Majestic Insurance Co. Affirmed

A.M. Best Co. reaffirmed the "A-" (Excellent) rating for Majestic Insurance Co., a San Francisco, Calif.-based workers' compensation insurance carrier. This rating category is assigned to companies that have, on balance, excellent financial strength, operating performance and market profile when compared to the standards established by the A.M. Best Company. A.M. Best also increased the Financial Size Category to VI.

Majestic Insurance is a specialist in State and USL&H Act workers' compensation insurance coverage. Majestic maintains strong long-term relationships with its policyholders and producers offering tailored products and flexibility combined with excellent claims management and risk control services. The success of these partnerships enables Majestic to be recognized as one of the most capable providers of workers' compensation insurance in the Western United States.

Liberty Mutual Maintains 'A'

A.M. Best Co. said the current financial strength and debt ratings of the Liberty Mutual Insurance Cos. remain unchanged following its announcement regarding the acquisition of Prudential Financial Inc.'s U.S. property/casualty operations in 47 states—excluding New Jersey, specialty auto and affinity businesses—for about $540 million.
Concurrently, A.M. Best has assigned an indicative rating of "bbb" to $413 million of seller notes to be issued by Liberty Mutual Group Inc., the direct parent of Liberty Mutual Insurance Company, to Prudential Financial.

In March, A.M. Best downgraded Liberty Mutual's financial strength rating to "A" (Excellent) from "A+" (Superior).

The acquisition, which gives Liberty Mutual a potential $1 billion book of personal auto and homeowners renewals, is consistent with the group's strategy to diversify its product offerings by efficiently expanding its personal lines segment. With a long-term distribution agreement in place, Liberty Mutual will also have access to Prudential Financial's captive agency force.

Due to the increased diversification of Liberty Mutual's operations and hard market conditions, A.M. Best anticipates that the acquisition will strengthen the group's earnings potential over the next few years. With strong premium rate increases across all lines in 2002, cash flow has also improved considerably across all business units, and policyholder retention remains strong.

However, in recent years, significant reserve charges have weakened overall capitalization and dampened earnings. A.M. Best continues to have concerns regarding reserve adequacy, particularly on older workers' compensation claims and unfunded asbestos liabilities.

Baldwin & Lyons Sub Upgraded

Indianapolis-based Baldwin & Lyons Inc. reported that A.M. Best has upgraded its financial rating of the company's subsidiary, Sagamore Insurance Co., from "A" to "A+" (Superior).

Baldwin & Lyons said A.M. Best indicated the ratings upgrade is a reflection of "the company's superior capitalization, improved operating performance and solid liquidity." Sagamore, which is licensed in 43 states, provides non-standard private passenger automobile coverage as well as liability, cargo and physical damage coverages for small fleet trucking companies and workers' compensation coverages for small businesses.

The company's other subsidiary, Protective Insurance Co., is also rated "A+" (Superior) by A.M. Best. Protective specializes in insurance coverage for the large fleet trucking industry.

Together, Sagamore and Protective comprise the Baldwin & Lyons Group which is also rated "A+" by A.M. Best.

Endurance Specialty Gets Upgrade

A.M. Best Co. upgraded the financial strength rating to "A" (Excellent) from "A-" (Excellent) of Endurance Specialty Insurance Ltd. and its operating affiliates. The rating outlook is stable.

This action reflects the company's superior operating results which stem from the development of a strong broker distribution network, selective acquisitions and the successful implementation of underwriting and risk management controls. Additionally, Endurance maintains excellent capitalization with $1.5 billion of shareholders equity at March 31, 2003, along with a highly experienced and talented management team.

The company was originally formed in late 2001 in response to the market dislocation in the global insurance and reinsurance markets following the tragic events of Sept. 11 through a private placement equity offering led by Aon, Texas Pacific Group, Thomas H. Lee Company, Perry Capital and Capital Z. During its first year of operation, Endurance's book of business was split evenly between short-tail and long-tail business.

The entire book produced a combined ratio of 86 percent in 2002, benefiting from higher market rates, light catastrophes and an unencumbered balance sheet. Combined results also included conservative reserving methodologies for the company's long-tail casualty lines of business. Endurance also acquired the renewal rights to LaSalle Re's property catastrophe business and recently acquired the renewal rights to selected portions of Hartford Re's book of business. Each acquisition was complementary to Endurance's existing book of business and did not include the addition of any historical liabilities.

Endurance has established a diversified book of business, both geographically and by line. In 2002, Endurance expanded its operating platform through the formation of affiliated companies in the United Kingdom and the United States. Each affiliate's capital is protected through either quota share, stop loss or excess of loss reinsurance agreements with Endurance.

The financial strength rating applies to affiliates Endurance Reinsurance Corp. of America and Endurance Worldwide Insurance Ltd.