A.M. Best Upholds 'Excellent' Rating Of CAP-MPT

A.M. Best Upholds 'Excellent' Rating Of CAP-MPT The A.M. Best Company has upheld its rating of "A" (Excellent) to the Cooperative of American Physicians Inc. - Mutual Protection Trust (CAP-MPT), a provider of medical professional liability protection for more than 7,000 California physicians.

According to A.M. Best, "MPT has responded to the hardening market conditions by maintaining focus on preferred physicians and further enhancing its underwriting practices."

CAP-MPT's rating "also reflects the rigorous underwriting and claim management practices of MPT through its peer review panels staffed by member physicians. This has led to loss experience that is more favorable than other medical malpractice insurance writers."

The rating agency recognized "MPT's comprehensive risk management practices with visits to all members every four years and to new members within the first year of being covered, as well as attendance at CME accredited risk management course."

Furthermore, A.M. Best noted that membership in CAP-MPT continues to increase and membership retention is very high. Net membership increased 17.2 percent in 2002 and CAP-MPT now provides coverage to more than 10 percent of all California physicians.

Kemper Pool Downgraded Again

Standard & Poor's lowered its counterparty credit and financial strength ratings on the members of the Kemper Insurance Cos. intercompany pool to "CCC" from "B-" with a negative outlook.

All the ratings have been removed from CreditWatch, where they were placed on Feb. 18, 2003. The ratings have now been withdrawn at the company's request.

"The downgrade on Kemper reflects deterioration in the surplus position since year-end 2002," observed credit analyst John Iten.

At the same time, S&P lowered its rating on Lumbermens Mutual Casualty Co.'s $400 million 9.15 percent surplus notes due 2026 to "D" from "C," following the company's anticipated non-payment of interest.

Kemper disclosed on June 30 that its surplus decreased to $313 million by the end of May from $697 million at year-end 2002.

The decline in surplus was largely driven by a number of asset-valuation adjustments made by Kemper's outside auditor, KPMG LLP, to reflect the company's runoff status. S&P anticipates a more gradual decline in surplus, however, as many of the steps needed to convert the balance sheet from a going concern to a runoff basis have now been completed.

Best Assigns 'a-' Debt Ratings to Harleysville's Senior Notes

A.M. Best Co. announced that it has assigned an "a-" senior debt rating to the Pennsylvania-based Harleysville Group Inc.'s (HGIC) $100 million of 5.75 percent 10-year senior unsecured notes due July 2013.

It also affirmed the current "a-" debt rating on existing senior notes, and said the 'A' (Excellent) financial strength ratings of the P/C pooling members of Harleysville Insurance are unaffected. "The rating outlook for Harleysville Insurance is positive," said Best. while the "rating outlook for the remainder of the ratings is stable."

The proceeds from the senior debt issue may be used for general corporate purposes,

including the payment of outstanding debt, acquisition activities and capital contributions to insurance operating subsidiaries to support initiatives. Best noted that "HGIC, which is approximately 56 percent owned by Harleysville Mutual Insurance Company, maintains modest financial leverage, after the transaction with debt to capital of approximately 20 percent and excellent fixed-charge coverage of about seven times."

It indicated that, "These ratings reflect HGIC's excellent capitalization, generally solid earnings and strong regional market franchise. These attributes are derived from HGIC's conservative balance sheet, sound underwriting fundamentals and well-established agency relationships. Under a regional insurer approach, HGIC benefits from its strong name recognition, extensive local market knowledge and stable market presence." It also noted that the company is "among the top 50 property/casualty insurance organizations in the United States."

Best cited "HGIC's unrewarding personal lines results and ongoing susceptibility to catastrophes and weather-related losses," as offsetting factors, indicating that they could lead to "earnings variability." It stressed that, "personal lines results in recent years have been negatively impacted by weather-related losses and rising loss costs. Additionally, total returns have been dampened by investment losses. However, HGIC has implemented corrective actions to improve earnings that include re-underwriting, pricing adjustments, agency management actions and discontinuing business in unprofitable states."

Best Places Iowa Mutual Under Positive Review

A.M. Best Co. has placed the financial strength rating of "B" (Fair) of Dewitt-based Iowa Mutual Group under review with positive implications.

This rating action acknowledges the agreement between Iowa Mutual Group and Motorists Insurance Group to form a strategic alliance. Under the agreement, Iowa Mutual will become a participant in Motorists Insurance Group's inter-company pool. Furthermore, Motorists Insurance will have majority control on Iowa Mutual's board of directors.

A.M. Best views this transaction favorably for Iowa Mutual as it will provide it with access to additional products and increased financial security. This will also facilitate Motorists Insurance's entrance into the Iowa market by providing it with a strong agency presence. This strategic alliance will have no impact on the financial strength of Motorists A.M. Best Co. has placed the financial strength rating of "B" (Fair) of Dewitt-based Iowa Mutual Group under review with positive implications.

This rating action acknowledges the agreement between Iowa Mutual Group and Motorists Insurance Group to form a strategic alliance. Under the agreement, Iowa Mutual will become a participant in Motorists Insurance Group's inter-company pool. Furthermore, Motorists Insurance will have majority control on Iowa Mutual's board of directors.

A.M. Best views this transaction favorably for Iowa Mutual as it will provide it with access to additional products and increased financial security. This will also facilitate Motorists Insurance's entrance into the Iowa market by providing it with a strong agency presence. This strategic alliance will have no impact on the financial strength of Motorists Insurance.

The agreement between Iowa Mutual and Motorists Insurance is pending regulatory approval from Iowa's Insurance Division. The rating will remain under review until approval is received from the Iowa Insurance Division, as well as Iowa Mutual policyholders. Once approvals are received A.M. Best will re-evaluate the structure of Iowa Mutual and likely assign the financial strength of rating of "A" (Excellent) of Motorists Insurance.

The Iowa Mutual Group consists of two domestic property/casualty insurance companies, Iowa Mutual Insurance Company and its wholly-owned subsidiary, Iowa American Insurance Company. The group offers a broad range of property/casualty products with slightly more emphasis on personal lines.

Iowa Mutual Insurance writes personal and small commercial policies, principally private passenger automobile, homeowners, workers' compensation and other liability coverage. Iowa American writes commercial business, targeting low to moderate risks in the same areas as Iowa Mutual Insurance.