A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of the Kemper Insurance Companies, Long Grove, Ill., with a stable outlook. The group’s rating has been removed from under review with negative implications. The rating action applies to the group’s three pool members, led by Lumbermens Mutual Casualty Company and numerous reinsured affiliates.
This rating action follows the announcement by Kemper that the sale of its personal lines business has been closed and the consummation of its comprehensive strategic relationship with Berkshire Hathaway, Inc., including a $125 million investment in the group’s commercial casualty and specialty insurance operations, has been finalized.
At year-end 2001, the group entered into a retroactive reinsurance agreement on its asbestos reserves, and in April 2002, the group entered into two reinsurance transactions. These transactions incorporated an adverse development reinsurance cover on $3.5 billion core loss reserves and a third-party quota-share reinsurance agreement for 80 percent of some of its middle-market businesses; both of these reinsurance covers are being provided by Berkshire Hathaway.
These transactions, along with the finalization of the sale of its personal lines business and issuance of common stock for a newly formed downstream holding company to Berkshire Hathaway, have re-capitalized the group in accordance with a reduced, more focused book of business.
A.M. Best believes these transactions provide near-term surplus relief, $125 million of additional equity capital and a certain degree of protection against adverse loss reserve development. As a result, the rating outlook is stable.
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