Ratings Recap: Meadowbrook, C.P.A.

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Meadowbrook Insurance Group and its pooled members. Best also affirmed the ICR of “bbb-” of the parent holding company, Meadowbrook Insurance Group, Inc. (MIGI). The outlook for all of the ratings is stable. These ratings reflect Meadowbrook’s “sustained underwriting profitability, excellent overall operating performance and supportive capitalization,” said Best. It also “recognizes Meadowbrook’s diversified business mix that strategically positions the group with a more balanced product and distribution platform and provides flexibility to move more effectively through market cycles. Meadowbrook’s operating performance can be attributed to selective growth coupled with adherence to strict corporate underwriting guidelines, as well as larger net investment gains due to an increased investment base. Best added that it would “continue to closely monitor Meadowbrook’s capitalization to ensure that it remains commensurate with its current ratings, in addition to its operating results, particularly the impact of newer programs written during the past few years.” Best also acknowledged that the “financial flexibility provided by MIGI as well as MIGI’s balanced business model that provides diverse revenue sources. MIGI maintains a strong market position as a provider of risk management services to industry associations, affinity groups and individual businesses. Best summarized the companies covered by the ratings actions as follows:
The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for Meadowbrook Insurance Group and its following members:
• Star Insurance Company
• Century Surety Company
• Savers Property and Casualty Insurance Company
• ProCentury Insurance Company
• Williamsburg National Insurance Company
• Ameritrust Insurance Corporation

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘B+’ (Good) and issuer credit rating (ICR) of “bbb-” of Michigan-based C.P.A. Insurance Company, both with stable outlooks. At the same time Best withdrew the ratings at the company’s request and assigned a category NR-4 to the FSR and an “nr” to the ICR. The ratings “reflect C.P.A.’s change in ownership during 2009 as well as the replacement of its management team,” Best explained. “Other positive rating factors are C.P.A.’s low underwriting leverage and well defined niche market, providing railroad workers’ job loss insurance for over 100 years. C.P.A. also has very strong capitalization as measured by its high Best’s Capital Adequacy Ratio.” However, Best also indicated that these “positive rating factors are offset by C.P.A.’s significant ownership interest in Premium Finance, Inc., which constituted 60 percent of the company’s surplus at year-end 2009, and the potential inherent risk associated with the ramp up of the new business plan as C.P.A. enters new lines of business. Best indicated that a positive outlook “recognizes C.P.A.’s low underwriting leverage and Best’s expectation of improved underwriting performance through its focus on achieving expense efficiencies while prudently growing its premium base. The new ownership plan is for C.P.A. to expand into other lines of business as it obtains a full property/casualty license and gains admission into additional states. C.P.A. plans on reinsuring most or all of the new risks, resulting in high ceded leverage and elevated credit risk.”