Gulf Rated ‘A+’

A.M. Best Co. has assigned a financial strength rating of “A+” (Superior) to the re-established Gulf Insurance Group, and removed from under review the rating of six companies, which were previously part of the Travelers Property/Casualty Pool. The action follows the $139 million capital investment in Gulf’s immediate parent, Commercial Insurance Resources Inc. (CIRI), by outside investors and approximately 75 senior employees of Gulf Insurance Company, as well as the re-establishment of the Gulf Insurance Group pool, which will be retroactive to January 1, 2002. The rating also takes into account Gulf’s ceding of more than $230 million of non-core businesses along with $183 million of loss reserves, both via 100 percent quota share to Travelers Indemnity Company.

Members of the re-established Gulf Insurance Group include Gulf Insurance Company (Hartford, Conn.) and its affiliates, Select Insurance Company, Atlantic Insurance Company and Gulf Group Lloyds (all of Irving, Texas), and Gulf Underwriters Insurance Company (Hartford). As part of this transaction, Gulf Insurance Holdings UK Ltd. will be dividended to Travelers Indemnity. The financial strength rating of “A++” (Superior) of Gulf Insurance Company UK Ltd. was lowered to “A+” (Superior) and also removed from under review as it now cedes all of its specialty business via 100 percent quota share to Gulf.

Prior to joining Travelers Property & Casualty Pool on October 1, 2001, (retroactive to January 1, 2001), Gulf was assigned an A.M. Best financial strength rating of “A+” (Superior). Although ownership has changed somewhat, A.M. Best believes Gulf remains well managed and is strongly positioned in its markets. Other positive factors include Gulf’s strong capitalization, highly specialized and diversified product offerings, proven track record and benefits derived from its affiliation with Travelers. Partially offsetting these factors is the underwriting deterioration and greater earnings volatility over the past few years, continued broker concentration and reinsurance dependence. Gulf produced an uncharacteristically high combined ratio of 121.4 percent in 2001, primarily due to the events of September 11. Excluding September 11, Gulf’s normalized combined ratio of 102.7 percent was higher than Gulf’s historical results.