Standard & Poor’s Ratings Services announced that it has affirmed its ‘BBBpi’ counterparty credit and financial strength ratings on Pennsylvania National Mutual Casualty Insurance Co. and its wholly owned subsidiary Penn National Security Insurance Co. The “pi” indication means the ratings are based on public information.
“The ratings reflect the companies’ strong capitalization, very well-diversified product line, marginal operating efficiency, and high geographic concentration,” said S&P. “The two companies comprise the Penn National Insurance Group, participating in a pooling agreement under which Pennsylvania National Mutual, the lead company, assumes all combined premiums, losses, and expenses and cedes 50 percent of the business to Penn National Security,” it added.
S&P listed the following as “Major Rating Factors:
— Capital adequacy is strong, with a capital adequacy ratio of more than 133 percent as measured by Standard & Poor’s model. The surplus base of the group is growing consistently at a five-year compounded annual rate of 5 percent.
— The group’s operating performance is marginal, with an earnings adequacy ratio of 21.6 percent as measured by Standard & Poor’s model. It has a moderate five-year average return on revenue of 2.5 percent and a five-year average combined ratio of 107.6 percent. The group’s profits have been growing over the last five years.
— Geographic concentration is high, with five states accounting for 85 percent of the business. The group’s product line is well-diversified.
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