Both A.M. Best Co. and Standard & Poor’s Ratings Services have affirmed their respective ratings on the State Auto Group of Companies, which are in turn the operating divisions of State Auto Financial Corporation.
Best said its financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” on the Group remain unchanged, following the announcement that State Auto’s lead company, Ohio-based State Automobile Mutual Insurance Company (SAM) has reached a definitive agreement to acquire Rockhill Holding Company (RHC). Best also affirmed RHC’s ratings (See article under Ratings Roundup).
S&P affirmed its ‘A’ counterparty credit and financial strength ratings on State Auto’s operating insurance companies, and its ‘BBB’ counterparty credit rating on the holding company. S&P’s outlook on all of the companies remains negative, while A.M. Best’s outlook is stable.
S&P noted that “SAM will finance the purchase through a combination of internally generated cash and bank debt. State Auto is also assuming $52.5 million of existing Rockhill debt. The transaction is expected to close in the first quarter of 2009.”
S&P credit analyst John Iten stated: “The affirmation of the ratings reflects the company’s strong regional Midwest franchise in the personal and commercial lines insurance industry and continued strong capitalization. The ratings also reflect State Auto’s historically strong earnings performance, which we expect the company to return to if it takes appropriate measures to soften volatility.”
Best indicated that RHC’s “affiliates include Rockhill Insurance Company, Plaza Insurance Company, American Compensation Insurance Company and Bloomington Compensation Insurance Company, which operate under an intercompany pooling agreement and collectively comprise Rockhill Insurance Group (Rockhill). This transaction is subject to regulatory approval and is expected to close in first quarter 2009. The outlook for all ratings is stable.”
Best added that “SAM is purchasing diversified specialty insurers with a focus on niche excess and surplus and workers’ compensation business, while enhancing State Auto’s geographic and product diversification. SAM intends to operate RHC as a stand alone subsidiary and does not plan to add the members of Rockhill to the State Auto intercompany pooling agreement for the foreseeable future.”
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