StanCorp's 'A' Affirmed
A.M. Best Co. affirmed the financial strength rating of "A" (Excellent) of Portland, Ore.-based Standard Insurance Co., a wholly-owned subsidiary of StanCorp Financial Group Inc. Concurrently, A.M. Best affirmed the senior debt rating of "bbb+" on the $250 million 6.88 percent 10-year senior notes issued by StanCorp Financial Group Inc. All ratings have been assigned stable outlooks.
The affirmation of Standard Insurance reflects favorable and consistent earnings, its established presence in the employee benefits market, solid risk adjusted capitalization, positive cash flow and a conservative level of financial leverage. The rating also recognizes the benefit derived from management's disciplined pricing strategy, which has contributed to continued favorable operating results, unlike other more aggressive players in this market segment.
Additionally, the company has moved to expand its distribution, improve its results and reduce both risk and volatility in its businesses and investment portfolio.
Gulf Insurance Group Downgraded
A.M. Best Co. downgraded the financial strength rating to "A" (Excellent) from "A+" (Superior) of the Gulf Insurance Group. The rating outlook is stable. The action reflects the group's underwriting deterioration, increased earnings volatility over the past several years and its diminished stand-alone capitalization. These factors largely stem from the magnitude of losses sustained by Gulf in its discontinued residual value insurance (RVI) business, which takes into consideration a recent settlement of a claims coverage dispute and the strengthening of reserves on all of the group's RVI business. Gulf's susceptibility to credit risk, as well as dispute risk as it relates to its substantial reinsurance dependence was also considered.
In 2002 and first quarter 2003, Gulf's prior year loss reserves for RVI business were significantly strengthened, including an additional $239 million in first quarter 2003. In first quarter 2003, reserves for some of Gulf's core businesses were also strengthened by $30 million. A.M. Best believes there is potential for further reserve development at Gulf, particularly as it relates to professional liability lines where litigation and loss cost trends have been rapidly rising.
Sheffield Earns 'A' From S&P
S&P assigned its "A" financial strength rating to Sheffield Insurance Corp., a writer of specialty insurance, based on its integration into the business plan of its parent, experienced management, appropriate reinsurance and capital, and financial profile. Also affirmed were the "A" ratings on all of the currently interactively rated insurer units of Axis Capital Holdings Ltd. The outlook on Axis is stable. Sheffield was recently acquired by Axis Specialty U.S. Holdings Inc., an indirect subsidiary of Axis. Axis is a Bermuda-based holding company formed early this year that has global reinsurance and specialty insurance subsidiaries.
Sheffield will be renamed Axis Surplus Insurance Co. and will operate solely as a carrier of non-admitted business in the U.S. Business written includes property, umbrella and excess casualty, primary casualty, and professional lines insurance. Although Sheffield has an underwriting history that predates the acquisition by Axis, most of its outstanding exposure is either newly acquired through the purchase of the D&O insurance renewal rights from insurers of Kemper Corp. or is business recently written.
S&P expects that the company's exposure at year-end 2003 will be well in excess of what it is today as management exercises these renewal rights.
James River Assigned
A.M. Best Co. assigned an initial financial strength rating of "A-" (Excellent) to James River Insurance Company (James River). The rating outlook is stable. The company is the insurance subsidiary of James River Group Inc., a Delaware holding company organized in Sept. 2002 for the purpose of capitalizing and acquiring an insurance company with the authorization to write property/casualty insurance on an excess and surplus lines (E&S) basis in multiple states.
On June 30, James River Group Inc. received approval from the state of Ohio to acquire Fidelity Excess and Surplus Insurance Co., a clean shell, formerly owned by Great American Financial Property & Casualty Group. Fidelity has been renamed James River Insurance Co.
The rating reflects James River's strong initial capital base, the excellent track record of its management team in running an E&S lines company and its sound business plan to target specific segments of the E&S lines market place that may be currently underserved. The capital base for James River has been amassed through significant capital contributions of several primary investors that have not only provided the majority of the company's initial financing but have explicitly expressed their desire to provide additional capital support if the opportunity arises.
James River Group Inc. is led by J. Adam Abram, president and CEO, who brings extensive insurance experience and a demonstrated track record of producing strong results. A.M. Best expects that Abram and the James River management team will establish strong underwriting, risk management and pricing controls to ensure pricing discipline and adherence to their plan to serve the small to middle E&S lines market.
SCOR and Subs on Watch Neg
S&P's placed all its long-term ratings, including its "A-" counterparty credit and insurer financial strength ratings, on France-based reinsurer SCOR and subsidiaries on CreditWatch with negative implications. The placement follows the reinsurer's disappointing first quarter results, diminished business position and potential reserve strengthening down the line.
S&P will shortly meet with SCOR group management to resolve the CreditWatch placement. If, upon resolution of the CreditWatch placement, S&P decides to lower the ratings on SCOR and its subsidiaries, it is not expected that they will be lowered by more than one or two notches.
