Island Heritage Stable
A.M. Best Co. affirmed the financial strength rating "A-,"excellent, of Island Heritage Insurance Co. Ltd., based in the Cayman Islands, and removed the rating from under review. The outlook is stable.
This rating action follows Best's review of Island Heritage's range of probable losses emanating from Hurricane Ivan and the impact on its capital in conjunction with the presentation of a formal recapitalization plan. The plan meets Best's capital strengthening expectations, and fully supports the current financial strength rating.
Island Heritage's financial strength rating was placed under review in September 2004, due to the uncertainty surrounding the ultimate loss exposure from Hurricane Ivan and its impact on the capitalization of the company.
Employers Mutual Casualty Affirmed
Standard & Poor's Ratings Services affirmed its "BBBpi" counterparty credit and financial strength ratings on Employers Mutual Casualty Co. and related pool members.
S&P also raised its counterparty credit and financial strength ratings on EMC Reinsurance Co. to "BBBpi" from "BBpi."
The ratings on Employers Mutual Casualty Co. and its pool members reflect the pool's strong capitalization and well-diversified business, which are partly offset by a weak and volatile operating performance, according to S&P.
The ratings were raised to reflect the company's good capitalization and operating performance, which are said to have improved markedly in the past few years. The evaluation of the company is on a stand-alone basis.
Cascade National Assigned 'R'
S&P assigned its "R" financial strength rating to Cascade National Insurance Co. after the Washington State Insurance Department placed the company under receivership on the basis of inadequate capital, effective November 2004.
The Washington State Department of Insurance stated the company's financial problems had become more serious and its capital is said to have decreased to less than $2 million, much less than the state required minimum of $6.1 million. The company's operating ratio also rose to more than 160 percent.
An insurer rated "R" is under regulatory supervision due to its financial condition. During the pendency of the regulatory supervision, the regulators may favor one class of obligations over others, or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations.
National Lloyds Affirmed
S&P affirmed its "BBBpi" counterparty credit and financial strength ratings on National Lloyds Insurance Co. Also, it raised its counterparty credit and financial strength ratings on American Summit Insurance Co. to "BBBpi" from "BBpi."
According to S&P, the ratings reflect a very strong capitalization, extremely strong operating performance, and good liquidity, partially offset by very high geographic concentration. The ratings on American Summit were apparently raised to reflect its position within the group in addition to its extremely strong capitalization and earnings on a stand-alone basis.
GE Insurance Affirmed
Fitch Ratings has affirmed the 'A-' long-term issuer rating on GE Insurance Solutions Corp. and the 'A-' ratings on GE Insurance's senior unsecured notes. Fitch has also affirmed the 'AA-' insurer financial strength rating on GE Insurance's subsidiary, Employers Reinsurance Corporation (ERC). The outlook is stable.
Fitch's rating actions follow GE Insurance's ultimate parent company, General Electric Company's, recent disclosure that it has increased loss reserves in its insurance operation by $472 million after tax in the fourth quarter 2004 and that in aggregate, it increased prior accident year reserves by $1.2 billion in 2004.
The $1.2 billion of aggregate development is within the range of potential reserve deficiencies that Fitch had considered in July 2004 when it downgraded GE Insurance's and ERC's ratings to their current levels. Based on its review of ERC's group basis year-end 2003 Schedule P data and the company's recent development history, Fitch estimated a 15 percent to 25 percent reserve deficiency at that time. Although Fitch views the adverse prior accident year reserve development as significant, it believes that the company's capitalization continues to support its current ratings. Fitch notes that GE Insurance's debt-to-capital ratio at Sept. 30, 2004, including the effect of the $472 million after-tax charge on a pro-forma basis, is 21 percent compared to 17 percent on a reported basis.
The ratings on GE Insurance and ERC continue to reflect Fitch's concerns about ERC's underwriting performance, which has generally lagged that of peers during periods of strong market conditions. ERC's ability to materially improve its underwriting performance will be complicated by deteriorating cyclical pricing conditions in the reinsurance and commercial lines markets.
Fitch continues to believe that GE will likely further restructure or divest the companies at some point and thus its ratings on ERC and GE Global are largely stand-alone ratings with little financial support from GE.
