Ratings Roundup: Assurant, Brickstreet

February 2, 2011

Standard & Poor’s Ratings Services announced that its ratings on Assurant Inc. (BBB/Stable/A-2) and its related companies were unaffected by the announcement that Assurant will take a noncash goodwill impairment charge of $306 million (after taxes) for the fourth quarter of 2010. S&P noted that “Assurant took this write-down in connection with its annual goodwill impairment testing in accordance with ASC Topic 350: ‘Intangibles – Goodwill and Other.’ The impairment charge relates to the goodwill of the Assurant Health and Assurant Employee Benefits segments. Factors underlying the impairment charge include the effects of health care reform, low interest rates, continuing high unemployment, and the slow pace of the U.S. economic recovery. The goodwill impairment has not affected our view of Assurant’s risk-adjusted capital adequacy because goodwill is excluded when analyzing the company’s capitalization, which is consistent with our criteria. Furthermore, Assurant does not expect this noncash charge to affect its business operations, cash flow, or regulatory capital ratios or to result in future cash expenditures.”

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Charleston West Virginia-based Brickstreet Mutual Insurance Company, both with stable outlooks. The ratings reflect Brickstreet’s “strong risk-adjusted capitalization, solid underwriting and operating performance and dominant position in the West Virginia workers’ compensation market,” said Best. “The ratings also recognize the company’s prudent loss reserving standards, which have allowed for favorable loss reserve development on prior accident years and the significant rate flexibility afforded by the company’s five rating tiers.” As partial offsetting factors Best noted Brickstreet’s “concentrated business risk, operating as a mono-line writer within a limited geographic spread, which exposes the company’s operations to local regulatory and economic changes, as well as increased competition given West Virginia’s recent change to an open market. However, Brickstreet’s modest geographic expansion plans should partially mitigate this concentration over time.” Best added that the rating outlook nonetheless recognizes its expectation that “Brickstreet’s operating performance will remain solid over the near term and its capitalization will continue to support the current ratings.”

Topics Virginia West Virginia

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