leveraged than similar companies, with net premiums written plus liabilities to surplus at 5.17x, which is a limiting factor.
The company is rated on a stand-alone basis.
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